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Drop-shipping is a commonly adopted online-order fulfillment strategy in the Internet age. In this practice, online retailers leverage the fulfillment capabilities of suppliers to fulfill orders. On the other hand, purchase dependence is a frequent phenomenon and is characterized by the purchase of certain items together due to their unknown interior associations. Although this concept has been significantly examined in the marketing field (e.g., market basket analysis), it has largely remained unaddressed in operations management. This paper develops an $(R,T)$ model to address an environment in which unmet demand orders are partially lost and partially backordered when purchase dependence exists. The partial backorders are fulfilled by a drop-shipping option. Through computational analyses, this paper demonstrates the effect of both drop-shipping on a partial backordering and purchase dependence. The results show that more profit can be realized by utilizing a drop-shipping option under purchase dependence.

Many online retailers have adopted drop-shipping as their main order fulfillment strategy. Against this backdrop, this paper studies the service time and pricing decisions in an online retailing system in which the single retailer is served by either monopolistic or duopolistic suppliers. The suppliers are dominant in the Stackelberg game. We employ the guaranteed service framework to model the intricate relationship between service time and inventory. The model stipulates that the delivery of online orders must be completed within guaranteed service time. The equilibrium service times and prices are derived for both cases of monopolistic and duopolistic suppliers. In addition, we systematically analyze the impact of operational and market factors on service time, respectively, and rich insights have been obtained. Interestingly, we find that the presence of competition does not necessarily lead to more rapid delivery service. Suppliers in the duopoly market tend to adopt a price-based competitive strategy, i.e., they are better off by lowering price at the expense of longer service time, especially for the new entrant. However, as competition intensifies to some extent, suppliers are recommended to leverage on more responsive service to maintain or expand the customer base.