Application of Distribution-Free Approach in Integrated and Dual-Channel Supply Chain Under Buyback Contract

Application of Distribution-Free Approach in Integrated and Dual-Channel Supply Chain Under Buyback Contract

Rekha Guchhait (Banasthali Vidyapith, India), Sarla Pareek (Banasthali Vidyapith, India) and Biswajit Sarkar (Hanyang University, South Korea)
DOI: 10.4018/978-1-5225-3232-3.ch021
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Abstract

Customer's aim is to obtain good quality products with less effort. Nowadays, the preference of online selling is very high compare to offline selling. A dual channel supply chain model is introduced to control the quality of products with more profit using buyback contract by reducing lost sale costs. Manufacturer sells product through retail and e-tail channel, i.e., by dual channel. Demand of products depends on e-tail price, retail price, demand sensitivity, advertisement of retail channel, service level of e-tail channel, and delivery cost e-tail channel. This delivery cost has inverse impact on demand of e-tail chain. This study finds the maximum profit for each case and compares results when advertisement and service level are not present in supply chain. The model is solved for centralized and decentralized ways for RC (retail channel) using Stackelberg game policy, EC (e-tail channel), and DC (dual channel). Numerical results give that the model obtains maximum profit at optimum point. Sensitivity analysis is conducted to test the effects of key parameters of the model.
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Introduction

Competition in business is going on day by day as number of production houses, manufactures, and companies increase and associate with those, business politics are changing rapidly. Choice of customers is also changing as lifestyle of people is changed. New generations are tech-savvy and the old generations still believe in traditional system. Customers are thus divided into two categories. Traditional retail chain and direct online chain are two types of business strategies and dual channel is the combination of traditional and direct channel. Companies take care both of these two types of customers into their service. Dual supply chain model for a single-type of products is the platform to reach both types of customers. Taking as an example, Samsung sells their mobile phones through both retail outlet and online by some third party namely, Flipcart, Snapdeal etc. Some customers would live to buy mobile from outlet and rests are interested about online shopping, they can choose their choice. E-tail channel has also are placement policy for customers of the product within a certain time period for any problem with that product. When a company offers dual chain for a single type of products, it must be assured that the wholesale price for the retailer must be less than the direct channel price for the customer. Advertisement about the product is a wider way to increase the popularity and reach to remote people easily. To introduce these ideas, the best platform is to use integrated model or supply chain model.

A deterministic integrated inventory model for single-vendor single-buyer had been investigated by Shah and Gor (2009). They considered that received lot size was random variable having mean and variance and a trade credit period is offered by vendor to attract buyer. Deterministic economic order quantity (EOQ) model having imperfect products was studied by Jaggi and Mittal (2011) where percentage of defected random variable followed uniform distribution. Joshi and Soni (2011) investigated an inventory model with service level constraint in a stochastic environment. In that model, demand was assumed as fuzzy and demand during lead time was also fuzzy demand. Shah et al. (2012) observed a pricing and ordering based integrated inventory model under trade credit policy where demand was deterministic and quadratic in nature. A supply chain must contain at least two participants. Pal et al. (2014) worked on a two-echelon supply chain model having different pricing and ordering policy. Supply chain consisted two cycles and production rate of imperfect products was random. Modak et al. (2014) worked on a dual chain system under corporate social responsibility in centralized and decentralized case. After single type of product, Cárdenas-Barrón and Sana (2015) studied a multi-item EOQ model with two-layer supply chain model having promotional effect. Supply chain coordination of vendor and buyer in an imperfect production system had been observed by Khanna et al. (2016) under trade credit financing. A dual channel system under deterministic demand for customized products under consignment policy was studied by Batarfi et al. (2016). Liu et al. (2016) studied a dual supply chain model to observe the effect of risk aversion under complete and asymmetric information case. Panda et al. (2017) investigated a supply chain in two different ways, namely, profit relative to corporate social responsibility (CSR) and profit for closed loop supply chain (CLSC) using recycling of products. Giri et al. (2017) studied forward and reverse dual supply chain under five different scenarios. Xie et al. (2017) observed revenue sharing policy in a dual chain in both forward and reverse channel. A two-echelon supply chain model was constructed by Sarkar et al. (2017) with quality improvement and setup cost reduction.

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