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Capacity planning and allocation with multi-channel distribution

Author

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  • Xie, Wenming
  • Jiang, Zhibin
  • Zhao, Yingxue
  • Hong, Junjie

Abstract

In this paper, we study a multi-channel distribution system in which a manufacturer sells its product via an independent service provider and a direct selling market simultaneously. The manufacturer allocates its production capacity to the service provider, and then the service provider supplements some value-added services to the product to satisfy the demand of the downstream customers. We assume that the manufacturer's production capacity planning and allocation decisions are challenged by information asymmetry with the service provider and consider a two-stage model: at the first stage, the manufacturer determines the optimal production capacity based on the service provider's order reservation and the demand forecast in the direct selling market. At the second stage, the manufacturer allocates the production capacity, taking into account updated demand from the service provider and the direct selling market. In the paper, we propose several decision-making models and identify some structural properties for them. In addition, policies for production capacity allocation between the service provider and the direct selling market are developed with various different market scenarios. The numerical experiment results show that introducing direct selling market can significantly improve the system performance and the decision-making mechanism developed in the paper is feasible and effective for the system.

Suggested Citation

  • Xie, Wenming & Jiang, Zhibin & Zhao, Yingxue & Hong, Junjie, 2014. "Capacity planning and allocation with multi-channel distribution," International Journal of Production Economics, Elsevier, vol. 147(PA), pages 108-116.
    • Handle: RePEc:eee:proeco:v:147:y:2014:i:pa:p:108-116
    DOI: 10.1016/j.ijpe.2013.08.005
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    Cited by:

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    2. Tahirov, Nail & Glock, Christoph H., 2022. "Manufacturer encroachment and channel conflicts: A systematic review of the literature," European Journal of Operational Research, Elsevier, vol. 302(2), pages 403-426.
    3. Lu, Qihui & Chen, Xiangfeng, 2018. "Capacity expansion investment of supplier under make-to-order and make-to-stock supply chains," International Journal of Production Economics, Elsevier, vol. 198(C), pages 133-148.
    4. Elahi, Hamid & Pun, Hubert & Ghamat, Salar, 2023. "The Impact of Capacity Information on Supplier Encroachment," Omega, Elsevier, vol. 117(C).
    5. Li, Tingting & Xie, Jinxing & Zhao, Xiaobo, 2015. "Supplier encroachment in competitive supply chains," International Journal of Production Economics, Elsevier, vol. 165(C), pages 120-131.
    6. Saghiri, Soroosh & Wilding, Richard & Mena, Carlos & Bourlakis, Michael, 2017. "Toward a three-dimensional framework for omni-channel," Journal of Business Research, Elsevier, vol. 77(C), pages 53-67.
    7. Alexander Hübner & Andreas Holzapfel & Heinrich Kuhn, 2016. "Distribution systems in omni-channel retailing," Business Research, Springer;German Academic Association for Business Research, vol. 9(2), pages 255-296, August.
    8. Kim, Nayeon & Montreuil, Benoit & Klibi, Walid, 2022. "Inventory availability commitment under uncertainty in a dropshipping supply chain," European Journal of Operational Research, Elsevier, vol. 302(3), pages 1155-1174.
    9. Cannella, Salvatore & Dominguez, Roberto & Ponte, Borja & Framinan, Jose M., 2018. "Capacity restrictions and supply chain performance: Modelling and analysing load-dependent lead times," International Journal of Production Economics, Elsevier, vol. 204(C), pages 264-277.
    10. Yang, Feng & Shan, Feifei & Jin, Minyue, 2017. "Capacity investment under cost sharing contracts," International Journal of Production Economics, Elsevier, vol. 191(C), pages 278-285.

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