The mechanism and scheme of product allocation in multi-channel distribution

The growth of internet and technology information increases the use of online sales. Manufacturers sell their products with traditional channels by retailers, but nowadays, they provide a drop-shipping channel for online sales, which brings many benefits for manufacturers and retailers. The supply c...

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Bibliographic Details
Main Authors: Devy, Nadia L., Masruroh, Nur A.
Format: Conference Proceeding
Language:English
Subjects:
Channels
Demand
Mathematical analysis
Mathematical models
Online sales
Optimization
Order quantity
Retail stores
Sales
Shipping
Supply chains
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Summary:The growth of internet and technology information increases the use of online sales. Manufacturers sell their products with traditional channels by retailers, but nowadays, they provide a drop-shipping channel for online sales, which brings many benefits for manufacturers and retailers. The supply chain provides allocation distribution by traditional channels, drop-shipping, and direct sales. The manufacturers’ limited capacity and inability to fulfill orders are common in a supply chain when there are low demand and high demand seasons. Therefore, the manufacturers face asymmetric allocation causing failure to meet the total order quantity. Retailers compete in a high season to maximize the allocation of their traditional channel. The manufacturer and the primary retailer optimize the number of the providing of the drop-shipping capacity product. In this research, the manufacturer has to make an allocation scheme and mechanism to maximize its profit. The mathematical model is developed to maximize the manufacturer’s profit which considers the primary retailer profit. The research successfully found the optimum value of proportion capacity for drop-shipping, the optimal order quantity of retailers in the low season period, and the best value of factor allocation for the traditional channel. Based on this case, we use multi objectives approach to maximize the supply chain profit. The result of this mathematical model is better than the existing system. A numerical study is also conducted to discuss the sensitivity to different demand levels.
ISSN:0094-243X
1551-7616
DOI:10.1063/5.0192421