Stochastic Inventory Models for Dual Channel Retailers

Abstract

We look at some inventory models for dual channel retailers who fulfill demands from both channels from the same pool of stock. Since the arrival of the internet, companies, particularly retailers, have been trying to figure out how best to take advantage of this new channel. This became acute for retailers when Amazon.com became the pre-dominant bookseller overcoming rivals like Barnes and Noble and Borders who had been operating for several decades. Firms in other categories were worried that a web only retailer like Amazon.com could end up dominating their sectors as well. To respond to such threats, existing retailers like Tesco and Lands End began offering their products through a web-site which became their web channel. To improve efficiency and to take advantage of specific characteristics of this channel, firms had to modify the operations of their existing channels. In this thesis, we look at retailers who took advantage of the web channel to better their operations for the entire firm.