Impacts of pre-sales service and delivery lead time on dual-channel supply chain design

Pre-sales service and delivery lead time in addition to sales price are crucial factors that affect customers’ purchase decisions in practice. In this paper, we incorporate these factors into our discussion and analyze the channel configuration strategy for a manufacturer who faces a market demand that is sensitive to price, pre-sales service, and delivery lead time. We investigate the impacts of the parameters related to pre-sales service and delivery lead time on the pricing/service/lead-time strategies and performance of the supply chain under centralized and decentralized settings. Our analysis shows that in the centralized supply chain, the manufacturer prefers the dual-channel structure when customer acceptance of the online channel is relatively high. In the decentralized case, however, this preference holds only if the retailer’s service cost factor is relatively large and service level sensitivity parameter and customer acceptance of the online channel are relatively low. An interesting finding is that in the centralized setting, pre-sales service level sensitivity does not always positively affect the retailer’s profit in the dual-channel structure, although it has a positive effect on the retailer’s price, pre-sales service level, and demand. However, this is not the case in the decentralized setting. We also find that the manufacturer in the decentralized setting adopts the online channel for strategic purposes to lower the retailer’s product price while maintaining the pre-sales service level. This can partially resolve the double-marginalization problem that increases the retailer’s channel efficiency. Finally, we find that our main results are robust for cases in which customer acceptance of the online channel is greater than that of the traditional channel and is affected by the delivery lead time.