Title: Buyback contract in a risk-averse supply chain with a return policy and price dependent demand

Authors: T.T.H. Duc; N.T. Loi; J. Buddhakulsomsiri

Addresses: Business and Economics, Universiti Brunei Darussalam, Brunei Darussalam ' College of Engineering Technology, Can Tho University, Can Tho City, Vietnam ' School of Manufacturing Systems and Mechanical Engineering, Sirindhorn International Institute of Technology, Thammasat University, Pathum Thani, Thailand

Abstract: This paper examines a two-stage supply chain where a retailer offers a return policy with partial refund to end customers, and a manufacturer offers a buyback contract for all unsold and returned items to the retailer to share the risk. Customer demand is stochastic and price dependent. Key performance measure is the utility of profit, a function of the mean and variance of profit. Supply chain members are risk averse. Optimal buyback price, wholesale price, and retailer's order quantity are determined for the supply chain under coordination. A computational study is conducted to investigate the impacts of the members' risk attitudes, refund amount, and retail price on the optimal decisions. Further analysis shows break-even points among utility values at different retail prices as the risk attitude parameters and refund amount change. These break-even points provide a guideline for the retailers to adjust the price to maximise the utility of profit.

Keywords: customer returns; supply chain coordination; buyback contract; price dependent demand; risk-averse; utility function.

DOI: 10.1504/IJLSM.2018.092612

International Journal of Logistics Systems and Management, 2018 Vol.30 No.3, pp.298 - 329

Received: 06 Sep 2016
Accepted: 13 Jan 2017

Published online: 26 Jun 2018 *

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