Optimal Decisions in a Dual-channel Supply Chain for the Substitute Products with Special Orders under Disruption Risk and Brand Consideration

In this paper, a three-echelon supply chain model, including two producers, distributor and retailer was considered, which both producers produce one kind of goods in different brands and qualities. Each manufacturer has its own channel that the retailer can offer exclusively its manufacturer s product and receives a discount on the purchase of the goods from the distributor (exclusive market) or offers the goods of both manufactrers (non-exclusive market). In this work, pricing decisions for the same substitute products were developed with different brands in the exclusive and non-exclusive markets. Customers are divided into two categories of loyal customers and indifferent customers whom the demand for products depends on the distance from the brand and the distance of the product prices from the ideal product prices. In this model, the retailer sells the required goods from the distributor, there may be a risk of discontinuity between the retailer and the distributor, in which case only a percentage of the retailer s order quantity can met by the distributor and the unsatisfied orders are directly purchased from the manufacturer on a special order. The purpose of this research is to maximize the total supply chain profit by application of game theory, which determines the optimal sales price in each supply chain. Finally, application of the model is illustrated by numerical examples and then sensitivity analysis was conducted on its important parameters.