Sales Strategy in Transshipment Networks

Automobile dealers form trading relationships in order to satisfy uncertain demand (Anupindi, Bassok and Zemel 2001; Granot and Sosic 2003; Pairolero 2016). This paper explores the decision to transship inventory in terms of sales associate ability or experience. The primary result is that an inexperienced sales associates should never offer the trade because of his inability to extract enough consumer value. As the sales associate gains experience through selling the models in stock, negotiating ability is likely to increase and the ability to extract consumer value in trade increases. Since higher negotiating ability in trade increases trade profitability, trade is more likely to be optimal for experienced sales associates. The results of this paper could be used to advise sales managers on the training of new sales associates in industries utilizing transshipment networks.