A Model and its Solution Method for a Two-Item Newsvendor Supply Chain with Return Policy and Demand Leakage

Abstract

We study a one-manufacturer and one-retailer type of supply chain that the manufacturer manufactures two newsvendor-type items and offers a buy-back contractual commitment to the retailer who sells the items in a stochastic demand market with various prices, allowing demand leakage from high-priced item to low-priced one. The objective of this study is to coordinate the chain by jointly determining wholesale prices, buy-back prices, retail prices and order sizes. We first derive a succinct model for the chain in which the manufacturers expected profit subject to the retailer’s optimal expected profit will be explored. And a solution method to the case of uniformly distributed error demand is subsequently proposed; accordingly, a series of examples along with graphical concavity and satisfying constraint of the manufacturer’s expected profit are conducted to validate our solution method.

Authors and Affiliations

Che-Tsung Tung, Kuo-Hsien Wang, Yu-Je Lee

Keywords

Related Articles

Market Rewards to Earnings Smoothing: Evidence from Firms’ Valuation in Nigeria

This paper documents evidence that the Nigerian market rewards low earnings per share volatility with higher share prices. Earnings smoothing was measured by the standard deviation of earnings stream over a five year rol...

Correlation between Growth Rate and Non Performing Retail Loans in the Republic of Macedonia

The research paper investigates the correlation between Gross Domestic Product, total declared and paid wages by Macedonian real economy and the level of nonperforming retail loans in the Republic of Macedonia in the pe...

Property, Plant and Equipment disclosure requirements and firm characteristics: the Portuguese Accounting Standardization System

In the new Portuguese accounting frame of reference (Portuguese Accounting Standardization System – Sistema de Normalização Contabilística), the issues related to Property, Plant and Equipment assets are dealt with in th...

International Tax Avoidance Schemes: An Investigation of Multinational Technology Companies

The opportunity to use tax havens leads to a decline in tax revenues of many resident countries of multinational technology companies. Several studies have proven that havens aid multinational technology companies to eng...

Perceived Social Power and Audit Committee Effectiveness in Malaysia: The Conceptual Model

Decision is best implemented using the social power. Social power exists in everywhere and needs for every organization actor. As an independent governance mechanism, Audit Committee (AC) needs social power to achieve th...

Download PDF file
  • EP ID EP162502
  • DOI 10.6007/IJARAFMS/v4-i1/697
  • Views 104
  • Downloads 0

How To Cite

Che-Tsung Tung, Kuo-Hsien Wang, Yu-Je Lee (2014). A Model and its Solution Method for a Two-Item Newsvendor Supply Chain with Return Policy and Demand Leakage. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 397-408. https://europub.co.uk/articles/-A-162502