Reducing channel costs by investing in smart supply chain technologies

Abstract

This paper establishes a modeling framework that incorporates channel costs as a decision variable when smart supply chain technology can be invested in. A traditional manufacturer-retailer supply chain is studied, and the conditions under which the technology should be invested are identified. Issues of supply chain efficiency and coordination are addressed. A platform supply chain is also investigated, and it is found that a platform may invest in reducing the channel cost even if it does not bear any part of this cost. In this case, the percentage fee is found to be an important parameter.