Ordering and transshipment strategies of dual-distribution channels with customers switching

Transshipment can decrease shortage cost and increase customer service level. When customers transfer to the other channel because of shortage, that is, there exists customers switching, the transshipment strategy of the dual-distribution channel is based on the competition for customers. So decision processes are more complicated when there exists customers switching. In this paper, the optimal ordering strategy and equilibrium solution under transshipment condition are proposed, which are compared with those under non-transshipment condition. Further, we compare the profit of the dual channels under transshipment and non-transshipment strategies with given customer switching rate. The computational results indicate that transshipment is a better choice for decision-maker when there exists customer switching.