The newsvendor problem for resalable products with conflicting objectives

Because of the developing marketing strategies, competition policies of enterprises are focused on meeting customer expectations at the highest level. In this context, the case that customers return the products they purchased for any reason is being increasingly common recently within the marketing strategies of several enterprises. For this requirement, determining the inventory policies by using newsvendor model for returned products is widely used in the literature.The newsvendor problem is one of the fundamental models in stochastic inventory theory. In this model, the order quantity which optimises the single period expected profit or cost function is calculated. Since the demand for some products is seasonal, inventory planning of this type of products is done for a single period. Different objectives have been developed to satisfy changing requirements, for newsvendor problem apart from the classical approach that optimizes the expected cost or profit function. Most frequently used alternative objectives can be explained as the order quantities that maximises target profit or the probability of exceeding expected profit.In this study, the newsvendor problem will be examined with respect to resalable returns and the optimal order quantity that maximises the probability of exceeding the expected profit will be searched. Later, the order quantity that balances the contradictory purposes, the order quantity that maximises the expected profit and the quantity amount that maximises the probability of exceeding the expected profit, will be researched. By simulated demand data, order policies are determined, and sensitivity analysis for model parameters as well as economical interpretations are presented.Key Words: The newsvendor problem, resalable returned products