The impact of product returns on delivery time decision

The increasing quantity of product returns has been one of the major problems faced by many businesses in online retailing. Besides the quality of products and other factors such as price, the inconsistency between promised delivery lead time (PDL) and actual realized lead time could increase product returns to some extent. Thus, this paper studies the impact of product returns on the business's joint decisions of PDL and service level when both demand and returns are leadtimesensitive. Through revealing the tradeoff among the shorter PDL to capture more demand, the higher service level or the longer PDL to decrease the probability of returns due to delay and the cost in online retailing, we show that the PDL is not affected by returns when the returns sensitivity to delay is relatively low and increases with returns while the delay sensitivity increases to a threshold. In addition, the threshold decreases in the return rate to demand, which means the impact of product returns would be more serious on the business with a high return rate with respect to demand.