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Demand uncertainty and manufacturer returns policies for style-good retailing competition

Demand uncertainty and manufacturer returns policies for style-good retailing competition
Demand uncertainty and manufacturer returns policies for style-good retailing competition
This paper investigates the role of the returns policy in the co-ordination of supply chain: A manufacturer provides a return policy for unsold goods to two competing retailers who face uncertain demand. The problem is described with a game theory structure: The manufacturer, as the Stackelberg leader, first commits a returns price to the retailers under a given wholesale price. Upon receiving this information, two competing retailers, as followers, make decisions for their retail price and order size, in which the process of pricing and ordering is played as Nash equilibrium. Anticipated the retailers’ responses, the manufacturer designs his returns policy. Adopting the classic newsboy problem model framework and using numerical study methods, the study finds that the provision of a returns policy is dependent on the market conditions faced by the retailers. The paper also analyses the impact of demand variability on the decisions of optimal retail price and order quantity and profit reallocation between the manufacturer and the retailers. Finally, it investigates how the competing factor influences the decision-making of supply chain members in response to uncertain demand and profit variability.
supply chain co-ordination, reverse logistics, returns policy
0953-7287
691-700
Yao, Z.
d19f07af-939a-4c74-9651-d12a6e647565
Wu, Y.
e279101b-b392-45c4-b894-187e2ded6a5c
Lai, K.K.
20379c9f-ac5f-4549-ab91-77722180b971
Yao, Z.
d19f07af-939a-4c74-9651-d12a6e647565
Wu, Y.
e279101b-b392-45c4-b894-187e2ded6a5c
Lai, K.K.
20379c9f-ac5f-4549-ab91-77722180b971

Yao, Z., Wu, Y. and Lai, K.K. (2007) Demand uncertainty and manufacturer returns policies for style-good retailing competition. Production Planning & Control, 16 (7), 691-700. (doi:10.1080/09537280500274148).

Record type: Article

Abstract

This paper investigates the role of the returns policy in the co-ordination of supply chain: A manufacturer provides a return policy for unsold goods to two competing retailers who face uncertain demand. The problem is described with a game theory structure: The manufacturer, as the Stackelberg leader, first commits a returns price to the retailers under a given wholesale price. Upon receiving this information, two competing retailers, as followers, make decisions for their retail price and order size, in which the process of pricing and ordering is played as Nash equilibrium. Anticipated the retailers’ responses, the manufacturer designs his returns policy. Adopting the classic newsboy problem model framework and using numerical study methods, the study finds that the provision of a returns policy is dependent on the market conditions faced by the retailers. The paper also analyses the impact of demand variability on the decisions of optimal retail price and order quantity and profit reallocation between the manufacturer and the retailers. Finally, it investigates how the competing factor influences the decision-making of supply chain members in response to uncertain demand and profit variability.

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More information

Published date: 21 February 2007
Keywords: supply chain co-ordination, reverse logistics, returns policy

Identifiers

Local EPrints ID: 35917
URI: http://eprints.soton.ac.uk/id/eprint/35917
ISSN: 0953-7287
PURE UUID: 118175ac-aa80-426c-a3a5-6ca3048cd701

Catalogue record

Date deposited: 22 May 2006
Last modified: 27 Apr 2022 07:34

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Contributors

Author: Z. Yao
Author: Y. Wu
Author: K.K. Lai

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