The return policy model with fuzzy demands and asymmetric information

Return policy, by offering the retailer some reimbursements for the leftover products, is one of the most efficient mechanisms for channel coordination. This paper considers a supplier–retailer channel to design the optimal return policy for the supplier. It is assumed that the supply chain operates under uncertain demands, which is represented by fuzzy sets. We first study the return policy in a supply chain with symmetric channel information, i.e. the channel information is completely shared between the supplier and the retailer. Further we assume the retailer keeps retail price information private, i.e. the channel information is asymmetric. Thus, the supplier makes the return policy on the basis of estimated retail price which is described as a fuzzy number. We formulate an inventory model with fuzzy demand and fuzzy retail price for the supplier to make a suitable return policy so that the retailer could be motivated to make the optimal order decision to improve the overall supply chain performance. Finally, some characteristics of the return policy are discussed, and numerical examples are presented to demonstrate the model applicability.