Risk Analysis and Supply Chain Coordination for Optimal Operation in E-Commerce Environment with Uncertainties in Demand and Customer Returns

This paper discusses risk analysis and supply chain coordination (SCC) for the optimal operation in a supply chainunder e-commerce environment (e-SC) with the uncertainties in product demand and customer returns. An e-SC consistsof a retailer and a manufacturer. The return handlings are discussed regarding customer returns and unsold products. A retailer receives customer returns from a market once and resells the resalable returns in the same market. Amanufacturer buys back the unsold products and the un-resold customer returns from the retailer, considering the differenceof quality between them. The mean-variance analysis (MVA) with three risk attitudes regarding the aboveuncertainties is discussed: risk-neutral attitude maximizing the decision maker’s expected profit in e-SC, risk-averseattitude with negative consideration of variance of the relevant profit, and risk-prone attitude with positive considerationof the variance. Using MVA, the optimal operations for product order quantity, the unit retail price and refundratio of customer returns under the decentralized e-SC (DSC) and the integrated e-SC (ISC) are determined. The analysisnumerically verified that each risk attitude on product demand and customer returns affected the optimal operationsunder DSC and ISC. SCC adjusting the unit wholesale price and buyback prices between members under ISCcan shift to ISC.