The newsboy problem with resalable returns: A single period model and case study |
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| Institution: | 1. Chair of Logistics and Quantitative Methods in Business Administration Wuerzburg University Stephanstr. 1, Wuerzburg 97070 Germany;2. Department of Management Science, Lancaster University, Lancaster, United Kingdom;1. Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston IL 60208, USA;2. Department of Integrated Systems Engineering, The Ohio State University, Columbus OH 43210, USA;3. School of Business, Universidad Adolfo Ibañez, Santiago, Chile;1. Department of Economics Indian Institute of Management, Mohanlal Sukhadia University Campus, Ganesh Nagar, Udaipur, 313001, India;2. Operations Management Department ESSEC Business School, Paris-Singapore 3 Avenue Bernard Hirsch, Cergy-Pontoise 95021, France |
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| Abstract: | We analyze a newsboy problem with resalable returns. A single order is placed before the selling season starts. Purchased products may be returned by the customer for a full refund within a certain time interval. Returned products are resalable, provided they arrive back before the end of the season and are undamaged. Products remaining at the end of the season are salvaged. All demands not met directly are lost. We derive a simple closed-form equation that determines the optimal order quantity given the demand distribution, the probability that a sold product is returned, and all relevant revenues and costs. We illustrate its use with real data from a large catalogue/internet mail order retailer. |
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