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.