2017 : PRICING STRATEGIES OF DETERIORATING PRODUCT IN DUAL CHANNEL SUPPLY CHAIN TO MANAGE LOCAL PRODUCT’S DEMAND AND REVENUE

Erwin Widodo ST., M.Eng.
Dody Hartanto ST., MT.

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Type

RESEARCH

Keywords

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Abstract

The advent of internet has given significant reformation in almost all practices in industry, including supply chain structures and operations. Before the introduction of the internet, supply chain practitioners used conventional or offline channel to deliver their products or services to customers. Once the internet has been introduced for public use, supply chain managers utilized online channel as their online catalog, point of order, or online sales outlet. In order to widen their market range, to respond to customers’ behavior change, and increase supply chain profitability, people start combining both online and offline channel as a new and complementary structure. Such mixture is known as dual channel supply chain (DCSC hereinafter).\nAt the beginning, non-deteriorating (ND in short) products such as books are sold under DCSC. Later on music, movies, electronics, apparels, tickets and even foods are also available in this structure. In recent practice, it is not only ND but also deteriorating products are taking place in DCSC hot list items. Some advancing ideas have been contributed to smoothen the operations of DCSC, however there are still a lot of interesting issues to research, including how to handle specific pricing for deteriorating products in DCSC.\nThis research attempts to study pricing strategy for deteriorating product. The typical property for such product is an implementation of dynamic pricing both for two types of deteriorating product, namely perishable and decaying product. The dynamic pricing mathematical representation is appended to basic online and offline demand function of DCSC which have been developed in author’s previous work series. Afterward, these model components are utilized to construct several objective function as well as corresponding constraints representing some scenarios considered. Two classical coordination contrasts in game theory viewpoint in managing DCSC are modeled, namely centralized and decentralized scenario. Centralized scenario is treated as vertical Nash game, meanwhile decentralized scenario is treated by two options i.e. online and offline-Stackelberg game. Afterwards by using analytical approach, optimum prices for all scenarios and all player under discussion could be proposed. Up to this stage, theoretical approach should be brought forward as the first research benefit.\nTo validate proposed model sets some industrial cases are selected. The results, together with sensitivity analysis based on a number of important system parameters, are then discussed. By relying on validation and sensitivity analysis results, some managerial implication could also be provided as the second research benefit. By applying these results, DCSC managers will be provided reliable insights prior to making their daily operational decisions.\nBy the end of the proposed year 2017, the targeted seminar for publication of this research is . Following the second and the third conference publications, to sum up, a paper to be submitted to Operations Research Letter by Elsevier Publisher will be submitted in the year of 2019. \n\nKeywords: dual channel supply chain, deteriorating product, pricing, game theory