The optimal disposition decision for product returns

V. Daniel R. Guide, Evrim Didem Gunes, Gilvan C. Souza, Luk N. van Wassenhove

Research output: Contribution to journalArticlepeer-review

50 Scopus citations

Abstract

We provide an analytic model for The optimal disposition decision for product returns. The manager decides which product returns to accept for processing at the remanufacturing facility, and which ones to sell immediately as-is at a salvage value. High congestion levels in the remanufacturing facility delay the sale of the remanufactured product at the secondary market, decreasing the value at which it can be sold; this may imply a more attractive salvaging option. This is particularly important for high-tech products with short life cycles, such as computers and printers. We propose a two-step policy. In the first step, the returned product's random processing time is observed. In the second step, a disposition decision is made: if the processing time is larger than a threshold k* the product is salvaged; otherwise the product is remanufactured. We provide an approximate procedure to compute k* in industrial settings. Our numerical study demonstrates the superiority of our policy over the current industrial practice ignoring the time value of money.

Original languageEnglish (US)
Pages (from-to)6-14
Number of pages9
JournalOperations Management Research
Volume1
Issue number1
DOIs
StatePublished - Sep 2008

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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