Inventory decisions of a dual-channel supply chain based on service level

With the development of Internet, more and more enterprises open a direct channel to attract more consumers who are accustomed to buy products online. This paper studies a dual-channel supply chain with one manufacturer who sells products through a direct channel and a retailer. The inventory and service problems are very important for firms in recent years. This paper studies the inventory decisions of the manufacturer and the retailer, and also studies the service level of the retailer. We also analyze the relationship between the optimal decisions and some important parameters. We use numerical examples to illustrate the equilibrium results. We find that, when the retailer provides services, the service level, the wholesale price and the inventory of the retail channel decrease with the service cost factor and increase with the sensitive coefficient of services. The inventory of the direct channel increases with the service cost factor and decreases with the sensitive coefficient of services. We also find that, when the service cost factor is small and the sensitive coefficient of services is not too small, the retailer´s profit and the manufacturer´s profit under (retailer) providing services can be larger than that under (retailer) providing no service.