Location-based pricing and channel selection in a supply chain: a case study from the food retail industry

Chen Wei, Sobhan Asian, Gurdal Ertek, Zhi Hua Hu

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

Many retailers nowadays operate in an Internet-enabled dual-channel supply chain setting, referred to as “click and mortar”. In such a structure, products and services are delivered through both online B2C (business-to-consumer e-tail) and offline B2C (traditional brick and mortar retail) channels. In this paper, we develop and present a unified modeling approach that reflects a real-world dual-channel supply chain in the food retail industry. Motivated by the actual business operations of a case study, we incorporate the spatial locations of customers, as well as other logistics and operational costs, into the service provider’s pricing and the customers’ channel choice decisions. We develop two models, namely the benchmark and proposed models, and conduct extensive numerical experiments with parameter values centered on actual values. The results reveal that the ratio of online and offline profit to the total dual-channel profit vary significantly, depending on the locations of customers and the values of the logistics costs. In addition, our statistical and visual analysis suggest that by jointly optimizing the logistics and operational processes, the service provider can achieve a considerably high profit through both channels, without necessarily expanding the size of its geographical service areas.

Original languageEnglish
Pages (from-to)959-984
Number of pages26
JournalAnnals of Operations Research
Volume291
Issue number1-2
DOIs
Publication statusPublished - Aug 1 2020
Externally publishedYes

Keywords

  • Channel selection
  • Dual-channel supply chains
  • E-commerce logistics
  • Food retail industry
  • Location-based pricing

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research

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