Coordinating a decentralized supply chain with customer returns and price‐dependent stochastic demand using a buyback policy

Coordinating a decentralized supply chain with customer returns and price‐dependent stochastic demand using a buyback policy

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Article ID: iaor20133311
Volume: 212
Issue: 2
Start Page Number: 293
End Page Number: 300
Publication Date: Jul 2011
Journal: European Journal of Operational Research
Authors: ,
Keywords: cooperation
Abstract:

We investigate a decentralized supply chain that consists of a manufacturer and a retailer where the retailer simultaneously determines the retail price and order quantity while experiencing customer returns and price dependent stochastic demand. We propose an agreement between the manufacturer and the retailer that includes two buyback prices, one for unsold inventory and a second for customer returns, and show that this type of easy‐to‐implement agreement can achieve perfect supply chain coordination and be a win–win for both manufacturer and retailer when a complementary profit‐sharing agreement is included.

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