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Joint optimization of new production, warranty servicing strategy and secondary market supply under consumer returns

Author

Listed:
  • Marc Reimann

    (Institute of Production and Operations Management, Karl-Franzens-University Graz)

  • Weihua Zhang

    (School of Economics and Management, Beihang University, Beijing)

Abstract

In this paper, we consider an OEM selling new products to the market offering (i) a warranty period during which defective units are dealt with at no cost for the customer, and (ii) a full refund to customers who return products that do not meet their expectations (consumer returns). The manufacturer has different options for satisfying the warranty cases as well as for utilizing the consumer returns. Warranty cases could be dealt with by repairing the defective units, replacing them with new products, or replacing them with refurbished consumer returns. Alternatively leftover new products or consumer returns can also be sold on a secondary market. We develop a model and derive the OEMs optimal decisions with respect to these options under demand uncertainty on the primary market.

Suggested Citation

  • Marc Reimann & Weihua Zhang, 2013. "Joint optimization of new production, warranty servicing strategy and secondary market supply under consumer returns," Working Paper Series, Social and Economic Sciences 2013-03, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
  • Handle: RePEc:grz:wpsses:2013-03
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    References listed on IDEAS

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    Cited by:

    1. Borenich, Andrea & Dickbauer, Yanick & Reimann, Marc & Souza, Gilvan C., 2020. "Should a manufacturer sell refurbished returns on the secondary market to incentivize retailers to reduce consumer returns?," European Journal of Operational Research, Elsevier, vol. 282(2), pages 569-579.

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