Manufacturer's channel and logistics strategy in a supply chain

We examine a manufacturer's channel selection and logistics strategies in a supply chain where the manufacturer can sell either through an e-tailer only (single channel) or through the e-tailer and also directly to the consumer (dual channel). With a dual-channel structure, the manufacturer needs to decide how to deliver products sold in its own direct channel: an independent logistics system or the e-tailer's logistics system. We identify the manufacturer's optimal channel selection and logistics strategies. The results show that the manufacturer's channel decision depends on the logistics gap between channels and the self-demand sensitivity. When the logistics gap is relatively large and the self-demand sensitivity is small, introducing a direct channel reduces the manufacturer's profit. When both the logistics gap and self-demand sensitivity are large, the manufacturer should choose the dual-channel structure and use the e-tailer's logistics. When the logistics gap is small, the manufacturer should choose the dual-channel structure and use its own logistics system. We also examine the implications of promised delivery time (PDT) in the direct channel and show that PDT makes the direct channel more attractive and the manufacturer is more likely to adopt the dual-channel strategy.