Revenue management in the presence of customer returns

In the proposed research, revenue management (RM) techniques will be used to investigate the impact of customer returns on the simultaneous pricing and ordering decisions of a firm or of a supply chain to mitigate the negative impact of customer returns.The returns of product by customers are mundane phenomena in retailing industries. Product returns represent a serious problem for both the retailer, who must process the incoming returns, and the product supplier, who must cope with the inventory of returned product. The proposed research will develop mathematical models to examine three research projects: 1) pricing and inventory decisions in multiple periods, 2) the impact of customer returns on decisions in a supply chain, including identifying the distinguishing characteristics of the buyback policy, and, in particular, investigating the supply chain coordination mechanisms, and examining the value of sharing customer return information, and 3) using customer returns as a device to segment the market.The proposed research is important and of value to both academics and practitioners. It will contribute to the study of RM by incorporating customer returns that change with product price into pricing and ordering decisions and by segmenting a market with differentiated customer returns policies. It will also contribute to the study of handling customer returns, as I will explore approaches for effectively handling customer returns through price and order policies to mitigate negative impact of customer returns on the profit. Further, it will contribute to the study of supply chain coordination, as I will examine how to contract an easy-to-implement agreement between the manufacturer and the retailer to achieve supply chain coordination. The research will have significant implications for current business practices, both at strategic and operational levels, since customer return issues can affect decisions related to capacity, production, and inventory planning.