Total Channel Profit Research Articles

Customer's Channel Selection Behavior on Purchasing Standardized and Customized Products: Optimized Prices and Channel Performances.

Nowadays, the traditional production is unable to meet the new diverse needs of target customers. In the current customization era, more and more companies are required by customers to provide more desirable customized products. However, research on customization and standardization based on quantitative analysis has drawn little attention in the literature of dual channel supply chain. In this paper, we study the effect of adopting a dual channel supply chain on the performance of a two-level system (manufacturer-retailer) by using a novelty quantitative approach. We try to analyze the system to get optimal prices and maximize profits, where manufactures offer both standardized and customized products via their traditional and customized channels, respectively. We build a Stackelberg game mode to construct a centralized and a decentralized dual channel scenarios. Furthermore, we study the effects of the different channel structures on price, degree of customization, degree of standardization, and supply chain profitability. We also analyze the effects of both standardized and customized demand sensitivities on their prices and profits. Eventually, we introduce a cost-sharing coordinating contract to optimize the channel's performance. We find that the potential market demand for customization affects the price of customized products and the profits of customized channels. Compared with the decentralized dual channel case, the cost-sharing contract can achieve higher total channel profits. In the cost-coordination case, there is an optimal range for the proportion of standardized costs borne by manufacturers.

Pricing and Coordination Decisions in a Low-Carbon Supply Chain with Risk Aversion under a Carbon Tax

Under a carbon tax, with the constraint of carbon emissions reduction, by establishing game theoretical models for a low-carbon supply chain, the article investigates how the carbon tax rate and risk aversion degree may affect retail price, product carbon emission degree, and profits of the manufacturer, the retailer, and the entire supply chain. The results show that product carbon emission degree and supply chain profit in a centralized supply chain are higher than those in a decentralized supply chain. With a risk-averse manufacturer, the product’s carbon emission degree and supply chain profit will further decrease. With increased risk aversion, the manufacturer's profit and total channel profit will decrease, but the retailer's profit will be affected by the carbon tax rate. Carbon reduction investment cost-sharing contracts can contribute to the implementation of increased demand for low-carbon products and decreased retail prices. Regardless of whether the manufacturer is risk-averse, a carbon reduction investment cost-sharing contract can increase the overall efficiency and profit of the supply chain. Finally, the results are verified by numerical examples.

Three-echelon apparel supply chain coordination with triple bottom line approach

PurposeAn apparel supply chain primarily consists of geographically distant suppliers, manufacturers and retailers. The coordination among the members of the supply chain becomes difficult when we consider the triple bottom line of sustainability in it. Moreover, the complexity increases with the change in dominance power of the respective members. However, the task of managing the channel further becomes complicated after incorporating sustainability and dominance power simultaneously into the supply chain. To fill this gap, this paper focuses on designing of mechanism and demonstration of three-echelon model to coordinate sustainable supply chain.Design/methodology/approachIn this paper, the noncooperative game theoretic method has been applied for the exploration of models. The various structures of the centralized and decentralized supply chain are considered on the basis of a player's dominance power. The model uses simultaneous and sequential move games to analyze optimal profit of supply chain agents, total channel profit, green innovation level and corporate social innovation level.FindingsAnalytical results show that simultaneous game performs better than the sequential game. The consumer sensitivity toward green and social innovations increases total channel profit. We also proposed a linear two-part tariff contract model. The proposed model enhances the sustainability level and leads to perfect channel coordination. Using a numerical example, we present the effectiveness of multiple game structures under centralized and decentralized settings. The results reveal that channel efficiency is the highest in the two-part tariff contract followed by a simultaneous move game structure and lower in the cases of sequential move game.Research limitations/implicationsIn this research, model setting are deterministic and there is no any information asymmetry. Therefore researchers are encouraged to study multiechelon sustainable supply chain coordination models under stochastic and information asymmetry settings.Practical implicationsThe paper includes implications for the development of sustainable supply chain coordination model to tackle the problems of dominance power, sustainability issues and lower channel efficiency of supply chain.Originality/valueThis study proposes game-theory-based three-echelon sustainable supply chain for the channel coordination.

Avoiding medicine wastes: Introducing a sustainable approach in the pharmaceutical supply chain

While unused medicines, by proper planning, can help people who need them but do not have access to them, huge medicine wastes in many pharmaceutical supply chains (PSCs) lead to severe economic losses and environmental/social damages. This paper aims to investigate a novel collaborative model to mitigate the entry of medicine wastes into the environment in a two-echelon PSC with an upstream-member (pharma-supplier) and a downstream-member (pharma-retailer) under the triple-bottom-line of sustainability. In this regard, a donation program is introduced to enhance the social aspect of the channel, and a take-back strategy is also presented to preserve the environmental and economic aspects of the PSC. In the investigated PSC, the pharma-supplier determines medication donation quantity; subsequently, the pharma-retailer by the aim of alleviating the risk of shortages decides on medication order quantity. Regarding the demand uncertainty and medications' fixed shelf-life, the probability of facing huge volume of outdated medicine is high. This study introduces a take-back strategy to reduce the risk of large volumes of medicine waste that includes collecting surplus items to use as part of donation programs or alternatively selling them in the secondary market. A bi-level optimization scheme is developed to coordinate the channel. The numerical results show that using the proposed bi-level optimization collaborative scheme not only can enhance total channel profit but also persuade both members to decide based on integrated sustainable PSC goals. Furthermore, the proposed model provides some practical orientations for pharmaceutical managers to reduce pharmaceutical waste, enhance the health level of the society, as well as maintaining all aspects of PSC sustainability.

Decision Analysis of Spent Power Battery Recovery Mode under Hybrid Dual-Channel Collection

Recycling spent power battery is an important measure to alleviate energy shortage and environmental pollution. However, at present, there is no uniform standard for the recycling channels of spent power battery, and the construction of recycling channels of various recycling subjects is chaotic, and the mode with the highest efficiency is still inconclusive. Therefore, based on the current situation of spent power battery recycling, combined with the closed-loop supply chain channel decision-making theory, this paper studies three hybrid dual-channel recycling modes, compares and analyses the recycling rate and profit under different modes, and finally discusses the influence of different factors and recycling modes through numerical analysis. The results show that: (1) The hybrid dual-channel recycling mode of automobile alliance and third-party recycler can bring the maximum recovery rate and profit. (2) The competition between different recycling channels can not only improve the recovery rate, but will lead to the decline of the recovery rate and profit, resulting in a double loss situation. (3) Centralized decision-making brought about by cooperation can improve the total recovery rate and the total channel profit.

Channel coordination between manufacturers and competing retailers with fairness concerns

This study provides a game-theoretic analysis for channel coordination of a two-tier supply chain in which retailers have fairness concerns. We explore a setting in which a single manufacturer sells its product to consumers through two competing retailers that are horizontally differentiated at varying levels. We extend the previous literature, which examines only monopolistic supply chains.We show that the channel can be successfully coordinated in equilibrium in that the total channel profit is maximized and the retailers do not incur disutility due to disadvantageous inequality, even if they are not averse to their advantageous inequality. Specifically, only if the retailers are moderately differentiated is a fair channel successfully achieved. In addition, we find that in a market in which a fair channel is coordinated in equilibrium, the retailers necessarily benefit from their fairness concerns.Furthermore, we investigate a situation in which the ideal distribution ratios between the channel members can be endogenously chosen prior to subsequent pricing stages. Interestingly, even if such endogenous choices are allowed for the retailers, a fair channel still can be coordinated in equilibrium. Specifically, the retailers set their ideal ratios in equilibrium at the lowest level in their feasible ranges of successful coordination. However, this results in the prisoner’s dilemma, because if they were allowed to collude to set the ratios, the retailers would benefit the most from the highest level in the feasible ranges.

Coordination of a supply chain with a loss-averse retailer under supply uncertainty and marketing effort

<p style='text-indent:20px;'>This paper deals with a one-period two-stage supply chain, in which a loss-averse retailer facing stochastic demand orders products from a risk-neutral supplier subject to yield uncertainty. Marketing effort exerted by the retailer is employed to enhance the final market demand. We first establish a performance benchmark, and show that the wholesale price contract fails to coordinate the supply chain due to the effects of double marginalization and loss aversion. Then we propose a revenue-cost-sharing contract in order to achieve supply chain coordination. It is verified that a properly designed revenue-cost-sharing contract can achieve perfect coordination and a win-win outcome synchronously. Our results reveal that it is simple to implement and arbitrarily allocate the total channel profit between the retailer and the supplier. In addition, we examine the effect of the retailer's loss aversion degree on contract parameters and profit allocation, and we show that both the retailer and the supplier can benefit from marketing effort.</p>

Dynamic markdown decisions based on a quality loss function in on-site direct-sale supply chains for perishable food

Food loss and waste have become a critical problem worldwide. Determining an appropriate promotional strategy for reducing waste and environmental impacts to ensure sustainability is essential in supply chains (SCs). Considering quality losses, this paper proposes an on-site direct-sale dynamic SC inventory model involving one retailer and one contracted supply centre for perishable foods. This model enables the determination of optimal price markdown decisions while maximizing the total channel profit. Regularly priced and markdown products are substitutable during the markdown period, and their demand rates are dependent on price, quality, and time. The optimal solution for the price markdown timing is derived analytically, and a sensitivity analysis of various model parameters is conducted. Numerical studies are also presented to illustrate the effectiveness of the theoretical results; three scenarios with different types of customers served by the retailer are considered (general customers, product-quality-oriented customers, and price-oriented customers). Based on the theoretical and numerical findings, several managerial insights are provided.

Manufacturer defensive and offensive advertising in competing distribution channels

AbstractThis paper investigates how two competing manufacturers should invest in defensive and offensive advertising in a two‐segment market and whether they should each adopt a decentralized or an integrated channel if their goal is to maximize total channel profits. We find that manufacturers in decentralized channels can exclusively undertake either of the two types of advertising or combine the two at the equilibrium. In integrated channels, they can either combine the two or exclusively undertake defensive advertising. When multiple equilibria exist, strategies that combine both types of advertising should be preferred to exclusive defensive advertising strategies, which are better than exclusive offensive advertising strategies. Also, total channel profits are higher in decentralized channels than in integrated channels when the brands are moderately or highly substitutable. Conversely, total channel profits of integrated channels are higher than those of decentralized channels in areas where the brands are relatively differentiated and the offensive advertising retaliatory capacity of the rival is stronger. Theoretical and managerial implications of these findings are discussed.

Reverse channel choice in a closed-loop supply chain with new and differentiated remanufactured goods

ABSTRACTThis study deals with the problem of manufacturer’s choice of alternative reverse channel structures for collecting end-of-use products from consumers. We consider a two-echelon supply chain with one manufacturer and one retailer, based on which three reverse channel formats are proposed: an integrated model, manufacturer collection model, and retailer collection model. The main reason behind developing the models is to investigate how the wholesale price, the retail price, the collection rate, and the total channel profits are affected by the choice of the reverse channel structure. The three models are formulated as supply-constrained multi-variated optimization models and solved by using Lagrangian relaxation scheme. Our research findings suggest that the manufacturer tends to choose the direct collection system for a lower remanufacturing cost and a higher discount valuation of the remanufactured goods and to choose the indirect collection system for a lower collecting cost by the retailer.

Price Coordination in Closed-loop Data Supply Chain

By focusing on new features of data products and, based on game theoretical models, we study three pricing mechanisms' performance and their effects on the participants in the data industry from the data supply chain perspective. A win-win pricing strategy for the players in the data supply chain is proposed. We obtain analytical solutions in each pricing mechanism, including the decentralised and centralised pricing, Nash bargaining pricing, and revenue sharing mechanism. Our findings show that: 1) the decentralised pricing has the lowest performance; 2) although Nash bargaining pricing can achieve the centralised channel performance, the upstream data provider and downstream application provider can only equally divide the total channel profit; 3) revenue sharing mechanism, in which the data provider subsidises the application provider, can achieve the first best performance and divide the maximum profit arbitrarily. Accordingly, end-users benefit mostly from the bargaining pricing and revenue sharing.

Price Coordination in Closed-Loop Data Supply Chain

In this paper, we study pricing mechanisms’ performance and their effects on the participants in the data industry. We obtain analytical solutions in three pricing mechanisms, including the decentralized and centralized pricing, Nash Bargaining pricing, and revenue sharing mechanism. Our first result show that the decentralized pricing has the lowest performance. We also find that revenue sharing mechanism can achieve the first best performance and divide the maximum profit arbitrarily. Nash Bargaining pricing can achieve the centralized channel performance, the upstream data provider and downstream application provider can only equally divide the total channel profit.

Coordinating Data Pricing in Closed-Loop Data Supply Chain with Data Value Uncertainty

By focusing on new features of data products and, based on game theoretical models, we study three pricing mechanisms’ performance and their effects on the participants in the data industry from the data supply chain perspective. A win-win pricing strategy for the players in the data supply chain is proposed. We obtain analytical solutions in each pricing mechanism, including the decentralized and centralized pricing, Nash Bargaining pricing, and revenue sharing mechanism. Our findings show that: (1) the decentralized pricing has the lowest performance; (2) although Nash Bargaining pricing can achieve the centralized channel performance, the upstream data provider and downstream application provider can only equally divide the total channel profit; (3) revenue sharing mechanism, in which the data provider subsidizes the application provider, can achieve the first best performance and divide the maximum profit arbitrarily. Accordingly, end-users benefit mostly from the bargaining pricing and revenue sharing.

Managing channel profit and total surplus in a closed-loop supply chain network

Today’s government is interested in the product recovery programme in order to encourage sustainability. The research develops four closed-loop supply chain models by considering different scenarios for the governmental subsidies and fees under price-sensitive demand. Analytical results suggest that the government should provide subsidies to the manufacturer to maximise channel profit and total surplus. Higher subsidies advocates a manufacturer’s intention to lean towards remanufacturing activities under given manufacturing and consumption fees scenarios. The sensitivity analysis reveals that the total surplus and channel profit increases as subsidies increase in all closed-loop supply chain models.

Managing economic and social profit of cooperative models in three-echelon reverse supply chain for waste electrical and electronic equipment

In addition to maximizing economic benefits, reverse supply chains should further seek to maximize social benefits by increasing the quantity of waste electrical and electronic equipment (WEEE). The paper investigates cooperative models with different parties in a three-echelon reverse supply chain for WEEE consisting of a single collector, a single remanufacturer, and two retailers based on complete information. In addition, the optimal decisions of four cooperative models and the effect of the market demand of remanufactured WEEE products and the market share of two retailers on the optimal decisions are discussed. The results indicate that optimal total channel profit and recycle quantity in a reverse supply chain are maximized in a centralized model. The optimal total channel profit and recycle quantity increase with an increase in the market demand of remanufactured WEEE products. The three-echelon reverse supply chain consisting of duopolistic retailers maximizes total channel profit and recycle quantity in a reverse supply chain for WEEE.

Coordination strategies in a three-echelon reverse supply chain for economic and social benefit

• The four coordination strategies of a three-echelon reverse supply chain are studied. • Optimal coordination policies in four models are compared. • The completely centralized model maximizes the total channel profit as well as the recycle quantity. • The utilization ratio of used products as well as the magnitude of market size could significantly affects the optimal policy. In addition to seeking profit maximization, reverse supply chains should further seek to maximize social benefit. Consequently, this paper investigates the coordination strategies among different parties in a three-echelon reverse supply chain consisting of a single collector, a single remanufacturer, and two retailers with complete information sharing. Additionally, this paper discusses four coordination strategies and performs a detailed comparative analysis on the optimal decisions of different models. Three numerical analyses are performed to show how the potential market demand of remanufactured products and the utilization ratio of used products affect the optimal total channel profit, recycle quantity and retail prices among four models in a reverse supply chain. The results indicate that optimal total channel profit and recycle quantity in a reverse supply chain are maximized in a centralized model. With the same potential market demand of remanufactured products and utilization ratio of used products, a centralized model maximizes the economic and social benefit compared to the other three models.

Advertising and price competition in a manufacturer-retailer channel

We investigate how manufacturers' advertising competition, when advertising has a dynamic impact on the goodwill that affects market demand, interacts with the price competition in a manufacturer-retailer channel. Specifically, we examine the strategic choices made by manufacturers, the role of the retailer in exacerbating or mitigating competition among manufacturers, the total channel profit and how that is split among the different players. Using prices, sales, and advertising data in the laundry detergent category we find that advertising and pricing are strategic complements as manufacturer advertising increases the price elasticity of demand; advertising competition intensifies price competition but it also improves the profitability of manufacturers; the presence of retailers in the channel leads to increased advertising spending while mitigating the extent of price competition. Manufacturers can enjoy a higher profit from using retailers when they compete in both price and advertising. Finally, we show that the emergence of ecommerce, which enables manufacturers directly selling to end consumers, has asymmetric profit impacts on manufacturers, as brands with lower cost and lower brand goodwill are more benefited from ecommerce.

Reverse and closed loop supply chain coordination by considering government role

Due to the increasing number of end-of-life (EOL) products and their related environmental concerns, much attention has been paid to reverse logistics. In this paper, we consider a two-echelon reverse supply chain (RSC) with one manufacturer and one retailer who try to improve sustainable consumption by increasing customers’ willingness to return used products through offering a discount or a direct fee in exchange for bringing back EOL products. Afterward, the model is extended to consider a closed loop supply chain (CLSC). Quantity discounts and increasing fee contracts are proposed to coordinate supply chains. Then, government role in improving coordinated supply chains through donating different incentives (tax exemption and subsidy) to supply chain members are analyzed. Results show that total channel profit in the coordinated case is improved. Also, in the proposed models, each member has enough motives to participate in the plan. In addition, results demonstrate that government-sponsored incentives to the manufacturer are preferred to the retailer.

Assessing the profitability of cooperative advertising programs in competing channels

A large literature studied the profitability (effectiveness) of cooperative advertising programs (CAPs) in distribution channels, but very few studies modeled pricing decisions in competitive markets under different channel structures. This paper fills this gap. We propose a game-theoretic model where two competing channels make pricing and promotional decisions. The effectiveness of CAPs is studied under different channel structures to examine how vertical and horizontal externalities can impact the effectiveness of CAPs. Each channel structure can be integrated or decentralized to account for different vertical interaction effects, resulting in three cases: (i) both channels are decentralized (DD), (ii) both are integrated (II), and (iii) a hybrid structure where one channel is decentralized and is competing with an integrated channel (DI). We solve six non-cooperative games: (1) both manufacturers offer CAPs under DD, (2) only one manufacturer offers a CAP under DD, (3) both manufacturers do not offer CAPs under DD, (4) the decentralized manufacturer offers a CAP under DI, (5) the decentralized manufacturer does not offer a CAP under DI, and (6) the channel problem under II. Then, we obtain and compare equilibrium profits and strategies across these games. The main results indicate that the profitability of CAPs depends on the levels of price competition and of the advertising effects. Also, while manufacturers benefit from CAPs, retailers may not find such programs profitable. Finally, the decentralized or integrated structure of the competing channel significantly impacts the effects of cooperative advertising. For example, CAPs can effectively coordinate the DD channel and even help it exceed profits earned by a vertically integrated channel. However, in the DI case, although CAPs can improve total channel profits, they do not fully coordinate the channel.

Cooperative advertising for competing manufacturers: The impact of long-term promotional effects

The effectiveness of cooperative advertising programs is studied in a market where two competing manufacturers deal with an exclusive retailer and two products. Two two-stage game theoretic models are developed to analyze the long-term effects of retailer's promotions, which can be positive or negative, on the effectiveness of cooperative advertising. Closed-form equilibrium solutions are obtained and compared. We find that the level of product substitutability and the sign and magnitude of the long-term effects of retailer's promotions on sales determine whether cooperative advertising should be offered and accepted by the manufacturers and retailer. In particular, depending on the level of product substitutability, cooperative advertising can benefit both the manufacturers and retailer even when retailer's promotions negatively affect future sales. Conversely, it may not be in the interest of the manufacturers to offer cooperative advertising when the products are fairly undifferentiated regardless of the nature of the long-term effects of promotions. Finally, the manufacturers and retailer may refuse to respectively offer or participate in cooperative advertising programs that enhance total channel profits.