A Decision Support System for Pricing and Minimizing Product Returns
The first goal is to develop a decision support system for pricing and production amounts for a firm facing high levels of product returns. The second goal is to improve the management of the product returns process.
A food importer and manufacturer in Israel with a significant product returns rate.
A decision support module was added to the plant’s information system. The module is based on a supply chain pricing model and uses the sales data to infer future demand’s distribution. Ergonomic models were used to improve the design of the returns warehouse and the handling of the returns.
The decision support system allows to improve the plant’s pricing and quantity planning. Consequently, it reduced the number of product returns. The new design of the returns process improves worker’s productivity, reduces losses and results in safer outcomes.
The results show the promise of incorporating pricing supply chain models into informing systems to achieve a practical business goal.
This work can be replicated for different suppliers, manufacturers and retailers that suffer from product returns. They will benefit from the reduction in returns, as well as the decrease in the losses associated with these returns.
It is worthwhile to research whether decision support systems can be applied to other aspects of the organizations’ operations.
Product returns is a lose-lose situation for producers, retailers and customers. Moreover, mismanagement of these returns is harmful for the environment and may result in the case of foods, in health hazards. Reducing returns and improving the handling improves sustainability and is beneficial for society.
The DSS’s underlying pricing model assumes a specific business setting. This can be extended using other pricing models and applying them in a similar fashion to the current application.