Managing consumer returns in high clockspeed industries
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In this study, we address control policies to manage the collection of products that have been returned by consumers to retailers after they have been sold. Specifically, we model a consumer returns process where the operational decision of interest is the frequency in which returns are picked up from a collection point and then processed at a centralized location. Returns decay in value over time according to their industry clockspeed. Hence there is an intrinsic tradeoff in the decision - a longer interval between collections not only reduces transportation cost, but also reduces the value of asset recovery. We analyze a stylized model with a single collection point and a centralized returns processing center. Given an asset decay rate and a fixed transportation cost we determine the optimal collection interval. We later expand the analysis to the case of a capacitated returns processing center. We also explore the value of information (number of returns held at the collection point) sharing between a collection point and the central processing facility. We find that the voi is quite sensitive to parametric settings ranging upwards to over 20% with a median value of 5.0%. We find that the voi increases with respect to the asset value decay rate and the rate of returns, while it decreases with respect to the shipping cost. 2013 Elsevier Ltd.
