Coordination and strategic decision making in a stochastic dual-channel supply chain based on customers’ channel preferences

The corona virus pandemic situation has changed customers’ purchasing habits and this change can be lasting. As a consequence, new marketing patterns need to be identified and appropriate strategies need to be adopted to reach the majority of consumers. The current paper explores a dual channel supply chain considering the impact of customers’ channel preferences under a stochastic demand environment. The influences of retailers’ cooperative advertising and manufacturers’ direct online services on the channel’s best decisions and coordination have been investigated. The model analyzes the best decisions and benefits of single and dual-channel strategies under centralized and decentralized decisions. Based on customers’ channel preferences, the proposed model identifies some regions and the corresponding best-profit channel strategies that are preferred by each member of the chain and the whole chain. The numerical simulation of the proposed model confirms that in dual-channel marketing, cooperative advertising and online services are beneficial to the manufacturer and the whole supply chain but detrimental to the traditional retailer. The scope for dual-channel use becomes wider when the manufacturer offers a return policy to the seller. The decentralized situation of the proposed dual-channel model has been coordinated by sharing cooperative advertising costs and adopting a return policy. Finally, the proposed paper analyzes the sensitivity of key parameters and provides some managerial insights for choosing an optimal channel strategy.