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The news-vendor problem with drop-shipping and resalable returns

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  • Shouyu Ma
  • Zied Jemai
  • Evren Sahin
  • Yves Dallery

Abstract

As e-commerce expands, more and more products are offered online to attract internet consumers’ interest. These products are then shipped to consumers’ home by a drop-shipper. Drop-shipping seems to be a good option to sell products in addition to physical stores. Furthermore, both types of products, either sold in store or on Internet can be returned by consumers, with often a higher return ratio for those purchased on Internet. To model these two sales channel and the interactions between them, we consider a News-Vendor (NV) managing both a physical store and an online sale channel that can be fulfilled by a drop-shipping option. We also consider the possibility of reselling products that are returned by consumers during the selling season. The concavity of the expected profit is proven and the optimality condition is obtained. Promising results are obtained from a numerical analysis. In particular, we show that the expected profit can be 14.4% less than the optimal expected profit if the return effect is ignored. Using drop-shipping option can reduce the optimal store inventory by 31.2% and if the NV has no drop-shipping option, the expected profit can be 9% less.

Suggested Citation

  • Shouyu Ma & Zied Jemai & Evren Sahin & Yves Dallery, 2017. "The news-vendor problem with drop-shipping and resalable returns," International Journal of Production Research, Taylor & Francis Journals, vol. 55(22), pages 6547-6571, November.
    • Handle: RePEc:taf:tprsxx:v:55:y:2017:i:22:p:6547-6571
    DOI: 10.1080/00207543.2017.1324221
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    Citations

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    Cited by:

    1. Rung-Hung Su & Tse-Min Tseng & Chun Lin, 2024. "Integrated Profitability Evaluation for a Newsboy-Type Product in Own Brand Manufacturers," Mathematics, MDPI, vol. 12(4), pages 1-23, February.
    2. Leonard Calin ABRUDAN & Mirabela Constanta MATEI & Maria Madela ABRUDAN, 2018. "Running A Business Through A Sharing Responsibilities (And Profits) Strategy," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(1), pages 28-38, November.
    3. Shi, Siyu & Sun, Jingchun & Cheng, T.C.E., 2020. "Wholesale or drop-shipping: Contract choices of the online retailer and the manufacturer in a dual-channel supply chain," International Journal of Production Economics, Elsevier, vol. 226(C).
    4. Umair Akram & Melinda Timea Fülöp & Adriana Tiron-Tudor & Dan Ioan Topor & Sorinel Căpușneanu, 2021. "Impact of Digitalization on Customers’ Well-Being in the Pandemic Period: Challenges and Opportunities for the Retail Industry," IJERPH, MDPI, vol. 18(14), pages 1-21, July.
    5. Barcs, Cristian & Pop, Izabela Luiza & Toader, Cezar & Ighian, Diana, 2022. "Drop-Shipping – A Business Model Without Holding Inventory: A Case Study of Online Store," MPRA Paper 118638, University Library of Munich, Germany.
    6. Hübner, Alexander & Hense, Jonas & Dethlefs, Christian, 2022. "The revival of retail stores via omnichannel operations: A literature review and research framework," European Journal of Operational Research, Elsevier, vol. 302(3), pages 799-818.
    7. Kim, Nayeon & Montreuil, Benoit & Klibi, Walid, 2022. "Inventory availability commitment under uncertainty in a dropshipping supply chain," European Journal of Operational Research, Elsevier, vol. 302(3), pages 1155-1174.
    8. Li, Guo & Zhang, Xuefeng & Liu, Mengqi, 2019. "E-tailer’s procurement strategies for drop-shipping: Simultaneous vs. sequential approach to two manufacturers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 130(C), pages 108-127.
    9. Guo Li & Hong Zheng & Mengqi Liu, 2020. "Reselling or drop shipping: Strategic analysis of E-commerce dual-channel structures," Electronic Commerce Research, Springer, vol. 20(3), pages 475-508, September.
    10. Rung-Hung Su & Chia-Ding Hou & Jou-Yu Lee, 2024. "Obtaining Conservative Estimates of Integrated Profitability for a Single-Period Product in an Own-Branding-and-Manufacturing Enterprise with Multiple Owned Channels," Mathematics, MDPI, vol. 12(13), pages 1-22, July.
    11. Sodero, Annibal C. & Namin, Aidin & Gauri, Dinesh K. & Bhaskaran, Sreekumar R., 2021. "The strategic drivers of drop-shipping and retail store sales for seasonal products," Journal of Retailing, Elsevier, vol. 97(4), pages 561-581.

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