Return handling options and order quantities for single period products

Abstract

Products which are sold through E-commerce or mail sales catalogues tend to have a much higher return rate than traditional products. The returns are especially problematic for seasonal products. To support decision making in these situations we study various options, which may be considered as strategic decisions, on handling the increased return flow. Closed form analytic expressions for optimal order quantities are obtained by solving the models developed for each option. Decision making guidelines on choosing between return options and some properties of the optimal solutions are presented. We also discuss estimation of the serviceable return rate in practical situations.