A Decision Support System and Warehouse Operations Design for Pricing Products and Minimizing Product Returns in a Food Plant

Abstract

Aim/Purpose: The first goal is to develop a decision support system for pricing and production amounts for a firm facing high levels of product returns. The second goal is to improve the management of the product returns process. Background: This study was conducted at a food importer and manufacturer in Israel facing a very high rate of product returns, much of which is eventually discarded. The firm’s products are commonly considered to be a low-cost generic alternative and are therefore popular among low-income families. Methodology: A decision support module was added to the plant’s business information system. The module is based on a supply chain pricing model and uses the sales data to infer future demand’s distribution. Ergonomic models were used to improve the design of the returns warehouse and the handling of the returns. Contribution: The decision support system allows to improve the plant’s pricing and quantity planning. Consequently, it reduced the size of product returns. The new design of the returns process is expected to improve worker’s productivity, reduces losses and results in safer outcomes. This study also demonstrates a successful integration and of a theoretical economical model into an information system. Findings: The results show the promise of incorporating pricing supply chain models into informing systems to achieve a practical business task. We were able to construct actual demand distributions from the data and offer actual pricing recommendations that reduce the number of returns while increasing potential profits. We were able to identify key deficiencies in the returns operations and added a module to the decisions support system that improves the returns management and links it with the sales and pricing modules. Finally, we produced a better warehouse design that supports efficient and ergonomic product returns handling. Recommendations for Practitioners: This work can be replicated for different suppliers, manufacturers and retailers that suffer from product returns. They will benefit from the reduction in returns, as well as the decrease in the losses associated with these returns. Recommendation for Researchers: It is worthwhile to research whether decision support systems can be applied to other aspects of the organizations’ operations. Impact on Society: Product returns is a lose-lose situation for producers, retailers and customers. Moreover, mismanagement of these returns is harmful for the environment and may result in the case of foods, in health hazards. Reducing returns and improving the handling improves sustainability and is beneficial for society. Future Research: The decision support system’s underlying pricing model assumes a specific business setting. This can be extended using other pricing models and applying them in a similar fashion to the current application.