Does outsourcing enhance consumer services and profitability of a dual-channel retailing?

Abstract

In the era of digital commerce, the concept of dual-channel retailing has attracted increased attention. Dual-channel retailing increases the importance of outsourcing for an imperfect production process to enhance customer satisfaction. This study explores a sustainable dual-channel retailing strategies for an imperfect production process under a flexible production system. The manufacturer runs a production process prone to defects utilizes both offline and online channels for product sales. The manufacturer contemplates green investments to enhance the production efficiency and reduce waste and carbon emissions, alongside the possibility of outsourcing a portion of production to a partner. A mathematical model is developed to accounts for these factors and analyzes the optimal allocation of products between channels, pricing strategies, production rates, and investments amount to reduce carbon emissions. The model incorporates demand sensitiveness to green practices and channel's selling price. Results of this research are directed towards offering significant perspectives for organizations that aspire to attain a harmonious equilibrium among financial profitability, ecological sustainability, and addressing deficiencies in their manufacturing procedures in a dual-channel retail setting through subcontracting. Numerical illustrations exhibit that partial outsourcing enhances system's profit by 2.03%, whereas investments to reduce carbon emissions enhance the profit by 4.95%. Flexibility in the production process helps to increase the profit by 13.50%, and channel coordination helps to enhance the profit by 38.54%.