Impact of Service on Customers’ Demand and Members’ Profit in Supply Chain

Abstract

This paper investigates the impact of provided service by the retailers and manufacturers on customers’ demand and members’ profit in a supply chain. It focuses on a supply chain structure with one manufacturer and a common retailer. The demand of customers depends on retailer price and service level. A game-theoretic framework is applied to obtain the equilibrium solutions for each entity in supply chain. In order to investigate the impact of service on the demand and supply chain members’ profit when the manufacturer is a leader, we derive and compare equilibrium solutions for the supply chain under three different scenarios. These scenarios include the case that manufacturer and retailer do not provide any service to customers; the case that retailer provides service to customers; and the case that manufacturer provides service to customers. We compare results from these three scenarios and provide the best scenario for the proposed problem.