Retailer Pricing and Ordering Decisions Considering Customer Returns and Resales

Based on consumer returns in online retail, a supply chain consisting of a manufacturer and an online retailer is constructed. To address the issue of return management, two return management strategies of retailer resale and manufacturer buyback are proposed. A joint order pricing decisions are made with the objective of maximizing the profit, and different return management strategies are compared to provide insights for retailers and manufacturers. Results show that: (1) If the retailer resale strategy is not adopted, the negative impact of returns is usually reduced by raising prices and reducing order quantity. But the expected profit of both the retailer and the manufacturer is reduced. (2) If the retailer resale strategy is adopted, when the resale processing cost is low, accepting returns for resale at a discounted price is more profitable for the supply chain than that without any return management strategy. (3) If the manufacturer buyback strategy is adopted, for the manufacturer, the difference between the buyback price and the recovered salvage value is the key factor to determine the profitability of buybacks. Meanwhile, the retailer always benefits from the increase of the buyback price.