The Newsboy Problem with Resalable Returns

Abstract

We analyze a newsboy problem with resalable returns. A single order isplaced before the selling season starts. Purchased products may bereturned by the customer for a full refund within a certain timeinterval. Returned products are resalable, provided they arrive backbefore the end of the season and are undamaged. Products remaining atthe end of the season are salvaged. All demands not met directly arelost. We derive a simple closed-form equation that determines theoptimal order quantity given the demand distribution, the probabilitythat a sold product is returned, and all relevant revenues and costs.We illustrate its use with real data from a large catalogue/internetmail order retailer.inventory;reverse logistics;product returns;mail order retailer;newsboy problem