Paper

Supply Chain Coordination with Returns Handling and Clearance Sales


Authors:
Etsuko Kusukawa
Abstract
Optimal sales strategy between retailers and manufacturers in supply chains with clearance sales market has been discussed in the inventory management. However, the profitability of combination of clearance sales and profit sharing has not been discussed substantially. In this paper, we present an optimal sales strategy for order quantity and discount ratio in a supply chain with return handling and profit sharing. Three consecutive sales periods: a normal sales period, a clearance sales period and a recycle sales period are discussed here. Two types of supply chains with a retailer and a manufacturer: (i) a decentralized supply chain (DSC), and (ii) an integrated supply chain (ISC) is analyzed theoretically. Under DSC, the Stackelberg game is adopted. The optimal decisions are made to maximize the expected profit of a retailer who is the Stackelberg leader. Under ISC, the optimal decisions are made to maximize the expected profit of the entire supply chain. Also, profit sharing as supply chain coordination (SCC) is discussed in order to encourage the shift of the optimal decisions under ISC. The proposed profit sharing is introduced under ISC as to the expected investment ratio of each member under ISC. Here, the expected investment ratio of each member is calculated as the ratio of each member’s expected profit to the member’s expected cost. It is verified that SCC based on investment ratio can enable to guarantee more profits to both members under ISC, considering a barometer of cost-benefit performance for each member in a supply chain. Research outcomes in this paper are shown as guiding principles to operate not only E-business, but also services sciences.
Keywords
Returns Handling; Clearance Sales; Newsvendor-Type Model; Stackelberg Game; Supply Chain Coordination
StartPage
85
EndPage
101
Doi
Download | Back to Issue| Archive