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Article: On supply chain coordination for false failure returns: A quantity discount contract approach

TitleOn supply chain coordination for false failure returns: A quantity discount contract approach
Authors
KeywordsClosed-loop supply chains
Consumer returns
Quantity discount contract
Supply chain coordination
Issue Date2011
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ijpe
Citation
International Journal Of Production Economics, 2011, v. 133 n. 2, p. 634-644 How to Cite?
AbstractA large proportion of consumer returns fall into the category of false failure returns, which refer to returns without functional defects. In this paper, we consider profits resulting from exerting costly effort to reduce false failure returns in a reverse supply chain. The supply chain as a whole has a strong incentive to reduce such returns for cost saving. However, retailers typically enjoy a full credit provided by suppliers for returns, so they may not have sufficient incentives to exert enough effort for supply chain profit maximization. In some scenarios retailers may even have the motivation to encourage such returns. We suggest using a coordination contract to resolve this profit conflict. We introduce a quantity discount contract which specifies a payment to the retailer with an amount exponentially decreasing in the number of returns. We present explicit forms of such contracts given different assumptions about the distribution of the number of returns. We also prove that the contract is Pareto improving. Besides, it is shown that when the contract is applied in a closed-loop supply chain, it can deter retailer's potential incentive to encourage returns. Moreover, some modifications of the contract can lead to easy allocation of supply chain profit. © 2011 Elsevier B.V. All right reserved.
Persistent Identifierhttp://hdl.handle.net/10722/145561
ISSN
2015 Impact Factor: 2.782
2015 SCImago Journal Rankings: 2.749
ISI Accession Number ID
Funding AgencyGrant Number
GRF7017/07P
HKU CRCG
HKU
Funding Information:

Research supported in part by GRF Grant no. 7017/07P, HKU CRCG Grants and HKU Strategic Research Theme Fund on Computational Sciences. The authors would like to thank the referee for the useful comments and suggestions.

References

 

DC FieldValueLanguage
dc.contributor.authorHuang, Xen_HK
dc.contributor.authorChoi, SMen_HK
dc.contributor.authorChing, WKen_HK
dc.contributor.authorSiu, TKen_HK
dc.contributor.authorHuang, Men_HK
dc.date.accessioned2012-02-28T01:54:35Z-
dc.date.available2012-02-28T01:54:35Z-
dc.date.issued2011en_HK
dc.identifier.citationInternational Journal Of Production Economics, 2011, v. 133 n. 2, p. 634-644en_HK
dc.identifier.issn0925-5273en_HK
dc.identifier.urihttp://hdl.handle.net/10722/145561-
dc.description.abstractA large proportion of consumer returns fall into the category of false failure returns, which refer to returns without functional defects. In this paper, we consider profits resulting from exerting costly effort to reduce false failure returns in a reverse supply chain. The supply chain as a whole has a strong incentive to reduce such returns for cost saving. However, retailers typically enjoy a full credit provided by suppliers for returns, so they may not have sufficient incentives to exert enough effort for supply chain profit maximization. In some scenarios retailers may even have the motivation to encourage such returns. We suggest using a coordination contract to resolve this profit conflict. We introduce a quantity discount contract which specifies a payment to the retailer with an amount exponentially decreasing in the number of returns. We present explicit forms of such contracts given different assumptions about the distribution of the number of returns. We also prove that the contract is Pareto improving. Besides, it is shown that when the contract is applied in a closed-loop supply chain, it can deter retailer's potential incentive to encourage returns. Moreover, some modifications of the contract can lead to easy allocation of supply chain profit. © 2011 Elsevier B.V. All right reserved.en_HK
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ijpeen_HK
dc.relation.ispartofInternational Journal of Production Economicsen_HK
dc.subjectClosed-loop supply chainsen_HK
dc.subjectConsumer returnsen_HK
dc.subjectQuantity discount contracten_HK
dc.subjectSupply chain coordinationen_HK
dc.titleOn supply chain coordination for false failure returns: A quantity discount contract approachen_HK
dc.typeArticleen_HK
dc.identifier.emailChing, WK:wching@hku.hken_HK
dc.identifier.authorityChing, WK=rp00679en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.ijpe.2011.04.031en_HK
dc.identifier.scopuseid_2-s2.0-80051544818en_HK
dc.identifier.hkuros198634en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-80051544818&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume133en_HK
dc.identifier.issue2en_HK
dc.identifier.spage634en_HK
dc.identifier.epage644en_HK
dc.identifier.isiWOS:000294885600016-
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridHuang, X=36617352800en_HK
dc.identifier.scopusauthoridChoi, SM=26435077400en_HK
dc.identifier.scopusauthoridChing, WK=13310265500en_HK
dc.identifier.scopusauthoridSiu, TK=8655758200en_HK
dc.identifier.scopusauthoridHuang, M=26643214600en_HK
dc.identifier.citeulike9326665-

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