Returns Management In A Supply Chain With Service Reducing Consumer Mismatching

When consumers are purchasing goods, it is common that they do not know whether the product fit their demands. Consumer knows the product’s true value for them and mismatching loss only after using the product. In order to encourage consumers to buy, retailers usually provide returns service. There are two kinds of returns:asking for a refund, or replacing the product for another variant of the product. This paper addresses the second case. If replacement is allowed, consumers can replace the mismatched product with another variant of the product. Through comparing with mismatching cost and replacing handling cost, consumer decides whether to replace the product. In order to reduce mismatching rate (so reduce handling cost and enhance demand), retailer invests on store assistance service. However, the retailer needs to bear the cost of investing on store assistance service.Chapter 2 considers a one-manufacturer and one-retailer supply chain with the investment on store assistance service to reduce mismatching rate and studies channel coordination and the effect of market power on equilibrium outcome. Two kinds of models are developed:manufacturer Stackelberg model and retailer Stackelberg model. In the manufacturer Stackelberg model, the manufacturer is the leader and the retailer is the follower. A quantity discount-subsidy mechanism is designed to coordinate the retailer’s retail price and store assistance service level. The results show that:(i) when mismatching rate or system’s mismatching loss (includes retailer’s expected replacing handling cost and consumer’s expected mismatching loss) increase, the retailer will reduce unit wholesale price to bear the retailer’s handling cost, (ii) market scale can reverse the effects of mismatching rate and system’s mismatching loss on store assistance level and profits. Under retailer Stackelberg model, a two-part-margin-subsidy rate contract is designed to coordinate the manufacturer’s wholesale price decision. The influence of market power on equilibrium is investigated through comparing the manufacturer Stackelberg model with the retailer Stackelberg model. The results shows that the unit wholesale price and the manufacturer’s profit are lower under the retailer Stackelberg model than those under manufacturer Stackelberg model. Howerer, the retailer’s profit, the store assistance service level and the retailer price under the retailer Stackelberg model are higher than those under manufacturer Stackelberg model.Chapter 3 develops a vendor-managed inventory game model for a supply chain consisting of one manufacturer and one retailer. The manufacturer decides whether to allow consumers replacing mismatched products, i.e., offers the consumer returns policy. The results show that, when replacing is not allowed, if market scale is sufficiently low, the manufacturer prefers to sell product to low mismatching loss consumer. If mismatching rate is sufficiently high, allowing replacing reduces retail price. When service subsidy rate is sufficiently high, allowing replacing reduces unit wholesale price. Allowing consumer’s replacing reduces store assistance level, however, increases subsidy rate. Consumer’s expected mismatching loss can reverse the influence of subsidy rate and service cost factor on returns policy. If basic mismatching rate is not high, the manufacturer allows replacing. The effect of supply chain decentralization on returns policy increases with the manufacturer’s handling cost, however, it decreases with the mismatching loss of the high mismatching loss consumer.Chapter 4 considers a supply chain consisting of one manufacturer and one retailer under asymmetric information. The retailer has private information about retailer’s or consumer’s returns handling cost, or consumer mismatching rate. The retailer provides store assistance service to reduce consumer mismatching rate and stimulate demand. The result shows that:at most one type retailer has incentive to distort information. The high-type retailer (the retailer’s or consumer’s replacing handling cost is relatively high, or the mismatching rate is relatively high) does not have an incentive to distort information, however, the low-type retailer may report wrong information. In order to induce the low-type retailer when it has incentive to distort information to report ture information, the manufacturer needs to pay an information rent. The information asymmetry will not change the monotonicity of unit wholesale price to the retailer’s type. The wholesale price for the low-type retailer is always higher than that for the high-type retailer.