Ordering Decision and Coordination of a Dual-Channel Supply Chain with Fairness Concerns Under an Online-to-Offline Model

Abstract

We introduce reference dependence to describe the fairness utility functions of channel members and model a dual-channel supply chain (one manufacturer and one retailer) in three scenarios: only the manufacturer is concerned with fairness, only the retailer is concerned with fairness, and both parties are concerned with fairness. The ordering decisions and coordination of a dual-channel supply chain under the online-to-offline (O2O) business model are studied. Nash equilibrium solutions exist for the channel order quantities in all three scenarios, and the inventory transshipment strategy can be used to coordinate the dual-channel supply chain under the O2O business model. Numerical examples are used to analyze the effectiveness and feasibility of coordination. The inventory transshipment strategy can be used to directly coordinate the dual-channel supply chain when only the manufacturer is concerned with fairness. The retailer feels unfair in the other two scenarios, which affects cooperation. To maintain cooperation with the retailer and achieve optimal supply chain efficiency and channel coordination, the manufacturer must compensate the retailer or choose one with fewer expectations regarding its channel status or fewer fairness concerns.