Supply chain coordination for perishable products with consumer returns policies

Abstract

Consider a supply chain system consisting of one manufacturer and one retailer, in which the manufacturer provides one perishable product to the retailer with a wholesale price, and the retailer sales the product to consumers with a retail price, and the retailer provides partial returns policy for consumers. After knowing the retail price and the refund offered by the retailer, consumers according to their valuations for product to make keep or return decisions. Moreover, consumer's valuation is uncertainty and realized only after purchasing. A consumer's return model is proposed, and optimal pricing, quantity, as well as refund are obtained in the standard newsvendor setting. Subsequently, our researches are extended to supply chain setting, and two contracts are designed to coordinate the supply chain. Results show that the buy-back contract cannot realize supply chain coordination whereas the sales rebate contract can. Further profit allocation mechanisms under the sales rebate contract are discussed. Results indicate that the wholesale price is an important parameter influencing the profit allocation between the manufacturer and the retailer.