Inventory Management with Product Returns : The Value of Information

This paper evaluates the impact of misinformation for inventory systems with product returns. Ifone could exactly know how much is going to be returned and when, one would certainly benefitfrom incorporating this perfect information a priori in the management of production, inventory,and distribution. In practice, one has to attempt to forecast the timing and the amount of productreturns, by hypothesizing about the return flow properties. To do so, historic data on demandand returns can be used. The available literature on information and inventory managementwith product returns commonly 1) assumes known return probabilities; or 2) considers specificcases where the most informed method does not necessarily lead to the best performance,investigating the impact on inventory related costs