Abstract
This paper investigates a dual-channel supply chain in which a single manufacturer offers the standard product through a direct online channel and an inaugural green product through a traditional physical store (regular) channel. The manufacturer invests in a greening effort to produce green products by incorporating environment friendly features. These green products are offered to customers at a higher price in coordination with a downstream retailer. Standard (non-green) products, however, do not possess the enhanced green features and are offered by the manufacturer at a discounted price to customers using a direct channel. In this paper, we develop dual-channel supply chain (DCSC) coordination models for a more generalized case where the manufacturer and retailer are assumed to be risk averse. The risk aversion is modeled using a popular measure, namely, the mean-variance criterion. Further, the proposed DCSC coordination models enhance the existing DCSC coordination models in the literature, by allowing varying proportions of the market share associated with the traditional regular and online channels in lieu of fixed proportions. This is achieved by utilizing the price differentiation tool from revenue management for effectively segmenting the proportion of expected market share of the regular and online channels as a variable instead of a fixed value. In the proposed model for decentralized channel coordination, the manufacturer decision variables include price differentiation, wholesale price for greening products, and pricing in the direct channel along with the greening effort investment. Unlike manufacturer, the retailer plays the role of the follower within a leader-follower framework and decides on the retail price of the green products sold through the regular channel. For the integrated channel, the manufacturer determines the pricing for green and standard products in addition to the greening effort in a monopoly. The study also explores the supply chain coordination under revenue- and cost-sharing contracts for the dual channel supply chain. The models are unique since they capture the effects of demand cannibalization or demand leakage, which affects the supply chain revenue maximization due to price differentiation. A detailed numerical experimentation is carried out to investigate the impact of the risk-aversion, demand leakage, and market uncertainty on the performance of supply chain coordination.
Highlights
The majority of the global manufacturers including Samsung, Apple, Hewlett Packard and Lenovo are selling products through the direct online channel in addition to the traditional retail or regular channel [25,88]
The models proposed in the current study introduce a more flexible way of modeling the dual-channel supply chain (DCSC) green supply chain coordination by utilizing the price differentiation tool from revenue management and incorporating the demand cannibalization concept in lieu of the cross-price sensitivity [63,68,71,98]
Our study investigates the problem of green supply chain coordination for the DCSC assuming risk aversion behaviors by the supply chain members
Summary
The majority of the global manufacturers including Samsung, Apple, Hewlett Packard and Lenovo are selling products through the direct online channel in addition to the traditional retail or regular channel [25,88]. The variable differentiation price allows modeling of the demand leakages in DCSC green supply chain coordination without the restrictive assumption of a fixed expected market share. The manufacturer coordinates with a retailer (or seller) to sell a priced green product using a regular channel and a standard product at a relatively lower price through a direct online channel. Models are proposed for pricing, inventory and greening effort decisions in green supply chain coordination for DCSC where the manufacturer and seller are assumed to be risk averse. The proportions of expected market share of the two channels are not predetermined but controlled by the manufacturer through the differentiation price This facilitates the modeling of the impact of cannibalization or demand leakages on pricing, greening effort, and inventory in the regular channel (green product) and direct online channel (standard product).
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