IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v206y2013i1p59-7410.1007-s10479-013-1326-3.html
   My bibliography  Save this article

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

Author

Listed:
  • 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

Suggested Citation

  • 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
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10479-013-1326-3
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10479-013-1326-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ketzenberg, Michael E. & Rosenzweig, Eve D. & Marucheck, Ann E. & Metters, Richard D., 2007. "A framework for the value of information in inventory replenishment," European Journal of Operational Research, Elsevier, vol. 182(3), pages 1230-1250, November.
    2. S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
    3. Lau, Amy Hing Ling & Lau, Hon-Shiang & Zhou, Yong-Wu, 2007. "A stochastic and asymmetric-information framework for a dominant-manufacturer supply chain," European Journal of Operational Research, Elsevier, vol. 176(1), pages 295-316, January.
    4. Wang, Jian-Cai & Lau, Hon-Shiang & Lau, Amy Hing Ling, 2009. "When should a manufacturer share truthful manufacturing cost information with a dominant retailer?," European Journal of Operational Research, Elsevier, vol. 197(1), pages 266-286, August.
    5. Eric T. Anderson & Karsten Hansen & Duncan Simester, 2009. "The Option Value of Returns: Theory and Empirical Evidence," Marketing Science, INFORMS, vol. 28(3), pages 405-423, 05-06.
    6. Bonifield, Carolyn & Cole, Catherine & Schultz, Randall L., 2010. "Product returns on the Internet: A case of mixed signals?," Journal of Business Research, Elsevier, vol. 63(9-10), pages 1058-1065, September.
    7. Chen, Jing & Bell, Peter C., 2009. "The impact of customer returns on pricing and order decisions," European Journal of Operational Research, Elsevier, vol. 195(1), pages 280-295, May.
    8. Vlachos, Dimitrios & Dekker, Rommert, 2003. "Return handling options and order quantities for single period products," European Journal of Operational Research, Elsevier, vol. 151(1), pages 38-52, November.
    9. Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
    10. Esmaeili, M. & Aryanezhad, Mir-Bahador & Zeephongsekul, P., 2009. "A game theory approach in seller-buyer supply chain," European Journal of Operational Research, Elsevier, vol. 195(2), pages 442-448, June.
    11. Choi, Tsan-Ming & Sethi, Suresh, 2010. "Innovative quick response programs: A review," International Journal of Production Economics, Elsevier, vol. 127(1), pages 1-12, September.
    12. 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.
    13. Chen, Jing, 2011. "The impact of sharing customer returns information in a supply chain with and without a buyback policy," European Journal of Operational Research, Elsevier, vol. 213(3), pages 478-488, September.
    14. Timothy W. McGuire & Richard Staelin, 1983. "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, INFORMS, vol. 2(2), pages 161-191.
    15. Abel P. Jeuland & Steven M. Shugan, 1983. "Managing Channel Profits," Marketing Science, INFORMS, vol. 2(3), pages 239-272.
    16. Mark Ferguson & V. Daniel R. Guide , Jr. & Gilvan C. Souza, 2006. "Supply Chain Coordination for False Failure Returns," Manufacturing & Service Operations Management, INFORMS, vol. 8(4), pages 376-393, August.
    17. Yao, Dong-Qing & Liu, John J., 2005. "Competitive pricing of mixed retail and e-tail distribution channels," Omega, Elsevier, vol. 33(3), pages 235-247, June.
    18. Eunkyu Lee & Richard Staelin, 1997. "Vertical Strategic Interaction: Implications for Channel Pricing Strategy," Marketing Science, INFORMS, vol. 16(3), pages 185-207.
    19. Lau, Hon-Shiang & Lau, Amy Hing-Ling, 1999. "Manufacturer's pricing strategy and return policy for a single-period commodity," European Journal of Operational Research, Elsevier, vol. 116(2), pages 291-304, July.
    20. Mitra, Subrata, 2007. "Revenue management for remanufactured products," Omega, Elsevier, vol. 35(5), pages 553-562, October.
    21. Fiala, P., 2005. "Information sharing in supply chains," Omega, Elsevier, vol. 33(5), pages 419-423, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jie Wu & Zhixin Chen & Xiang Ji, 2020. "Sustainable trade promotion decisions under demand disruption in manufacturer-retailer supply chains," Annals of Operations Research, Springer, vol. 290(1), pages 115-143, July.
    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.
    4. Raghu Nandan Giri & Shyamal Kumar Mondal & Manoranjan Maiti, 2020. "Bundle pricing strategies for two complementary products with different channel powers," Annals of Operations Research, Springer, vol. 287(2), pages 701-725, April.
    5. Christos I. Papanagnou, 2022. "Measuring and eliminating the bullwhip in closed loop supply chains using control theory and Internet of Things," Annals of Operations Research, Springer, vol. 310(1), pages 153-170, March.
    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.
    13. Li, Guo & Li, Lin & Sethi, Suresh P. & Guan, Xu, 2019. "Return strategy and pricing in a dual-channel supply chain," International Journal of Production Economics, Elsevier, vol. 215(C), pages 153-164.
    14. Zhixin Chen & Shijian Hong & Xiang Ji & Ruixia Shi & Jie Wu, 2022. "Refurbished products and supply chain incentives," Annals of Operations Research, Springer, vol. 310(1), pages 27-47, March.
    15. Tiaojun Xiao & Jing Shi, 2016. "Consumer returns reduction and information revelation mechanism for a supply chain," Annals of Operations Research, Springer, vol. 240(2), pages 661-681, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Chen, Jing, 2011. "The impact of sharing customer returns information in a supply chain with and without a buyback policy," European Journal of Operational Research, Elsevier, vol. 213(3), pages 478-488, September.
    3. Zhang, Qiao & Chen, Jing & Chen, Bintong, 2021. "Information strategy in a supply chain under asymmetric customer returns information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    4. Duong, Quang Huy & Zhou, Li & Meng, Meng & Nguyen, Truong Van & Ieromonachou, Petros & Nguyen, Duy Tiep, 2022. "Understanding product returns: A systematic literature review using machine learning and bibliometric analysis," International Journal of Production Economics, Elsevier, vol. 243(C).
    5. Messinger, Paul R., 2016. "The role of fairness in competitive supply chain relationships: An experimental studyAuthor-Name: Choi, Sungchul," European Journal of Operational Research, Elsevier, vol. 251(3), pages 798-813.
    6. Xu, Senyu & Tang, Huajun & Lin, Zhijun & Lu, Jing, 2022. "Pricing and sales-effort analysis of dual-channel supply chain with channel preference, cross-channel return and free riding behavior based on revenue-sharing contract," International Journal of Production Economics, Elsevier, vol. 249(C).
    7. Wang, Charles X. & Qian, Zhuang & Zhao, Yabing, 2018. "Impact of manufacturer and retailer's market pricing power on customer satisfaction incentives in supply chains," International Journal of Production Economics, Elsevier, vol. 205(C), pages 98-112.
    8. Wu, Desheng, 2013. "Coordination of competing supply chains with news-vendor and buyback contract," International Journal of Production Economics, Elsevier, vol. 144(1), pages 1-13.
    9. Chen, Jing & Bell, Peter C., 2011. "Coordinating a decentralized supply chain with customer returns and price-dependent stochastic demand using a buyback policy," European Journal of Operational Research, Elsevier, vol. 212(2), pages 293-300, July.
    10. Ghosh, Debabrata & Shah, Janat, 2012. "A comparative analysis of greening policies across supply chain structures," International Journal of Production Economics, Elsevier, vol. 135(2), pages 568-583.
    11. Jing Chen & Bintong Chen, 2016. "Competing with customer returns policies," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 2093-2107, April.
    12. Edirisinghe, N.C.P. & Bichescu, B. & Shi, X., 2011. "Equilibrium analysis of supply chain structures under power imbalance," European Journal of Operational Research, Elsevier, vol. 214(3), pages 568-578, November.
    13. Michael Krapp & Johannes B. Kraus, 2019. "Coordination contracts for reverse supply chains: a state-of-the-art review," Journal of Business Economics, Springer, vol. 89(7), pages 747-792, September.
    14. Matsui, Kenji, 2019. "A supply chain member should set its margin later if another member's cost is highly uncertain," European Journal of Operational Research, Elsevier, vol. 275(1), pages 127-138.
    15. Lau, Amy Hing Ling & Lau, Hon-Shiang & Wang, Jian-Cai, 2007. "Pricing and volume discounting for a dominant retailer with uncertain manufacturing cost information," European Journal of Operational Research, Elsevier, vol. 183(2), pages 848-870, December.
    16. Zhou, Yong-Wu & Cao, Zong-Hong & Zhong, Yuanguang, 2015. "Pricing and alliance selection for a dominant retailer with an upstream entry," European Journal of Operational Research, Elsevier, vol. 243(1), pages 211-223.
    17. Ghosh, Debabrata & Shah, Janat, 2015. "Supply chain analysis under green sensitive consumer demand and cost sharing contract," International Journal of Production Economics, Elsevier, vol. 164(C), pages 319-329.
    18. Sudheer Gupta, 2008. "Research Note—Channel Structure with Knowledge Spillovers," Marketing Science, INFORMS, vol. 27(2), pages 247-261, 03-04.
    19. Tansev Geylani & Anthony J. Dukes & Kannan Srinivasan, 2007. "Strategic Manufacturer Response to a Dominant Retailer," Marketing Science, INFORMS, vol. 26(2), pages 164-178, 03-04.
    20. Eunkyu Lee & Richard Staelin & Weon Sang Yoo & Rex Du, 2013. "A “Meta-Analysis” of Multibrand, Multioutlet Channel Systems," Management Science, INFORMS, vol. 59(9), pages 1950-1969, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:206:y:2013:i:1:p:59-74:10.1007/s10479-013-1326-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.