Optimizing omni-channel supply chain strategies for online sales: addressing delivery time and product returns challenges

In this paper, optimization models are developed for pricing, delivery time and service-level decisions in centralized, decentralized and coordinated structures in an omnichannel supply chain. The final demand depends on price, product return risk and delivery time. The risk of returning the product by customers is a function of the service level provided by the retailer. As a result, the final demand increases as the price and the delivery time decrease and the service level increases. In order to develop a mechanism of coordinating the members of the supply chain, a novel contract called Double Compensation Profit Sharing (DCPS) contract is proposed. The analyses show that the proposed DCPS contract is efficient enough to coordinate the supply chain; that is, it not only improves the total profit in decentralized system to the level of the profit in centralized system but provides an appropriate profit-sharing mechanism too. Based on the sensitivity analysis, increasing the customer loyalty to the offline channel can increase the efficiency of the contract and the possibility of its acceptance by the parties through widening the acceptance limit of the contract. In addition, increasing the value of this parameter leads to an increase in the price and the level of service and a decrease in the lead time in a decentralized structure. The present study also provides some managerial insights through the analysis of the important parameters of the model.