Optimal Order Quantity in Hybrid Supply Chain and Its Sensitivity Analysis

Considering a hybrid supply chain (HSC) in which a supplier has a traditional retailer who also adopts a drop-shipping channel, we model and prove that the retailer's optimal order quantity for decentralized or centralized system exists. Different from traditional supply chain models, customer choice of channel is introduced to the model. The results show that the optimal order quantity for the HSC is influenced by customer choice of channel as well as cost, which is different from a single-channel (or pure) supply channel. To verify the results, number experiment is performed and sensitivity analysis is followed. The result of number experiment shows that the impact of customer choice of channel on optimal order quantity in decentralized HSC is different from that in centralized HSC. At the end of the study the further research direction to the topic is proposed.