Evaluating Anticipated Inventory Return Rates: Analysis of Circular Economy Metrics

Abstract

This research explores the role of inventory management in the circular economy, focusing on how return inventory rates affect the sustainability and profitability of supply chain management. The present study proposes an Economic Production Quantity (EPQ) model with dual-market demand, recoverable items, external procurement, and circular economy indicators. A mixed-methods approach including quantitative surveys and qualitative interviews was employed to collect insights from 90 industry experts across the fashion and technology sectors. The results indicate that a majority of the respondents have high return rates of 91-95%, prefer a low percentage of inventory floats, and expect fast processing of returns with most respondents expecting a velocity rate to be above 90%. Furthermore, respondents had an overwhelming desire to limit the write-offs to 2% of dispatched inventory value, maintaining the order-to-deliver cycles as short as possible, and making cost avoidance in the range of Rs. 9 crores per annum. Such a study highlights the effectiveness of good supply chain management practices for achieving circular economy goals such as reducing waste and improving economic value. The findings are beneficial for firms looking to align their inventory policies with circular economy objectives to ensure sustainable and profitable business operations.