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Impacts of Returning Unsold Products in Retail Outsourcing Fashion Supply Chain: A Sustainability Analysis

Glorious Sun School of Business and Management, Donghua University, Shanghai 200051, China
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Academic Editor: Alessio Ishizaka
Sustainability 2015, 7(2), 1172-1185; https://doi.org/10.3390/su7021172
Received: 19 November 2014 / Accepted: 13 January 2015 / Published: 23 January 2015
(This article belongs to the Special Issue How does Outsourcing Affect the Economy and its Sustainability?)
l outsourcing with a return policy is quite commonly adopted in the fashion supply chain. Under the return policy, the supplier as a brand owner may focus on production, and then outsource retailing to the retailer. In the meanwhile, the retailer may receive some support money from the supplier for subsidizing the loss of unsold products at the end of the selling season and be asked for shipping back. Motivated by this real practice in the fashion industry, we examine a two-echelon supply chain with one supplier and one retailer under the return policy. Several interesting findings are obtained from our analysis. First, we find that when the supply chain achieves channel coordination, the cost of physical return is at least partially borne by the supplier, no matter who is responsible for it in reality. Second, we find that the cost of physical return is significantly affecting the sustainability factors such as the expected amount leftover (which represents environmental friendliness), the expected sales to expected goods leftover ratio (which implies both environmental friendliness and economic sustainability), and the rate of return on investment (which indicates economic sustainability). Third, from a sustainability perspective, we find that the pure wholesale price contract is more sustainable than the coordinating return policy. A numerical study by the real company data is conducted and managerial insights from analysis are discussed. View Full-Text
Keywords: return policy; cost of physical return; supply chain coordination; sustainability analysis return policy; cost of physical return; supply chain coordination; sustainability analysis
MDPI and ACS Style

Shen, B.; Li, Q. Impacts of Returning Unsold Products in Retail Outsourcing Fashion Supply Chain: A Sustainability Analysis. Sustainability 2015, 7, 1172-1185.

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