Managing uncertain order cancellations with omni-channel coordination: Designing a novel buyback contract

This study presents a thorough exploration of decision-making methodologies within an omni-channel supply chain, particularly focusing on the Reserve Online, Pay-up, and Pick-up in Store (ROPS) strategy. The research emphasizes the importance of integrating online and offline distribution channels and identifies key factors influencing online sales, such as pricing strategies, deposit amounts, and the Online Service Level (OSL). The authors develop decision-making models under various organizational frameworks—centralized, decentralized, and coordinated—and introduce a novel contractual mechanism called the Hybrid Buyback and Online Profit-Sharing (HBOPS) contract. An algorithm utilizing the Lagrange multipliers method and Karush-Kuhn-Tucker (KKT) conditions is proposed to find optimal solutions for the decision variables involved. Key findings indicate that the deposit coefficient stimulates the optimal solutions for retail price, deposit amount, and OSL within all of the structures. While higher deposit coefficients enhance supplier and retailer profits in coordinated frameworks, they can lead to a decrease in supplier profits within decentralized systems. Additionally, an increase in the order cancelation coefficient results in higher deposits across all structures, but negatively impacts prices, OSL, and overall profitability for supply chain stakeholders. The study also highlights that as the values of the parameters increase, the effectiveness of the HBOPS contract in coordinating supply chain operations diminishes. Overall, this research provides valuable insights into the ROPS strategy and deposit mechanisms, offering practical implications for both academic research and managerial practices aimed at improving supply chain coordination in real-world scenarios.