Analysing and managing channel risk for return policy contracts with warranty
by Shirsendu Nandi
International Journal of Business Forecasting and Marketing Intelligence (IJBFMI), Vol. 3, No. 2, 2017

Abstract: Supply chain related to electronic appliances, computer and fashion apparel are products with volatile demand characterised by short selling season. The current paper analyses risk for all the parties involved in the supply chain when a warranty clause is also considered along with two return policy contracts. The study considers a risk-averse supply chain where the parties in the supply chain are also risk averse in nature and shows how to optimally design the contract parameters, warranty length to achieve higher channel profit. The paper also studies the nature of change in the amount of risk borne by the entire supply chain, manufacturer and retailer with change in order quantity and warranty length. It is found that with increase in the warranty length, the order quantity and other contract parameters remaining constant, the risk borne by the supply chain and its members increase first and then gradually decease.

Online publication date: Thu, 27-Apr-2017

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