Research profile: Jenny Chen
Jenny Chen, Rowe School of Business
Supply chain strategy in the presence of customer returns
Retail product returns are a crucial component of the customer-retailer relationship. Return rates have increased in recent years and are particularly high for online sales (typically 20% to 40%). Worldwide, customers return an estimated $642.6 billion worth of goods per year. For the management of customer returns, manufacturers typically use buyback contracts, while retailers use returns policies. Viewing the supply chain as a whole, we investigate customer returns management strategies by developing a game theoretical model for a manufacturer鈥檚 Stackelberg supply chain facing customer returns. The manufacturer chooses either a buyback contract or a wholesale-price contract, and the retailer chooses a returns policy鈥攅ither a money-back guarantee (MBG) or no returns鈥攁nd decides whether to resell returned products as open-box products.
Working with a PhD student, we will address: 1) What are the optimal supply chain strategies with regard to the manufacturer鈥檚 choice of contract and the retailer鈥檚 choice of returns and resale policies? 2) When should the retailer offer an MBG or a no-returns policy? 3) How do the manufacturer鈥檚 choice of contract and the retailer鈥檚 choice of returns and resale policies affect the manufacturer鈥檚 wholesale price, the retailer鈥檚 selling price and demand, and the profits of the manufacturer and the retailer? By deriving the optimal solution to each of these supply chain decisions, we will identify the optimal strategies of the supply chain. We aim to provide some new insights and implications to supply chain management in the presence of customer returns.