Coordination of a supply chain with consumer return under demand uncertainty
This paper investigates coordination of a supply chain consisting of one manufacturer and one retailer facing consumer return. We integrate consumer returns policy and manufacturer buyback policy within a modeling framework and explicitly model the positive effect of refund amount on demand and its negative effect on the probability that consumers keep the products. We design a buyback/markdown money contract to coordinate the supply chain under partial refund policy and find that the refund amount plays an important role in the decisions and profitability of the players. In the coordinated setting with given buyback price, the refund amount first increases the players' expected profits/quantity, and then decreases them. When the risk (variance) of the consumer's valuation increases, the manufacturer may raise the unit wholesale price to achieve a higher unit profit. The supply chain is better off using full refund policy if the risk is very small; otherwise, the supply chain prefers no returns policy. The results of this paper are robust to distribution form.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Choi, Tsan-Ming & Li, Duan & Yan, Houmin, 2008. "Mean-variance analysis of a single supplier and retailer supply chain under a returns policy," European Journal of Operational Research, Elsevier, vol. 184(1), pages 356-376, January.
- Fleischmann, Moritz & Kuik, Roelof & Dekker, Rommert, 2002. "Controlling inventories with stochastic item returns: A basic model," European Journal of Operational Research, Elsevier, vol. 138(1), pages 63-75, April.
- Yossi Aviv & Amit Pazgal, 2008. "Optimal Pricing of Seasonal Products in the Presence of Forward-Looking Consumers," Manufacturing & Service Operations Management, INFORMS, vol. 10(3), pages 339-359, December.
- V. Daniel R. Guide , Jr. & Gilvan C. Souza & Luk N. Van Wassenhove & Joseph D. Blackburn, 2006. "Time Value of Commercial Product Returns," Management Science, INFORMS, vol. 52(8), pages 1200-1214, August.
- Wong, W.K. & Qi, J. & Leung, S.Y.S., 2009. "Coordinating supply chains with sales rebate contracts and vendor-managed inventory," International Journal of Production Economics, Elsevier, vol. 120(1), pages 151-161, July.
- Che, Yeon-Koo, 1996.
"Customer Return Policies for Experience Goods,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 44(1), pages 17-24, March.
- Xuanming Su, 2007. "Intertemporal Pricing with Strategic Customer Behavior," Management Science, INFORMS, vol. 53(5), pages 726-741, May.
- James D. Dana, Jr. & Nicholas C. Petruzzi, 2001. "Note: The Newsvendor Model with Endogenous Demand," Management Science, INFORMS, vol. 47(11), pages 1488-1497, November.
- Wang, Yulan & Zipkin, Paul, 2009. "Agents' incentives under buy-back contracts in a two-stage supply chain," International Journal of Production Economics, Elsevier, vol. 120(2), pages 525-539, August.
- Sridhar Moorthy & Kannan Srinivasan, 1995. "Signaling Quality with a Money-Back Guarantee: The Role of Transaction Costs," Marketing Science, INFORMS, vol. 14(4), pages 442-466.
- Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
- Choi, Tsan-Ming & Li, Duan & Yan, Houmin, 2004. "Optimal returns policy for supply chain with e-marketplace," International Journal of Production Economics, Elsevier, vol. 88(2), pages 205-227, March.
- Arcelus, F.J. & Kumar, Satyendra & Srinivasan, G., 2008. "Evaluating manufacturer's buyback policies in a single-period two-echelon framework under price-dependent stochastic demand," Omega, Elsevier, vol. 36(5), pages 808-824, October.
- Terry A. Taylor, 2002. "Supply Chain Coordination Under Channel Rebates with Sales Effort Effects," Management Science, INFORMS, vol. 48(8), pages 992-1007, August.
- Karen L. Donohue, 2000. "Efficient Supply Contracts for Fashion Goods with Forecast Updating and Two Production Modes," Management Science, INFORMS, vol. 46(11), pages 1397-1411, November.
- Mostard, Julien & Teunter, Ruud, 2006. "The newsboy problem with resalable returns: A single period model and case study," European Journal of Operational Research, Elsevier, vol. 169(1), pages 81-96, February.
- 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.
- Jinhong Xie & Steven M. Shugan, 2001. "Electronic Tickets, Smart Cards, and Online Prepayments: When and How to Advance Sell," Marketing Science, INFORMS, vol. 20(3), pages 219-243, June.
- Kandel, Eugene, 1996. "The Right to Return," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 329-56, April.
- Gregory A. DeCroix & Paul H. Zipkin, 2005. "Inventory Management for an Assembly System with Product or Component Returns," Management Science, INFORMS, vol. 51(8), pages 1250-1265, August.
When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:124:y:2010:i:1:p:171-180. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.