Supply Chain Management

Answer: D - Both a buyback contract or returns clause in a contract allows a retailer to return unsold inventory up to a specified amount at an agreed upon price. For example, the supplier to the music store may agree to buy back CDs that have not sold at $4 per CD. This reduces the retailer’s loss from $6 to $3 for each unsold CD. The supplier absorbs the $4 per unsold CD as a reduction in margin.