Ordering and returns handling decisions and coordination in a supply chain with demand uncertainty

Abstract

We develop a newsvendor model to study the retailer's order quantity, the manufacturer's returns handling strategy, and channel coordination. The manufacturer chooses one of two returns handling strategies: manufacturer handling or retailer handling under the coordinated and decentralized scenarios, respectively. Under the coordinated scenario, we find that when consumer's returns handling cost under manufacturer handling or the manufacturer's returns handling cost is small, consumer returns should be handled by the manufacturer. Under the decentralized scenario, when the retailer's returns handling cost or the consumer's returns handling cost under retailer handling is low, the manufacturer will choose manufacturer handling; both the manufacturer and the retailer may be better off using manufacturer handling (a win–win situation). The impact of the returns handling strategy on the retailer's ordering quantity largely depends on its effect on the consumer's returns handling cost. Finally, we also design buyback contracts to coordinate the supply chain and find that both wholesale price and buyback price under manufacturer handling are higher than those under retailer handling.

Proposing channel coordination and horizontal cooperation in two competitive three‐echelon reverse supply chains

“…Liu et al. () discussed the buy‐back coordination mechanism and return handling of used products in a manufacturer–retailer closed‐loop SC. Mafakheri and Nasiri () analyzed revenue sharing contract to coordinate decisions of a manufacturer and a retailer in a dynamic RSC.…”

Does uncertainty spread vertically? A theory of multilayer newsvendors under asymmetric information

“…Recently, Qin et al (2011) and Khouja (1999) provide two excellent surveys. Liu et al (2020) studied a retailer's ordering decisions and the supply chain's return handling strategies by the manufacturer vis-à-vis by the retailer under a coordinated or delegated scenario in the presence of demand uncertainty. Liu et al (2020) studied a retailer's ordering decisions and the supply chain's return handling strategies by the manufacturer vis-à-vis by the retailer under a coordinated or delegated scenario in the presence of demand uncertainty.…”

“…Deng and Zheng (2020) analyzed a risk-averse manufacturer's optimal production quantity under a profit target constraint when it faces random yield and stochastic demand. Liu et al (2020) studied a retailer's ordering decisions and the supply chain's return handling strategies by the manufacturer vis-à-vis by the retailer under a coordinated or delegated scenario in the presence of demand uncertainty. A number of authors have studied a newsvendor's concomitant decisions on pricing and inventory.…”

Coordination of a two‐echelon supply chain in presence of market segmentation, credit payment, and quantity discount policies

“…Liu et al. () coordinated the supply chain by designing buyback contracts and determined wholesale and buyback prices. Huang et al.…”

“…Liu et al. () believed that by utilizing coordinated strategies like a quantity discount contract, significant cost savings would be attained. They presented a quantity discount contract and also the expansion of this contract with constraints in a coordinated replenishment and delivery model.…”