A risk-free perishable item returns policy

Scott Webster, Z. Kevin Weng

Research output: Contribution to journalArticle

107 Scopus citations

Abstract

A returns policy, which specifies a schedule of rebates from manufacturer to retailer for product left over at the end of the selling season, encourages larger order quantities and can increase manufacturer profit. One downside from a manufacturer's perspective is the possibility of very low profit due to high rebate expense when demand is lower than expected. We take the viewpoint of a manufacturer selling a short life-cycle product to a single risk-neutral retailer and describe returns policies that, when compared to no returns, satisfy two conditions: (1) the retailer's expected profit is increased and (2) the manufacturer's profit is at least as large as when no returns are allowed. We call such a returns policy risk-free.

Original languageEnglish (US)
Pages (from-to)100-106
Number of pages7
JournalManufacturing and Service Operations Management
Volume2
Issue number1
StatePublished - Dec 1 2000
Externally publishedYes

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Keywords

  • Contacts
  • Returns Policies
  • Supply Chain

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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