| In direct sales supply chain, the customers buy direct from the manufacturer sacrificing the benefit of physical inspection of the product. This increases the likelihood that customers will have some dissatisfaction with the product and would like to return it. A clearly explained and generous return policy, then, will be welcome by the customers and therefore will enhance sales. However, this reversed flow merchandise has always been a problem for all parties in the supply chain due to the disruption in operations and headache in processing returned merchandises. We are interested to examine the roles of return policy in reverse logistics from various angles. First, we survey the existing literature on the area of reverse logistics. We offer a new literature classification that will close the research's gap in the area. We then look into specific problems of return policy namely the relationship between price and return policy, the effect of product's quality on the return policy, and the effect of uncertainty in the returned merchandise to the return policy. We obtain a number of managerial guidelines for using marketing and operational strategy variables to influence the reaction parameters so as to obtain the maximum benefit from the market for each problem. We here also disprove that return policy is all about cost. We show that return policy is a powerful tool to increase firm's profit. |
