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Lateral inventory transshipment problem in online-to-offline supply chain

Author

Listed:
  • Fuguo Zhao
  • Desheng Wu
  • Liang Liang
  • Alexandre Dolgui

Abstract

Online-to-offline (OTO) is a new commercial model with enormous market potential. Online customer orders are forwarded to the offline brick-and-mortar store to fulfil, which is a combination of dual-channel supply chain. OTO overcomes many disadvantages of the traditional dual-channel supply chain, but still faces uncertain market demand. To reduce the inventory risk caused by demand uncertainty, lateral inventory transshipment is employed in this paper to pool inventory risk in OTO supply chain. We model centralised OTO and decentralised OTO with/without transshipment, and then analyse different scenarios. Our results demonstrate that there exists a unique Nash equilibrium of inventory order levels in dual channels and an optimal transshipment price to maximise the profit of the entire supply chain. Finally, we provide a numerical example of uniform demand distribution. Our analyses offer many managerial insights and show that transshipment always benefits the OTO supply chain.

Suggested Citation

  • Fuguo Zhao & Desheng Wu & Liang Liang & Alexandre Dolgui, 2016. "Lateral inventory transshipment problem in online-to-offline supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 1951-1963, April.
    • Handle: RePEc:taf:tprsxx:v:54:y:2016:i:7:p:1951-1963
    DOI: 10.1080/00207543.2015.1070971
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    Cited by:

    1. Zhisong Chen & Shong-Iee Ivan Su, 2021. "Consignment supply chain cooperation for complementary products under online to offline business mode," Flexible Services and Manufacturing Journal, Springer, vol. 33(1), pages 136-182, March.
    2. Dehghani, Maryam & Abbasi, Babak, 2018. "An age-based lateral-transshipment policy for perishable items," International Journal of Production Economics, Elsevier, vol. 198(C), pages 93-103.
    3. Min Wang & Jiao Ouyang & Lindu Zhao, 2021. "Production planning with transshipment in a global supply chain under different carbon trading mechanisms," Operational Research, Springer, vol. 21(4), pages 2309-2331, December.
    4. Chun-Hung Chiu & Gang Hao & Xin Dai & Hang Xie, 2020. "Inventory sharing of professional optics product supply chain with equal power agents," Annals of Operations Research, Springer, vol. 291(1), pages 169-194, August.
    5. Gan Wan & Gang Kou & Tie Li & Feng Xiao & Yang Chen, 2020. "Pricing Policies in a Retailer Stackelberg O2O Green Supply Chain," Sustainability, MDPI, vol. 12(8), pages 1-16, April.
    6. Zhisong Chen & Li Fang & Shong-Iee Ivan Su, 2021. "The value of offline channel subsidy in bricks and clicks: an O2O supply chain coordination perspective," Electronic Commerce Research, Springer, vol. 21(2), pages 599-643, June.
    7. Yongchang Wei & Fangyu Chen & Feng Xiong, 2018. "Dynamic Complexities in a Supply Chain System with Lateral Transshipments," Complexity, Hindawi, vol. 2018, pages 1-15, June.
    8. Xiaohong Yu & Sujuan Wang & Xindong Zhang, 2019. "Ordering Decision and Coordination of a Dual-Channel Supply Chain with Fairness Concerns Under an Online-to-Offline Model," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 36(02), pages 1-26, April.
    9. Bingbing Cao & Tianhui You & Chunyi Liu & Jian Zhao, 2021. "Pricing and Channel Coordination in Online-to-Offline Supply Chain Considering Corporate Environmental Responsibility and Lateral Inventory Transshipment," Mathematics, MDPI, vol. 9(20), pages 1-30, October.
    10. Alawneh, Fawzat & Zhang, Guoqing, 2018. "Dual-channel warehouse and inventory management with stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 84-106.
    11. Feng, Xuehao & Moon, Ilkyeong & Ryu, Kwangyeol, 2017. "Warehouse capacity sharing via transshipment for an integrated two-echelon supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 104(C), pages 17-35.
    12. Silbermayr, Lena, 2020. "A review of non-cooperative newsvendor games with horizontal inventory interactions," Omega, Elsevier, vol. 92(C).
    13. Xiaohong Yu & Sujuan Wang & Xindong Zhang, 2019. "The Impact of Fairness Concerns on the Formation of Retailers Alliance with Consideration of Transshipment," Sustainability, MDPI, vol. 11(3), pages 1-19, January.
    14. Feng, Pingping & Wu, Feng & Fung, Richard Y.K. & Jia, Tao, 2018. "Evaluation of two transshipment policies in a two-location decentralized inventory system under partial backordering," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 207-224.
    15. Li, Ying & Liao, Yi & Hu, Xinxin & Shen, Wenjing, 2020. "Lateral transshipment with partial request and random switching," Omega, Elsevier, vol. 92(C).
    16. Zhang, Peng & He, Yong & Zhao, Xuan, 2019. "“Preorder-online, pickup-in-store” strategy for a dual-channel retailer," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 27-47.
    17. Hongyan Dai & Peng Liu, 2020. "Workforce planning for O2O delivery systems with crowdsourced drivers," Annals of Operations Research, Springer, vol. 291(1), pages 219-245, August.
    18. Yi Liao & Jun Li & Xinxin Hu & Ying Li & Wenjing Shen, 2020. "Application of Lateral Transshipment in Cost Reduction of Decentralized Systems," Sustainability, MDPI, vol. 12(12), pages 1-21, June.
    19. Difrancesco, Rita Maria & van Schilt, Isabelle M. & Winkenbach, Matthias, 2021. "Optimal in-store fulfillment policies for online orders in an omni-channel retail environment," European Journal of Operational Research, Elsevier, vol. 293(3), pages 1058-1076.
    20. Qiu, Ruozhen & Sun, Yue & Sun, Minghe, 2022. "A robust optimization approach for multi-product inventory management in a dual-channel warehouse under demand uncertainties," Omega, Elsevier, vol. 109(C).
    21. Taleizadeh, Ata Allah & Sadeghi, Razieh, 2019. "Pricing strategies in the competitive reverse supply chains with traditional and e-channels: A game theoretic approach," International Journal of Production Economics, Elsevier, vol. 215(C), pages 48-60.
    22. Aldrighetti, Riccardo & Battini, Daria & Ivanov, Dmitry & Zennaro, Ilenia, 2021. "Costs of resilience and disruptions in supply chain network design models: A review and future research directions," International Journal of Production Economics, Elsevier, vol. 235(C).
    23. Zümbül Atan & Lawrence V. Snyder & George R. Wilson, 2018. "Transshipment policies for systems with multiple retailers and two demand classes," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(1), pages 159-186, January.

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