Fall 2005 UMASS Amherst Operations Research / Management Science Seminar Series

Date: Friday, September 30, 2005 Time: 11:00 AM Location: Isenberg School of Management, Room 112

Speaker: Professor Ana Muriel Department of Mechanical and Industrial Engineering University of Massachusetts at Amherst

Biography: Ana Muriel is an Associate Professor in the Department of Mechanical and Industrial Engineering at the University of Massachusetts at Amherst. Dr. Muriel’s research focuses on different aspects of logistics and supply chain management, including the effective coordination of production, inventory and transportation in production/distribution networks characterized by economies of scale, the evaluation of the costs and benefits of production flexibility in the supply chain, and the estimation of the long-term dynamics and behavior of the supply chain. Dr. Muriel received an NSF CAREER award in 2002 and is an Associate Editor for IIE Transactions in Scheduling and Logistics and Naval Research Logistics. During the 2004-2005 Academic Year she was a Ramon y Cajal Scholar at the School of Management of the University of Salamanca, Spain, working on logistics coordination and reverse logistics problems. Dr. Muriel received her B.S. in Mathematics from the University of Seville, Spain and an M.S. and Ph.D. in Industrial Engineering and Management Sciences from Northwestern University. Her previous experience also includes a tenure-track faculty position at the University of Michigan Business School.

TITLE: The Impact of Consumer Returns on Supply Chain Coordination

Abstract: In an effort to attract buyers in a highly competitive marketplace, consumer return policies have been drastically relaxed in the last decade. Most mass merchandisers offer full refund within 30-90 days of purchase; no questions asked. As a result, return rates from consumers to manufacturers or retailers are often in the range of 6% to 15%. Furthermore, for mail order companies and e-tailers, they can be as high as 35%. Managing consumer returns effectively thus becomes essential to business profits. This is one of the goals of the new and growing field of Reverse Logistics. In this talk, we investigate the effect that consumer returns have in the coordination of the supply chain with and without contracts. We consider a two-echelon supply chain with a single manufacturer and a single retailer that faces stochastic price-dependent demand in a single period. The retailer receives the items and commits to a selling price at the start of the season, having no additional replenishment opportunity. Logistics costs related to consumer returns are incurred at both the retailer and at the manufacturer sites.  Typically, a small percentage of this cost is paid by the retailer, corresponding to the handling of such returns. Meanwhile, the manufacturer faces the larger share, including transportation, inspection and possibly the remanufacturing of the product.   We first derive the optimal centralized and decentralized solutions for this supply chain and then consider buy back contracts in which the manufacturer fixes a wholesale price for the product and a repurchase price for the unsold items at the end of the season. Computational experiments are performed to study the practical impact that consumer returns have on the decision making process and on the coordination of the supply chain. The results obtained are counterintuitive: Higher profits and better coordination can be achieved when the players acting in a decentralized fashion do not consider any information about consumer returns as they make their pricing and ordering decisions. (Joint work with Rocio Ruiz-Benitez)

This series is organized by the UMASS Amherst INFORMS Student Chapter. Support for this series is provided by the Isenberg School of Management, the Department of Finance and Operations Management, INFORMS, and the John F. Smith Memorial Fund. For questions, please contact the INFORMS Student Chapter Representative, Ms. Tina Wakolbinger, wakolbinger@som.umass.edu