Strategic inventory deployment for retail and e-tail stores

In this paper, we study a supply chain comprising one manufacturer and one retailer. Customers can make purchases either from the retailer or directly from the manufacturer via an e-tail channel. From the manufacturer's perspective of managing the two channels. we stud three different inventory strategies, namely centralized inventory strategy, a Stackelberg inventory strategy, and a strategy where the e-tail operation is outsourced to a third party lolgistics provider (3PL). For each strategy, we obtain the optimal inventory levels in retail and e-tail stores and the respective expected profits. We compare the performance of various strategies. Managerial insights are provided through analytical and numerical analyses to illustrate the applicability of different strategies. (c) 2008 Elsevier Ltd. All rights reserved.