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The value of virtual pooling in dual sales channel supply chains

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  • Mahar, Stephen
  • Bretthauer, Kurt M.
  • Venkataramanan, M.A.

Abstract

Recently the most significant growth in online retailing has been attributed to traditional offline retailers extending their brands online. Unfortunately, there is little research addressing the value of better information in retail/e-tail organizations. To fill this gap, this paper examines how investing in the continuous monitoring of online demands and inventory positions can provide economic benefit for companies that handle both in-store and online sales. Specifically, we develop and evaluate two dynamic assignment policies that incorporate real time information to specify which of a firm's e-fulfillment locations will handle each of its Internet sales. Computational results indicate that investing in dynamic assignment capability can reduce system cost (holding, backorder, and transportation) by as much as 8.2% over the optimal static policy. The percentage of sales occurring online plays a critical role in determining the magnitude of the benefit.

Suggested Citation

  • Mahar, Stephen & Bretthauer, Kurt M. & Venkataramanan, M.A., 2009. "The value of virtual pooling in dual sales channel supply chains," European Journal of Operational Research, Elsevier, vol. 192(2), pages 561-575, January.
    • Handle: RePEc:eee:ejores:v:192:y:2009:i:2:p:561-575
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    4. Ross, Anthony & Khajehnezhad, Milad & Otieno, Wilkistar & Aydas, Osman, 2017. "Integrated location-inventory modelling under forward and reverse product flows in the used merchandise retail sector: A multi-echelon formulation," European Journal of Operational Research, Elsevier, vol. 259(2), pages 664-676.
    5. Yan, Tingting & Rabinovich, Elliot & Dooley, Kevin & Evers, Philip T., 2010. "Managing backlog variation in order fulfillment: The case of Internet retailers," International Journal of Production Economics, Elsevier, vol. 128(1), pages 261-268, November.
    6. Gabor, Adriana F. & van Ommeren, Jan-Kees & Sleptchenko, Andrei, 2022. "An inventory model with discounts for omnichannel retailers of slow moving items," European Journal of Operational Research, Elsevier, vol. 300(1), pages 58-72.
    7. Zhang, Yuankai & Sun, Lijun & Hu, Xiangpei & Zhao, Chen, 2019. "Order consolidation for the last-mile split delivery in online retailing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 309-327.
    8. Xu, Xun & Jackson, Jonathan E., 2019. "Examining customer channel selection intention in the omni-channel retail environment," International Journal of Production Economics, Elsevier, vol. 208(C), pages 434-445.
    9. Ishfaq, Rafay & Bajwa, Naeem, 2019. "Profitability of online order fulfillment in multi-channel retailing," European Journal of Operational Research, Elsevier, vol. 272(3), pages 1028-1040.
    10. Hübner, Alexander & Hense, Jonas & Dethlefs, Christian, 2022. "The revival of retail stores via omnichannel operations: A literature review and research framework," European Journal of Operational Research, Elsevier, vol. 302(3), pages 799-818.
    11. Iacocca, Kathleen & Mahar, Stephen & Daniel Wright, P., 2022. "Strategic horizontal integration for drug cost reduction in the pharmaceutical supply chain," Omega, Elsevier, vol. 108(C).
    12. Chiang, Wei-yu Kevin, 2010. "Product availability in competitive and cooperative dual-channel distribution with stock-out based substitution," European Journal of Operational Research, Elsevier, vol. 200(1), pages 111-126, January.
    13. Ting Qu & Tianxiang Huang & Duxian Nie & Yelin Fu & Lin Ma & George Q. Huang, 2022. "Joint Decisions of Inventory Optimization and Order Allocation for Omni-Channel Multi-Echelon Distribution Network," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
    14. Goedhart, Joost & Haijema, René & Akkerman, Renzo & de Leeuw, Sander, 2023. "Replenishment and fulfilment decisions for stores in an omni-channel retail network," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1009-1022.
    15. John M. Andrews & Vivek F. Farias & Aryan I. Khojandi & Chad M. Yan, 2019. "Primal–Dual Algorithms for Order Fulfillment at Urban Outfitters, Inc," Interfaces, INFORMS, vol. 49(5), pages 355-370, September.

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