Transshipment of cross-channel returned products

Arjan S. Dijkstra, Gerlach van der Heide, Kees Jan Roodbergen

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6 Citations (Scopus)
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Abstract

Companies increasingly employ dual-channeling strategies with online and o_ine channels to reach customers. The combination of high return rates in e-commerce and the possibility for customers to return products ordered online at any offline store may result in unbalanced inventories. Transshipments can be used to deal with these unbalanced inventories. In this paper we study dynamic policies for transshipment of products that are returned cross-channel from online to offline stores. At the end of each period in a finite sales season, cross-channel returned products can be transshipped back to the online store or kept on-hand at the offline store. Optimal transshipment policies are obtained using a Markov decision process. We introduce a well-performing heuristic based on the expected costs during the sales season, with a maximum deviation of 1:59% from the optimal costs in experiments. Furthermore, we show that in all instances our heuristic outperforms static policies in which products are either always or never shipped back to the online store. We observe that dynamic transshipment policies are more effective than static policies in dealing with imbalances in the initial stock. Dynamic transshipment of cross-channel returns seems to open up possibilities for more effective demand fulfillment of dual-channel companies.
Original languageEnglish
Pages (from-to)70-77
Number of pages8
JournalInternational Journal of Production Economics
Volume209
Issue number3
DOIs
Publication statusPublished - Mar-2019

Keywords

  • E-commerce
  • Multi-channeling
  • Returns
  • Lateral transshipments
  • Markov decision processes
  • Heuristics
  • LATERAL TRANSSHIPMENTS
  • INVENTORY SYSTEM
  • MODEL
  • SINGLE
  • POLICY
  • OPTIMIZATION
  • SIMULATION
  • SUPPLIER

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