Unified strategy of production, distribution and pricing in a dual-channel supply chain using leasing option

Abstract

The surge in e-commerce has significantly altered consumer shopping habits, shifting towards online purchases. This change renders the traditional single-channel supply chain insufficient, often resulting in lost profits. Consequently, many businesses now incorporate an online channel alongside their physical stores. This shift has led to the adoption of dual-channel supply chains by manufacturers, aiming to attract a broader customer base and expand market share. Leasing options are becoming increasingly popular, offering a novel method for consumers to acquire products. However, studies on dual-channel supply chains that include leasing options are scarce and typically focus on single-period pricing. This paper explores a realistic, centralised dual-channel supply chain model that encompasses manufacturing, remanufacturing, refurbishing, distribution, and storage, along with selling, leasing, and repair services. A mathematical model is developed for a multi-period environment. This model simultaneously optimises manufacturing, remanufacturing, distribution strategies, storage costs, service offerings, and pricing for both sold and leased products, considering repair services for defective items. The paper presents numerous numerical analyses to demonstrate how integrating leasing services impacts the supply chain's profitability, the effect of customer preferences on pricing strategies, and how the cost of collecting used products influences remanufacturing decisions over a set time frame.