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The impact of customer returns on supply chain decisions under various channel interactions

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  • Jing Chen
  • Peter Bell

Abstract

We examine a supply chain in which a manufacturer supplies a single product to a retailer who faces two forms of customer returns. We compare the impact of these two forms of customer returns on the decisions and profits of the manufacturer and the retailer under various types of channel interaction: Manufacturer Stackelberg (MS), Vertical Nash (VN), and Retailer Stackelberg (RS). We find that when the level of customer returns that are proportional to quantity sold is extremely high, the retailer prefers the MS rather than the RS channel interaction. We also examine the impact of the asymmetric customer returns information on the decisions of the manufacturer and the retailer and on profits under MS and VN channel interactions. We show that in the MS case, the retailer can decide whether or not to share customer returns information with its manufacturer without knowing the manufacturer’s estimates of customer returns and in the VN case, both the retailer and the manufacturer can decide whether or not to share/acquire the information based on observation of the other’s behavior. The issues of sharing this information are also discussed. Copyright Springer Science+Business Media New York 2013

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  • Jing Chen & Peter Bell, 2013. "The impact of customer returns on supply chain decisions under various channel interactions," Annals of Operations Research, Springer, vol. 206(1), pages 59-74, July.
    • Handle: RePEc:spr:annopr:v:206:y:2013:i:1:p:59-74:10.1007/s10479-013-1326-3
    DOI: 10.1007/s10479-013-1326-3
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    2. Yang, Hui & Chen, Jing & Chen, Xu & Chen, Bintong, 2017. "The impact of customer returns in a supply chain with a common retailer," European Journal of Operational Research, Elsevier, vol. 256(1), pages 139-150.
    3. Saeide Bigdellou & Shirin Aslani & Mohammad Modarres, 2023. "Sustainable Trade Promotions in Case of Negative Demand Disruption in E-Commerce," Sustainability, MDPI, vol. 15(3), pages 1-17, January.
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    6. Huang, Zongsheng & Feng, Ting, 2020. "Money-back guarantee and pricing decision with retailer's store brand," Journal of Retailing and Consumer Services, Elsevier, vol. 52(C).
    7. Yan, Ruiliang & Cao, Zixia, 2017. "Product returns, asymmetric information, and firm performance," International Journal of Production Economics, Elsevier, vol. 185(C), pages 211-222.
    8. Ilkka Ritola & Harold Krikke & Marjolein C.J. Caniëls, 2020. "Learning from Returned Products in a Closed Loop Supply Chain: A Systematic Literature Review," Logistics, MDPI, vol. 4(2), pages 1-13, April.
    9. Yang, Zaoli & Shang, Wen-Long & Miao, Lin & Gupta, Shivam & Wang, Zhengli, 2024. "Pricing decisions of online and offline dual-channel supply chains considering data resource mining," Omega, Elsevier, vol. 126(C).
    10. Jie Wei & Jing Zhao, 2016. "Pricing decisions for substitutable products with horizontal and vertical competition in fuzzy environments," Annals of Operations Research, Springer, vol. 242(2), pages 505-528, July.
    11. Wen, Xin & Choi, Tsan-Ming & Chung, Sai-Ho, 2019. "Fashion retail supply chain management: A review of operational models," International Journal of Production Economics, Elsevier, vol. 207(C), pages 34-55.
    12. Desheng Wu, 2017. "Pass-through decision analysis in a supply chain," Annals of Operations Research, Springer, vol. 257(1), pages 297-316, October.
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