Managing the reverse channel with RFID-enabled negative demand information

Date

2007-09-01

Author

Karaer, Özgen

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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We analyze the inventory decisions of a manufacturer who has ample production capacity and also uses returned products to satisfy customer demand. All returned items go through an evaluation process, at the end of which the decision of disposal, direct reselling, or rework is made for each unit according to a predetermined procedure. We quantify the value of information/visibility on the reverse channel for the manufacturer by making comparisons among three approaches: No information-naive; no visibility-enlightened; and full visibility. We find the value of visibility increases with the comparative length of the reverse channel and volume, volatility, and usability of returns. Furthermore, the smarter the manufacturer, the less benefit visibility brings to the system. By this analysis, we quantify the visibility savings of radio frequency identification (RFID) in the reverse channel as a candidate enabler technology. We also provide numerical examples to show that practical approximations in inventory management may have acceptable penalties to the manufacturer with visibility.

Subject Keywords

Value of information, Visibility, RFID, Reverse channels, Inventory

URI

https://hdl.handle.net/11511/54838

Journal

PRODUCTION AND OPERATIONS MANAGEMENT

Collections

Department of Industrial Engineering, Article

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Citation Formats

Ö. Karaer, “Managing the reverse channel with RFID-enabled negative demand information,” PRODUCTION AND OPERATIONS MANAGEMENT, pp. 625–645, 2007, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/54838.