Who is the Free Rider in the Drop-Shipping Supply Chain?

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Li Feng 1,* Tu Yijian 1 Guo Xiaolong 1

1. School of Management, University of Science and Technology of China, Hefei, P.R.China

* Corresponding author.

DOI: https://doi.org/10.5815/ijieeb.2011.03.07

Received: 13 Feb. 2011 / Revised: 20 Apr. 2011 / Accepted: 5 May 2011 / Published: 8 Jun. 2011

Index Terms

Direct distribution model, Drop-shipping, free rider, bi-direction excitation, quantity discount, compensation mechanism


In Drop-shipping supply chain, retailers get the customer orders and manufacturers carry out the orders. Are there any free riders while obtaining the customer order? If any, who could be the free riders? By comparing the decentralized and centralized decision making, we find that both manufacturers and retailers are possible to behave as free riders. Also, we study the contract designs to coordinate manufacturers and retailers in Drop-shipping supply chain, and we find that a combination of quantity discount and delivery reliability compensation mechanism as to guarantee manufacturers a safe delivery can achieve the bi-direction excitation, and finally the coordination of the supply chain.

Cite This Paper

Li Feng, Tu Yijian, Guo Xiaolong, "Who is the Free Rider in the Drop-Shipping Supply Chain?", International Journal of Information Engineering and Electronic Business(IJIEEB), vol.3, no.3, pp.44-51, 2011. DOI:10.5815/ijieeb.2011.03.07


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