Optimal Selling Policy for a Trading Network System with Return Handling in an e-commerce Environment

Abstract

For recent years, the volume of product sales in the e-commerce environment has been increasing in the global market. In general, the online sales tend to have a higher return rate than the brick-and-mortar sales. Since a higher return rate is a feature of the online sales, we should consider an optimal selling policy, including the handling of the return products. In this paper, we present an optimal selling policy for the trading network system in an e-commerce environment which consists of a manufacturer (MF) and a retailer (RT). Then, we consider two situations of the decentralized supply chain by MF and RT, and the integrated supply chain by MF and RT. For treating of the products returned from the primary market (PM), the selling policy of reselling at both the secondary market (2nd-M) and the salvage market (SM) is considered (selling policy 1). Additionally, we consider the selling policy that the unsold products in the PM are treated in either the 2nd-M or the SM in a phase manner. The optimal selling policy in the trading network system is investigated by comparing selling policy 1 with selling policy 2, under the above two situations.