An Inventory Decision Model of BOPS Retailing Considering Cross-selling

Omnichannel retailing has been getting more and more attention as people’s buying habits become more diverse. BOPS (Buy-on-line, Pick-up-in store) is an important pattern of Omnichannel retailing which has significant impacts on a cross-selling effect and inventory decisions. This paper explores this implementation with cross-selling from a perspective of inventory management by developing and analyzing a mathematical model based on EOQ model. After series of numerical experiments, we found that firms in a perfectly competitive market have motivations to launch BOPS services in most cases, especially when the supply chain structure is centralized. Furthermore, in a decentralized supply chain, if the manufacturer bears the inventory costs generated in B&M stores according to the proportion of BOPS sales when the inventory capacity is not big enough, the retailer can shift a part of costs to the manufacturer by deliberately making biased inventory decisions, and this cost shifting may damage the manufacturer’s motivation to implement BOPS where the cross-selling effect is powerful enough.