Return Policy of Two Substitutable Products with Fuzzy Demands

Since product substitutability would affect the vendor's ordering strategy and the manufacturer's return policy, it is interesting for the manufacturer to make proper return policy for substitutable products such that it is worthwhile to maximize the profit. This paper proposes a two-echelon model composed of a manufacturer and a vendor with two substitutable products under fuzzy demands. In the model, the manufacturer, who takes the substitutability of the products into account, makes the return policy as a leader, and the vendor makes the ordering policy under the given return policy. A hybrid algorithm combining chaos search algorithm with fuzzy simulation is applied to solve this type of problems. Finally a numerical example is provided to demonstrate the application of the algorithm.