Dual-Channel Supply Chain Coordination With BOPS and a Revenue-Sharing Contract

Abstract

The omni-channel strategy buy-online-pickup-in-store (BOPS) is used to cater to customers who want a consistent service experience in different channels. In this paper, the author thinks of BOPS as an effective strategy for encouraging some online customers to switch to offline stores with high online return losses. The author first studies an omni-channel supply chain with centralized and decentralized decision making and explains why online returns hurt the supply chain with respect to the matching rate and the unit return loss. Although different channels can be operated by the same firm or different firms, the author studies how to coordinate the entire chain using a revenue-sharing contract. When online return losses are high, it is effective to adopt BOPS to reduce online return losses; otherwise there is no need to do so. Finally, the author presents numerical experiments, including a special case, and shows that in many cases using an appropriate revenue-sharing contract under the proposed mechanism can increase the profits of the entire supply chain and its members.