Inventory Control with product returns: the impact of (mis)information

Product returns are often characterized by a dual uncertainty on time and quantity. In the literature on inventory management with product returns, best forecasts have been associated with methods that use the most information regarding product return history. In practice however, data is often scarce and unreliable. In this paper we investigate the impact of (mis)information on inventory performance. An exact analysis shows that in case of misestimation the most informed method does not necessarily lead to best performance. Further we provide a simulation study to investigate the impact of misinformation w.r.t. inventory costs. The results have relevant implications regarding investments in product return information systems. keywords: Product returns, forecasting, inventory control, information management