Optimal pricing and production decisions in utilizing reusable containers

In this study, we focus on pricing and production decisions in utilizing reusable containers with stochastic customer demand. We consider a manufacturer that sells a single product to the customers in reusable containers with two supply options: (i) brand-new containers and (ii) returned containers...

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Bibliographic Details
Published in:International journal of production economics 2013-06, Vol.143 (2), p.222-232
Main Authors: Atamer, Büşra, Bakal, İsmail S., Bayındır, Z. Pelin
Format: Article
Language:English
Subjects:
Acquisition management
Acquisitions
Closed-loop supply chain management
Containers
Decision making
Decisions
Deposit-refund systems
Manufacturers
Marketing
Mathematical analysis
Optimization
Order quantity
Pricing
Production costs
Reusable
Reusable containers
Reverse logistics
Studies
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Summary:In this study, we focus on pricing and production decisions in utilizing reusable containers with stochastic customer demand. We consider a manufacturer that sells a single product to the customers in reusable containers with two supply options: (i) brand-new containers and (ii) returned containers from customers. The return quantity depends on both customer demand and the acquisition fee determined by the manufacturer. The unit cost of production using brand-new containers is different than the unit cost of reusing returned containers. The customers are indifferent between brand-new and recovered products. We also consider resource restrictions on the production operations. In this setting, we investigate the optimal pricing and production decisions in order to maximize the manufacturer's profit. We characterize the optimal acquisition fee and the optimal order quantity of brand-new containers analytically and investigate the effect of parameters through an extensive computational study. ► We consider a manufacturer that sells a single product in reusable containers. ► We focus on pricing and production decisions under resource restrictions. ► The return quantity depends on both customer demand and the acquisition fee. ► In an uncapacitated system, returns are always utilized, even if they cost more. ► In a capacitated system, returns may be declined depending on system parameters.
ISSN:0925-5273
1873-7579
DOI:10.1016/j.ijpe.2011.08.007