A new location–inventory policy with reverse logistics applied to B2C e-markets of China

Based on the characteristics of consumer purchasing behavior over business-to-consumer (B2C) electronic markets in China, we consider a supply chain with one supplier, one B2C firm and multiple distribution centers (DCs) to jointly study supply chain location and inventory policies when product returns are allowed for. A new location–inventory policy is proposed and modeled as a bi-level programming problem: The upper level determines appropriate locations of third checking sites (3CS), and the lower level presents a coordinated inventory replenishment QS_R policy in light of the 3CS locations: An abstract network based on a B2C firm in China is adopted to illustrate the proposed model. We find that a QS_R policy is more effective on inventory control than the independent control policy is; 3CS added into the network improves the B2C firm’s profit, and sensitivity analysis provides interesting managerial insights into the B2C firm’s profit improvement in China.