Dynamics of coordination for return policy contracts with warranty

Shirsendu Nandi
Indian Institute of Management Rohtak, Haryana, India

The purpose of this paper is to determine the relationship among different variables and contract parameters in order to achieve coordination for buyback contract and quantity flexibility contract with warranty. The paper analyses the dynamics of coordination and performs numerical analysis to compare the results obtained for different demand distributions. The paper makes use of analytical model and optimization techniques to investigate the dynamics of coordination. This study finds relationship among different exogenous variables and contract parameters to achieve channel coordination through warranty period optimization. The study also finds that with increase in mean of the distribution the optimal warranty length decreases. It provides the graphical nature of the risk and profit allocation for both the parties in the supply chain with increase in flexibility, buyback rate. It is found that in case of exponential demand distribution with higher variance, the manufacturer is required to offer a higher flexibility to the retailer in terms of quantity ordered by fixing a relatively larger flexibility parameter to ensure that both the parties in the supply chain have a positive profit. Using the demonstrated guidelines the coordinator of the supply chain may optimally design the contract parameters, warranty length etc. The study contributes to the existing literature by deriving necessary conditions for achieving supply chain coordination in case of a buyback contract and a quantity flexibility contract with warranty. The study helps the channel coordinator to understand the dynamics of coordination.

Download Full Paper