Optimal Decisions in a Dual-channel Supply Chain for the Substitute Products with the Special Orders under DisruptionRisk and Brand Consideration

Authors

Department of Industrial Engineering, Faculty of Engineering, Kharazmi University, Tehran, Iran

Abstract

In this paper, a three-echelon supply chain , including two producers, distributor and retailer who produce products in different brands have been considered. Any manufacturer, has a separate channel and the exclusive retailer offers their products, which have been prepared from the distributor (exclusive market) with discount or other manufacturer. In this paper pricing decisions on substitute products with different brands on the market has been developed in exclusive and non-exclusive markets for loyal and indifferent customers. The demand for products depend on the distance from brand and ideal product prices. In this model retailer buys product from distributor, but as in the real world ,we face with disruption risk in each channel between the retailer and distributor, only some percentage of orders will be met by distributor and the remains will be done as special orders by manufacturer. The aim of this paper is maximizing the profitability of the entire supply chain, so that optimal selling price to be determined in every channel. Finally, numerical examples and sensitivity analysis have been done on them .

Keywords


1.     Moorthy, K.S., “Using game theory to model competition”, Journal of Marketing Research,  Vol. 22, No. 3, (1985), 262-282.

2.     Taleizadeh, A.A. and Noori-daryan, M., “Pricing, inventory and production policies in a supply chain of pharmacological products with rework process: A game theoretic approach”, Operational Research,  Vol. 16, No. 1, (2016), 89-115.

3.     Karakul, M. and Chan, L.M.A., “Analytical and managerial implications of integrating product substitutability in the joint pricing and procurement problem”, European Journal of Operational Research,  Vol. 190, No. 1, (2008), 179-204.

4.     Karakul, M. and Chan, L.M.A., “Joint pricing and procurement of substitutable products with random demands–a technical note”, European Journal of Operational Research,  Vol. 201, No. 1, (2010), 324-328.

5.     Chen, Y.C., Fang, S.-C. and Wen, U.-P., “Pricing policies for substitutable products in a supply chain with internet and traditional channels”, European Journal of Operational Research,  Vol. 224, No. 3, (2013), 542-551.

6.     Zhao, J., Tang, W. and Wei, J., “Pricing decision for substitutable products with retail competition in a fuzzy environment”, International Journal of Production Economics,  Vol. 135, No. 1, (2012), 144-153.

7.     Rasouli, N. and Kamalabadi, I.N., “Joint pricing and inventory control for seasonal and substitutable goods mentioning the symmetrical and asymmetrical substitution”, International Journal of Engineering-Transactions C: Aspects,  Vol. 27, No. 9, (2014), 1385-1394.

8.     Yazdi, A.A. and Honarvar, M., “A two stage stochastic programming model of the price decision problem in the dual-channel closed-loop supply chain”, International Journal of Engineering-Transactions B: Applications,  Vol. 28, No. 5, (2015), 738-745.

9.     Esmaeilzadeh, A. and Taleizadeh, A.A., “Pricing in a two-echelon supply chain with different market powers: Game theory approaches”, Journal of Industrial Engineering International,  Vol. 12, No. 1, (2016), 119-135.

10.   Khamseh, A.A., Soleimani, F. and Naderi, B.,“Pricing decisions for complementary products with firm's different market powers in fuzzy environments”, Journal of Intelligent & Fuzzy Systems,  Vol. 27, No. 5, (2014), 2327-2340.

11.   Wong, H. and Eyers, D., “An analytical framework for evaluating the value of enhanced customisation: An integrated operations-marketing perspective”, International Journal of Production Research,  Vol. 49, No. 19, (2011), 5779-5800.

12.   Xia, N. and Rajagopalan, S., “Standard vs. Custom products: Variety, lead time, and price competition”, Marketing science,  Vol. 28, No. 5, (2009), 887-900.

13.   Xiao, T., Shi, J. and Chen, G., “Price and leadtime competition, and coordination for make-to-order supply chains”, Computers & Industrial Engineering,  Vol. 68, (2014), 23-34.

14.   Xanthopoulos, A., Vlachos, D. and Iakovou, E., “Optimal newsvendor policies for dual-sourcing supply chains: A disruption risk management framework”, Computers & Operations Research,  Vol. 39, No. 2, (2012), 350-357.

15.   Ledari, A.M., Pasandideh, S.H.R. and Koupaei, M.N., “A new newsvendor policy model for dual-sourcing supply chains by considering disruption risk and special order”, Journal of Intelligent Manufacturing,  Vol. 29, No. 1, (2018), 237-244.

16.   Qi, L., “A continuous-review inventory model with random disruptions at the primary supplier”, European Journal of Operational Research,  Vol. 225, No. 1, (2013), 59-74.