Optimal dual-channel supply chain configuration for product categories with different customer preference of online channel

This study addresses the supply chain configuration problem of manufacturer faced with multiple channel choices. We investigate the optimal combination of traditional and online sales channels for different product categories with differing customer preference of the online channel. We have considered three distinct dual-channel supply chain configurations comprising of a manufacturer, a traditional channel and an online channel viz. retailer–e-tailer; company store–e-tailer; and retailer–e-marketplace. As the manufacturer will face a quantity allocation decision between traditional and online channels, the competition is modeled using Cournot model with the manufacturer as the Stackelberg leader. Values of optimal order quantity and price for the different entities have been established. Influence of variation in customer preference of online channel on the optimal policies is also examined. We find that the manufacturer prefers retailer–e-marketplace configuration for products with high customer preference of online channel and company store–e-tailer configuration for products with low customer preference of online channel. In addition, we find that the retailer–e-tailer configuration is dominated by company store–e-tailer and retailer–e-marketplace configuration irrespective of the product’s customer preference of online channel.