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Coordinating a three level supply chain with flexible return policies

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  • Ding, Ding
  • Chen, Jian
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    Abstract

    This paper studies the coordination issue of a three level supply chain selling short life cycle products in a single period model. The manufacturer first negotiates the trade contract with the retailer, then with the supplier. We construct the so-called flexible return policy by setting the rules of pricing while postponing the determination of the final contract prices. With return policies between each pair of adjacent firms, unsold products or used modules dissembled from the unsold products are returned level by level from the retailer to the upstream firms and each firm shares in the loss due to the overstock. We show that the three level supply chain can be fully coordinated with appropriate contracts and the total profit of the channel can be allocated with any specified ratios among the firms.

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    Bibliographic Info

    Article provided by Elsevier in its journal Omega.

    Volume (Year): 36 (2008)
    Issue (Month): 5 (October)
    Pages: 865-876

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    Handle: RePEc:eee:jomega:v:36:y:2008:i:5:p:865-876

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    Related research

    Keywords: Supply chain management Return policy Coordination;

    References

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    1. GĂ©rard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
    2. Lee, Chang Hwan, 2001. "Coordinated stocking, clearance sales, and return policies for a supply chain," European Journal of Operational Research, Elsevier, vol. 131(3), pages 491-513, June.
    3. A. A. Tsay & W. S. Lovejoy, 1999. "Quantity Flexibility Contracts and Supply Chain Performance," Manufacturing & Service Operations Management, INFORMS, vol. 1(2), pages 89-111.
    4. Z. Kevin Weng, 1995. "Channel Coordination and Quantity Discounts," Management Science, INFORMS, vol. 41(9), pages 1509-1522, September.
    5. Mantrala, Murali K. & Raman, Kalyan, 1999. "Demand uncertainty and supplier's returns policies for a multi-store style-good retailer," European Journal of Operational Research, Elsevier, vol. 115(2), pages 270-284, June.
    6. Abel P. Jeuland & Steven M. Shugan, 1983. "Managing Channel Profits," Marketing Science, INFORMS, vol. 2(3), pages 239-272.
    7. Terry A. Taylor, 2002. "Supply Chain Coordination Under Channel Rebates with Sales Effort Effects," Management Science, INFORMS, vol. 48(8), pages 992-1007, August.
    8. Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347.
    9. Hamilton Emmons & Stephen M. Gilbert, 1998. "Note. The Role of Returns Policies in Pricing and Inventory Decisions for Catalogue Goods," Management Science, INFORMS, vol. 44(2), pages 276-283, February.
    10. Dawn Barnes-Schuster & Yehuda Bassok & Ravi Anupindi, 2002. "Coordination and Flexibility in Supply Contracts with Options," Manufacturing & Service Operations Management, INFORMS, vol. 4(3), pages 171-207, May.
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    Citations

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    Cited by:
    1. Feng, Xuehao & Moon, Ilkyeong & Ryu, Kwangyeol, 2014. "Revenue-sharing contracts in an N-stage supply chain with reliability considerations," International Journal of Production Economics, Elsevier, vol. 147(PA), pages 20-29.
    2. Keren, Baruch, 2009. "The single-period inventory problem: Extension to random yield from the perspective of the supply chain," Omega, Elsevier, vol. 37(4), pages 801-810, August.
    3. Palsule-Desai, Omkar D., 2013. "Supply chain coordination using revenue-dependent revenue sharing contracts," Omega, Elsevier, vol. 41(4), pages 780-796.
    4. Hua, Zhongsheng & Zhang, Xuemei & Xu, Xiaoyan, 2011. "Product design strategies in a manufacturer-retailer distribution channel," Omega, Elsevier, vol. 39(1), pages 23-32, January.
    5. Wang, John & Yan, Ruiliang & Hollister, Kimberly & Zhu, Dan, 2008. "A historic review of management science research in China," Omega, Elsevier, vol. 36(6), pages 919-932, December.
    6. Pan, Kewen & Lai, K.K. & Liang, L. & Leung, Stephen C.H., 2009. "Two-period pricing and ordering policy for the dominant retailer in a two-echelon supply chain with demand uncertainty," Omega, Elsevier, vol. 37(4), pages 919-929, August.
    7. Huang, Di & Zhou, Hong & Zhao, Qiu-Hong, 2011. "A competitive multiple-product newsboy problem with partial product substitution," Omega, Elsevier, vol. 39(3), pages 302-312, June.
    8. Holsapple, Clyde W. & Lee-Post, Anita, 2010. "Behavior-based analysis of knowledge dissemination channels in operations management," Omega, Elsevier, vol. 38(3-4), pages 167-178, June.
    9. Liu, Jian & Mantin, Benny & Wang, Haiyan, 2014. "Supply chain coordination with customer returns and refund-dependent demand," International Journal of Production Economics, Elsevier, vol. 148(C), pages 81-89.
    10. Hu, Fei & Lim, Cheng-Chew & Lu, Zudi, 2013. "Coordination of supply chains with a flexible ordering policy under yield and demand uncertainty," International Journal of Production Economics, Elsevier, vol. 146(2), pages 686-693.
    11. Hasuike, Takashi & Ishii, Hiroaki, 2009. "On flexible product-mix decision problems under randomness and fuzziness," Omega, Elsevier, vol. 37(4), pages 770-787, August.
    12. Huang, Ximin & Gu, Jia-Wen & Ching, Wai-Ki & Siu, Tak-Kuen, 2014. "Impact of secondary market on consumer return policies and supply chain coordination," Omega, Elsevier, vol. 45(C), pages 57-70.
    13. Liang, Wen Yau & Huang, Chun-Che & Lin, Yin-Chen & Chang, Tsun Hsien & Shih, Meng Hao, 2013. "The multi-objective label correcting algorithm for supply chain modeling," International Journal of Production Economics, Elsevier, vol. 142(1), pages 172-178.

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