Money Back GuaranteesMoney Back GuaranteesMoney-back guaranteesIn case returns are allowed in the supply chin, two different scenarios are considered. First, the manufacturer offers to the final customers in case that they are not satisfied with the product to return it directly to the manufacturer (see diagram below). If the customer decide to return the product, he receives partial refund of a*r, where 0 ≤ a ≤ 1. The probability that the customer will return the product is θ. For this scenario, the part of returned products to the manufacturer is θX.
Second, the retailer allows the customers to return the product in case that they are unsatisfied with it (see diagram below). For this case the refund that the customer retains is as in previous case a*r, where 0 ≤ a ≤ 1. After the return of the product to the retailer, the retailer obtains a salvage value for the product from the manufacturer. The expected number of returned products is θX.
It is assumed that the demand is a random variable distributed between 1 and 5. The probabilities for each demand value are given (see table below). The expected demand for the product is calculated in the table E(X) = 1200.
Expected demandProductIn order to find the equilibrium fort he both scenarios, the profits have to be calculated, which the manufacturer, retailer and the channel as a whole would obtain in the both cases.
It is assumed that production costs for the manufacturer are 90. The price for which the product is sold to the final customer is 120. Therefore, the manufacturer has to set his price in the range between 90 ≤ w ≤ 120. It is considered that the probability that the customer would be unsatisfied with the product and would return is 10% (see table below). Two scenarios are assumed, the customer obtains full refund for the returned products (a = 1) and partial refund of the half of the price (a = 0,5).
Full refund (a = 1)The data conserning this case is included in the table below:VariableValue1) In case that the products are returned directly to the manufacturer, the profits of the participants in the supply chain are as follows:Profit OEMProfit RTotal Profit-144003600021600-132003480021600-120003360021600-108003240021600-96003120021600-84003000021600-72002880021600-60002760021600-48002640021600-36002520021600-24002400021600-12002280021600216002160020400216001920021600180002160016800216001560021600144002160013200216001200021600108001080021600120002160013200216001440021600156002160016800216001800021600192002160020400216002160021600The break even point fort he manufacturer is w = 102. With other words, he
The study states you (your employer) must use that data to compare various possible outcomes
Ad Predicting Disappointment Rates
The study states you (your employer) must use that data to compare various possible outcomes
Predicting Disappointment Rates
The study states you (your employer) must use that data to compare various possible outcomes