Transshipments in dual-channel supply chain

This paper analyzes the transshipment operations in a dual-channel supply chain, which includes a traditional retail channel and an online direct channel. Previous study has shown that the implementation of transshipment among integrated firms can improve the revenue and customer service level, and also reduce the quantity of inventory. But in the dual-channel supply chain, firm in the traditional retail channel is competing for customers with the firm in the online direct channel. Can the transshipment operation still improve the performance of both firms when customers switching exists? There is little literature addressing this problem. To fill this gap we compared the transshipment strategy with non-transshipment strategy between competitive firms in a dual channel supply chain. It is concluded that transshipment operations do benefit both firms, subjecting to the customer switching rate and the transshipment cost.