Research on the Returns Policy Model of a Dual-Channel Supply Chain in E-commerce

This paper quantitatively analyzes the use of the e-marketplace for selling the returned products after rework in a dual-channel supply chain. In our dual-channel model, we derive the optimal order quantities and optimal retail prices for all the parties in the supply chain and we also propose the optimal buyback price established by the manufacturer. Through comparative analysis of the single-channel and the dual-channel model, we further find that the returns policy with e-marketplace is better than the traditional returns policy. In e-commerce, due to the existence of B2B e-marketplace, the returned products can be sold with a higher price which is higher than the salvage price. Both the manufacturer and the retailer can benefit from the dual-channel supply chain. Finally, we show that the retailer’s expected profit is an increasing function of the buyback price and the manufacturer’s expected profit is a decreasing function of the buyback price.