Supply Chain Coordination for False Failure Returns

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dc.contributor.authorSouza, Gilvan
dc.contributor.authorFerguson, Mark
dc.contributor.authorGuide, V. Daniel, Jr.
dc.date.accessioned2005-04-11T13:17:49Z
dc.date.available2005-04-11T13:17:49Z
dc.date.issued2005-04-11T13:17:49Z
dc.description.abstractFalse failure returns are products that are returned by consumers to retailers with no functional or cosmetic defect. The cost of a false failure return includes the processing actions of testing, refurbishing if necessary, repackaging, the loss in value during the time the product spends in the reverse supply chain (a time that can exceed several months for many firms), and the loss in revenue because the product is sold at a discounted price. This cost is significant, and is incurred primarily by the manufacturer. Reducing false failure returns, however, requires effort primarily by the retailer, for example informing consumers about the exact product that best fits their needs. We address the problem of reducing false failure returns via supply chain coordination methods. Specifically, we propose a target rebate contract that pays the retailer a specific dollar amount per each unit of false failure returns below a target. This target rebate provides an incentive to the retailer to increase her effort, thus decreasing the number of false failures and (potentially) increasing net sales. We show that this contract is Pareto–improving in the majority of cases. Our results also indicate that the profit improvement to both parties, and the supply chain, is substantial.en
dc.format.extent436018 bytes
dc.format.mimetypeapplication/pdf
dc.identifier.urihttp://hdl.handle.net/1903/2281
dc.language.isoen_US
dc.relation.isAvailableAtRobert H. Smith School of Businessen_us
dc.relation.isAvailableAtDecision & Information Technologiesen_us
dc.relation.isAvailableAtDigital Repository at the University of Marylanden_us
dc.relation.isAvailableAtUniversity of Maryland (College Park, Md.)en_us
dc.subjectsupply chain coordinationen
dc.subjectconsumer returnsen
dc.subjectclosed-loop supply chainsen
dc.subjectreverse logisticsen
dc.titleSupply Chain Coordination for False Failure Returnsen
dc.typeWorking Paperen

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