Customer's Channel Selection Behavior on Purchasing Standardized and Customized Products: Optimized Prices and Channel Performances

Abstract

Nowadays, the traditional production is unable to meet the new diverse needs of target customers. In the current customization era, more and more companies are required by customers to provide more desirable customized products. However, research on customization and standardization based on quantitative analysis has drawn little attention in the literature of dual channel supply chain. In this paper, we study the effect of adopting a dual channel supply chain on the performance of a two-level system (manufacturer-retailer) by using a novelty quantitative approach. We try to analyze the system to get optimal prices and maximize profits, where manufactures offer both standardized and customized products via their traditional and customized channels, respectively. We build a Stackelberg game mode to construct a centralized and a decentralized dual channel scenarios. Furthermore, we study the effects of the different channel structures on price, degree of customization, degree of standardization, and supply chain profitability. We also analyze the effects of both standardized and customized demand sensitivities on their prices and profits. Eventually, we introduce a cost-sharing coordinating contract to optimize the channel's performance. We find that the potential market demand for customization affects the price of customized products and the profits of customized channels. Compared with the decentralized dual channel case, the cost-sharing contract can achieve higher total channel profits. In the cost-coordination case, there is an optimal range for the proportion of standardized costs borne by manufacturers.