Evaluating a Pricing Model in a Two-level Supply Chain by Integrating Traditional and Modern Channels with the Return Policy

Abstract

Objective: This study focuses on analyzing a pricing problem within a two-echelon supply chain, comprising a manufacturer and multiple retailers. It also explores the integration of various channels, including traditional, electronic, and omni-channels such as "Buy-Online-Pickup-in-Store", "Buy-Online-Deliver-to-Home", and "Order-in-Store-Deliver-to-Home". In addition, it seeks to develop a demand function dependent on product price and return policy in electronic channels, as well as delivery times for products. Accordingly, the present study aims to investigate and evaluate a pricing model considering various distribution channels in a single-period single-product environment and to provide a solution approach with valuable performance that can be used in real problems as a decision-making tool. It also tries to investigate the impact of various factors on the number of decision variables and the profit of the entire supply chain.Methods: The problem was formulated as a non-linear mathematical programming model and coded and implemented using GAMS software. Furthermore, several numerical examples were solved to investigate the effect of changes in some parameters on the values of decision variables, retailers' demand, and the total profit of the supply chain.Results:The results showed that the two parameters of price sensitivity of demand and return sensitivity of demand have a critical impact on decision variables including the retailer's sales price, return price, delivery time, and profit of the entire supply chain. Conclusion: This study proposed an integrated approach to evaluate the impact of pricing decisions and return policy in the supply chain. Therefore, it can serve as a valuable resource for companies in making operational decisions regarding the concurrent implementation of pricing decisions, product return policy, and delivery time. Online retailers can use the achieved results to make operational decisions regarding the application of the product return policy according to the presented analysis.

Keywords

• return policy
• pricing
• omni-channel distribution
• demand sensitivity
• supply chain management