The newsboy problem with resalable returns

Abstract

We analyze a newsboy problem with resalable returns. A singleorder is placed before the selling season starts. Purchasedproducts may be returned by the customer for a full refund withina certain time interval. Returned products are resalable, providedthey arrive back before the end of the season and are undamaged.Products remaining at the end of the season are salvaged. Alldemands not met directly are lost. We derive a simple closed-formequation that determines the optimal order quantity given thedemand distribution, the probability that a sold product isreturned, and all relevant revenues and costs. We illustrate itsuse with real data from a large catalogue/internet mail orderretailer.inventory;reverse logistics;product returns;mail order retailer;newsboy problem