Title: Adjusted-Stackelberg scheme in applying profit-sharing to coordinate dual channel supply chain

Authors: Erwin Widodo; I Nyoman Pujawan; Budi Santosa

Addresses: Department of Industrial Engineering, Institut Teknologi Sepuluh Nopember, Surabaya, 60111, Indonesia ' Department of Industrial Engineering, Institut Teknologi Sepuluh Nopember, Surabaya, 60111, Indonesia ' Department of Industrial Engineering, Institut Teknologi Sepuluh Nopember, Surabaya, 60111, Indonesia

Abstract: Dual channel supply chain (DCSC), a structure of simultaneous sales through conventional store and online facility has been gaining popularity. However, besides its potential, DCSC also comes with its inner-competition, i.e., between incumbent conventional store and newly introduced online facility. This situation leads to the necessity of an effective coordination mechanism. We propose an approach of profit sharing based on an adjusted-Stackelberg-equilibrium result on DCSC prices. Our approach is simply practical unlike the complicated full-coordination of Bertrand scheme but is able to offer higher total DCSC profit than the original Stackelberg scheme.

Keywords: dual channel supply chains; DCSC; profit sharing; Stackelberg equilibrium; supply chain management; SCM; supply chain coordination.

DOI: 10.1504/AJMSA.2013.056006

Asian Journal of Management Science and Applications, 2013 Vol.1 No.1, pp.50 - 66

Received: 17 Dec 2012
Accepted: 18 Dec 2012

Published online: 23 Aug 2013 *

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