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Strategies for warranty service in a dual-channel supply chain with value-added service competition

Author

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  • Bin Dan
  • Shuguang Zhang
  • Maosen Zhou

Abstract

This paper studies a dual-channel supply chain composed of a manufacturer and a retailer. The manufacturer and the retailer sell homogeneous durable goods bundled with warranty service that is provided by the manufacturer, and they compete for customers by offering free value-added service. Both the warranty and value-added services can affect the purchasing behaviour of customers. We examine the warranty service decision of the manufacturer and the value-added service competition between the manufacturer and the retailer. Three types of warranty service strategies that can affect the value-added service competition are proposed. By analysing the equilibriums of the value-added service level decisions of the manufacturer and the retailer, we find that when the manufacturer increases its warranty service level, the value-added service competition will be weakened, and when the warranty service level is high enough, there is no value-added service competition. In addition, we examine the optimal warranty service strategy and warranty service level of the manufacturer under different conditions, and we find that the stronger the manufacturer’s bargaining power is, or the stronger the value-added service competition intensity is, the more motivation the manufacturer has to provide a high warranty service level. Numerical examples reveal that differentiation strategy in value-added service may hurt the profits of the manufacturer, the retailer and the entire supply chain.

Suggested Citation

  • Bin Dan & Shuguang Zhang & Maosen Zhou, 2018. "Strategies for warranty service in a dual-channel supply chain with value-added service competition," International Journal of Production Research, Taylor & Francis Journals, vol. 56(17), pages 5677-5699, September.
    • Handle: RePEc:taf:tprsxx:v:56:y:2018:i:17:p:5677-5699
    DOI: 10.1080/00207543.2017.1377355
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    Cited by:

    1. Xin, Baogui & Song, Yaping & Xie, Lei, 2024. "Dynamic pricing and service customization strategy for IoT-based smart products," Technological Forecasting and Social Change, Elsevier, vol. 199(C).
    2. Xiangping Wang & Ivan Kai Wai Lai & Huajun Tang & Chuan Pang, 2022. "Coordination Analysis of Sustainable Dual-Channel Tourism Supply Chain with the Consideration of the Effect of Service Quality," Sustainability, MDPI, vol. 14(11), pages 1-24, May.
    3. Weihua Liu & Shangsong Long & Yanjie Liang & Jinkun Wang & Shuang Wei, 2023. "The influence of leadership and smart level on the strategy choice of the smart logistics platform: a perspective of collaborative innovation participation," Annals of Operations Research, Springer, vol. 324(1), pages 893-935, May.
    4. Hu, Yihong & Qu, Shengnan & Li, Guo & Sethi, Suresh P., 2021. "Power structure and channel integration strategy for online retailers," European Journal of Operational Research, Elsevier, vol. 294(3), pages 951-964.
    5. Takuya Nakata & Sinan Chen & Masahide Nakamura, 2022. "Uni-Messe: Unified Rule-Based Message Delivery Service for Efficient Context-Aware Service Integration," Energies, MDPI, vol. 15(5), pages 1-18, February.
    6. Wei, Jie & Chang, Meijing, 2023. "Are price matching and logistics service enhancement always effective strategies for improving profitability?," European Journal of Operational Research, Elsevier, vol. 307(1), pages 103-115.
    7. Wang, Huan & Wang, Daao & Fang, Zhigeng & Zeng, Xiao-Jun, 2024. "Impacts of inspection errors and warranty costs on a complex product supply chain under different development modes," International Journal of Production Economics, Elsevier, vol. 272(C).
    8. T. M. Rofin & Sreejith Alathur, 2024. "Optimal online channel configuration for a Manufacturer under price and lead time-sensitive demand," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(2), pages 121-139, April.
    9. Liu, Mengqi & Liang, Ke & Perera, Sandun & Huang, Rui & Ghose, Sanjoy, 2022. "Game theoretical analysis of service effort timing scheme strategies in dual-channel supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    10. Pi, Zhenyang & Fang, Weiguo & Perera, Sandun C. & Zhang, Baofeng, 2022. "Enhancing the online buyer perception of consumer experience products in a dual-channel supply chain: A new role of free-riding," International Journal of Production Economics, Elsevier, vol. 253(C).
    11. Wenhui Zhao & Jibin Ma & Zhanyang Wang & Youting Li & Weishi Zhang, 2022. "Potential Hydrogen Market: Value-Added Services Increase Economic Efficiency for Hydrogen Energy Suppliers," Sustainability, MDPI, vol. 14(8), pages 1-18, April.
    12. Shiming Yi & Liying Yu & Ziyuan Zhang, 2020. "Research on Pricing Strategy of Dual-Channel Supply Chain Based on Customer Value and Value-Added Service," Mathematics, MDPI, vol. 9(1), pages 1-19, December.
    13. Guangmei Cao & Yuesen Wang & Honghu Gao & Hao Liu & Haibin Liu & Zhigang Song & Yuqing Fan, 2023. "Coordination Decision-Making for Intelligent Transformation of Logistics Services under Capital Constraint," Sustainability, MDPI, vol. 15(6), pages 1-25, March.
    14. Yuyang Tan & Chunxiang Guo & Dong Cai, 2023. "Value‐added service decision and coordination under fresh produce e‐commerce considering order cancelation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2199-2210, June.
    15. Huang, Hongfu & Liu, Feng & Zhang, Peng, 2021. "To outsource or not to outsource? Warranty service provision strategies considering competition, costs and reliability," International Journal of Production Economics, Elsevier, vol. 242(C).
    16. Yucai Wu & Jiguang Wang & Lu Chen, 2021. "Optimization and Decision of Supply Chain Considering Negative Spillover Effect and Service Competition," Sustainability, MDPI, vol. 13(4), pages 1-20, February.
    17. Wang, Di & Liu, Weihua & Shen, Xinran & Wei, Wanying, 2019. "Service order allocation under uncertain demand: Risk aversion, peer competition, and relationship strength," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 130(C), pages 293-311.
    18. Tianjian Yang & Chunmei Li & Xiongping Yue & Beibei Zhang, 2022. "Decisions for Blockchain Adoption and Information Sharing in a Low Carbon Supply Chain," Mathematics, MDPI, vol. 10(13), pages 1-23, June.
    19. Zhang, Guangming & Dai, Gengxin & Sun, Hao & Zhang, Guitao & Yang, Zhilin, 2020. "Equilibrium in supply chain network with competition and service level between channels considering consumers' channel preferences," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).
    20. Zheng, Zhijun & Li, Gang & Cheng, T.C.E & Wu, Feng, 2022. "Offline supplementary service strategies for the online marketplace: Third-party service or marketplace service?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    21. Bin Cao & Qingyu Zhang & Mei Cao, 2022. "Optimizing Hybrid-Channel Supply Chains with Promotional Effort and Differential Product Quality: A Game-Theoretic Analysis," Mathematics, MDPI, vol. 10(11), pages 1-21, May.
    22. Sun, Mingyao & Ng, Chi To & Yang, Liu & Zhang, Tianhua, 2024. "Optimal after-sales service offering strategy: Additive manufacturing, traditional manufacturing, or hybrid?," International Journal of Production Economics, Elsevier, vol. 268(C).

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