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Return and refund policy for product and core service bundling in the dual‐channel supply chain
Author(s) -
Zhang Zichen,
Luo Xinggang,
Kwong Chun Kit,
Tang Jiafu,
Yu Yang
Publication year - 2019
Publication title -
international transactions in operational research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.032
H-Index - 52
eISSN - 1475-3995
pISSN - 0969-6016
DOI - 10.1111/itor.12385
Subject(s) - business , supply chain , profit (economics) , bundle , dual (grammatical number) , channel (broadcasting) , service (business) , core (optical fiber) , industrial organization , product (mathematics) , microeconomics , marketing , economics , computer science , telecommunications , mathematics , art , materials science , geometry , literature , composite material
Recently, manufacturers have increasingly begun to sell products bundled with core services. However, customers are inconvenienced by individually returning the product or refunding the service after they have purchased a bundle. This paper presents a return and refund policy under two‐stage demand uncertainty (uncertainty at time 0 and inherent uncertainty), for products bundled with core services in the dual‐channel supply chain. Consumers can use the direct channel to return the default product–service bundle. In contrast, consumers in the retail channel can unsubscribe from the retailer's diverse core service by first receiving an unused service refund; the retailer then returns the product to the manufacturer. We use an approximate algorithm to solve for the optimal product quantity in the retail channel, demonstrating that the proportional marginal profit has a greater positive influence on the retailer's profit, and especially for the demand with a higher mean and lower variance.