Optimal ordering decisions with returns and excess inventory

Recycling is one of the most efficient ways to protect our environment. In recent years, inventory management with product returns has drawn attention from many researchers. This study considers a two‐echelon inventory system with returns and shortage backordering, and its objective is to minimize the total cost of the system. In addition, we examine a situation when stock increases will result in more consumption. Numerical examples are provided to illustrate the theory.