Fresh Produce Retailer's Optimal Ordering Policies with Bidirectional Options

Abstract

Abstract Considering the circulation loss of the fresh produce, we investigate the fresh produce retailer's optimal ordering policies with bidirectional options in a two-stage one period supply chain. We examine how the retailer maximizes her profit both with and without bidirectional options under the newsvendor frame. We show that the fresh produce retailer’s total optimal order quantity with bidirectional options is no less than the one without bidirectional options, and her maximum expected profit with bidirectional options is no less than the one without bidirectional options. The conclusions after numerical study show that the fresh produce retailer's optimal order quantity with and without bidirectional options are all increasing in the circulation loss rate, while her maximum expected profit with and without bidirectional options are all decreasing in the circulation loss rate.