The fashion industry has long been subject of different studies. Although some of these studies focused on determining cycles and forecasting the demand, the reality is now being accepted that the demand for fashion products cannot be forecast (Peck, Lowson, & Christopher, 2004). Without this forecast in demand it can be argued that it becomes extremely difficult to manage the supply chain. Aside from the rapid changes in the industry such as global sourcing or high levels of price competition the fashion industry has its own set of market characteristics which make it different from any other. These characteristics include factors such as a short product life cycle, a high volatility and a low predictability (Bruce, Daly, & Towers, 2004). For businesses to compete in such a market, with high uncertainty in demand they need to be able to adapt their supply chain in such a way that they can respond to these unpredictable factors. The capability of a supply chain to become flexible is called agility (Christopher M. , 2000). For businesses involved in the fashion supply chain it is imperative to understand how the supply chain works as well as how to react to the unpredictability in the supply chain.
Introduction to Research questions
This paper is mainly concerned with answering some questions that follow from existing literature on the subject of agility in the fashion industry supply chain.
The main question of the research conducted is:
MAIN RQ: What are the problems businesses face in the European fashion industry and how can an agile supply chain deal with these problems?
This research question poses some sub-questions about different concepts that need to be explored in order to answer the main research question.
RQ 1: What is the fashion supply chain and what are the specific characteristics?
RQ 2: What is an agile supply chain and what are its specific characteristics?
Method and expected outcomes
This research paper is a literature study conducted on the subject of optimization of the fashion industry through an agile supply chain. The literature study conducted follows certain methods in order to provide a well-structured review. Methods used like; key-word searches, forward and backward searches will be further discussed in chapter 3.
This paper is concerned with two objectives. Firstly it provides a more clear definition of the concepts addressed in the research question. These concepts being the ‘fashion industry’ and the ‘agile supply chain’. Secondly it is concerned with making a conceptual framework that covers the relationship between these two concepts and answer the questions these concepts pose. The expected outcomes in this paper are that after this literature research there will be a more precise understanding of the fashion supply chain and the concept of agile supply chains. Furthermore the question will be answered on how agility in the fashion industry will help companies with the problems they face.
There have been quite some studies on the subject of the fashion industry supply chain. All of these try to explore how the fashion industry can be optimized (Christopher, Lawson, & Peck, 2004) (Peck, Lowson, & Christopher, 2004). Or, more precisely how can these different fields of focus make the fashion supply chain more agile (Harrison, Christopher, & van Hoek, 1999). This paper will have a more general approach and will not be focused on the different implementations a business has to do in order to become more agile. Instead it will use the existing literature in order to validate on a more strategic level how the fashion supply chain is organized and how an agile supply chain can help with the problems the fashion industry. A general used fundamental framework that will be discussed later on in the paper will be used to illustrate the position of agility in the supply chain. Furthermore the supply chain of the fashion industry will be explained through a process flow that is discussed in different articles. Efficiency in the supply chain is a subject that has been researched often in literature as well. Regarding to the fashion industry an efficient and responsive supply chain is often seen as an ‘agile supply chain’. But what exactly does an agile supply chain mean? And why is it important to have an agile supply chain in the fashion market?
As the existing literature suggest there is some affiliation between the fashion supply chain and the agile supply chain. The main question this paper is interested in however is to research if the agile supply chain is the solution for the problems faced in the fashion supply chain. In order to get a better understanding about both supply chains the characteristics need to be compared in order to see if there is any overlap between the characteristics of the two. Where one poses the problem and the other might give the solution. This is why the two research questions both ask to describe the supply chain, whether this is the agile supply chain or the fashion supply chain, and give a description of their specific characteristics. After both these questions are answered and all specific characteristics are clear it follows that a certain deduction can be made as in how the agile supply chain can help with the problems in the fashion industry.
Lay out of paper
After the introduction the method of research of this paper will be explained in order to provide information on how the literature review was conducted. The data analysis will be explained as well. In chapter 3 the theory and concepts of the paper will be further explained and the two research questions will be answered using this information. After this chapter 4 will explain the final result of the literature review and will provide an answer to the main question. The final chapter will give room for discussion. The results found in the previous chapter will be discussed and further implications will be explored. Different views will be discussed and some type of consensus will be given.
2. Research method and data analysis
In his chapter the method of research will be explained in order to provide information on how the literature review was conducted. Also the data analysis will be explained and a summary of the different articles that are used will be given.
This research paper is a literature study conducted on the subject of optimization of the fashion industry through an agile supply chain. The literature study conducted follows the methods that will be described shortly in order to provide a well-structured review. This structure is used in order to lay ground for the problems that need to be identified from the existing literature (i.e. the research questions) and also provide an overlap with the work already done in this field of research (literature discussion). Most articles used in this paper are peer reviewed journal articles that serve as the base of the literature review. Effective search techniques such as keyword search, backward and forward searches are used in order to ensure the depth and broadness of the literature. (Levy & Ellis, 2006). Other studies have been evaluated and analyzed for useful information. Contradicting literature or information that counters with the expected outcome will also be discussed in order to strengthen the rationale of the information found.
Most literature used in this paper is found on the library site of the VU University (www.ub.vu.nl). In addition to this collection of literature where most peer reviewed articles on the subject have been found, further searches have been conducted on search engines such as google.com in order to find other articles related to the subject or concepts. A flowchart of the search process is shown in figure 1. During the initial literature search (phase 1) the following key-words were used: ‘Fashion supply chain’, ‘agile supply chain’, ‘agility’, ‘supply chain’, ‘fashion industry’, ‘agility in fashion supply chain’. These key words proved to give the most results in the title and subtext. The abstract or chapters were not yet read in this phase. Coupling it with further key-words proved not to be a good method because other subjects, such as improvements of the textile production process were addressed in these papers. While these subjects cover the fashion supply chain they do not address the strategic level of two supply chain concepts as a whole, therefore these papers were not used and the faulty search words were discarded. After phase 1 there were 91 scanned papers that appeared to be interesting for the review. In the second phase of the paper selection the abstract was scanned for various key words. A set of new key words was introduced when looking at the abstract. These were: ‘complexity’, ‘responsiveness’ , ‘fashion market’, and ‘globalization’. Together with the old key words a paper was identified for further study when more than or equal to three of the keywords were mentioned in the abstract. As a result quite some papers were rejected from the initial 91.There were 28 papers left after the selection of phase 2. After the abstract selection a paper selection was made if the papers that actually dealt with the information needed to answer the research questions. In practice this meant reading the abstract, introduction, results and conclusion. Only 6 papers proved to be useful for answering the research questions (phase 3). Because the number of papers was too small to give enough substantial information on the concepts. Backward and forward searches were done in order to find more information. Doing Backwards literature searches proved to very useful. Out of 18 papers found using this technique and after using the keywords method in the, another 9 papers were found that proved to be helpful in answering the research questions (phase 4). The final selection included 15 papers.
Figure 1: paper selection process
To further substantiate the method used some articles and subjects need to be further characterized. Firstly, some articles needed to be excluded in order to further define to research topic. The research topic is only concerned with the relationship between two concepts. This is why all articles giving further information about how to achieve this concepts or provide information in how companies can achieve agility (implementation) have been excluded. However, if the information they provided on a topic that was useful to the research they might have been included even though the subject might be off-topic. This in order to further substantiate the definition of the concepts or the relationship between them. Furthermore, all articles that provided information on one of the concepts or information about the relationship between them were included in the gathering of the data as well. The data these papers provided consists of a helpful insight or definition of both or one of the concepts or further information on the relationship between these two concepts (i.e. information to answer the research questions). The information that was found in the articles were used to answer the research questions. All the relevant information found is discussed in the results and these will be further discussed in the discussion section.
There are many different types of fashion supply chains across the world. The American market might differ for instance from the European market. The fashion supply chain is different across the globe. However there are some issues that characterize the fashion supply chain in general. This paper describes the fashion supply chain as a concept and focusses on the strategic level. If for illustrative reasons an example is given however, this paper uses a generalization of the European fashion supply chain. This means that the goods are produced in the far-east or Asia and shipped to Europe. Figure 3 further illustrates this supply chain example.
After the selection of the different papers data analysis has been conducted in the following way. Firstly The existing literature helps answer the two research questions posed in the introduction. Because these questions cover two strategic concepts a lot has been written on this subject. After answering these research questions with the help of the existing literature the main questions can be answered using the same information. Some analysis might be supported by further references but deductions can be made from the literature given on the two concepts. Obviously this might leave some room for discussion.
3. Existing literature and research questions
This chapter will be used to explain the existing literature on this subject in more detail as well as give an answer on two research questions.
RQ 1: The fashion supply chain
To illustrate the fashion industry supply chain the model in figure 3 is used. Although there are different companies with different supply chain models, this model is chosen to illustrate the global supply chain of the European fashion industry. In this case it concerns a brand of high street fashion in the UK (Bruce, Daly, & Towers, 2004).
Figure 3: European fashion industry supply chain
Fashion retailers in European countries often do not manufacture the textile products themselves. Fashion products are sourced from different manufacturers from cross the globe. For instance the far east or Asia. This internationalization of the supply chain, with its dramatic scale, the existence of large fashion networks and even more complex supply lines (Brun & Castelli, 2008), is a result of the economies of scale that become more important and the possibilities of cheap labor in these countries. When not addressed correctly efficiency in the supply chain might suffer however because of increased lead times and complexity. The fashion retailer often has an agent in these countries to ensure a direct line with the overseas manufacturer. This way any problems in the overseas part of the supply chain can be rectified more easily. The agent is also responsible for translating the information on trends and point-of-sale feedback to the manufacturer. After the fashion retailer approves the first samples of the production can commence on a larger scale. The manufacturer organizes transport to the docks in order to ship the products. There is a vast amount of legislation and rules concerning the trade affairs between countries. The most known are the incoterms of shipping the products. The most frequent used incoterm is Free on board, where the product is the responsibility of the shipping company until it reaches the harbor in the port of destination and is unloaded. The fashion retailer uses his agent or communicates directly with the shipping companies in order to attune these trade affairs. After unloading the products are picked up by a carrier service or the fashion retailer and distributed across the different retail stores, where eventually it ends up with the end user, namely the consumer. The representation that is used is a general one and it can be noted that complexity will increase depending on the number of processes and businesses working together in the fashion supply chain.
As can be read in the introduction of this paper the fashion industry has some unique characteristics that defines the supply chain. Fashion, however is a term that is widely used and can encompass any market where there is an element of style that is likely to have a short product life cycle. For this research the fashion market in this paper is defined with the following characteristics (Christopher, Lawson, & Peck, 2004):
Short lifecycles ‘ There are a few factors that influence the short life cycle of the products in the fashion supply chain. For instance there is the fast changing consumer taste and with a high seasonal character the products have a short lifecycle that is likely to have a small window in which it can be sold, for instance months or even weeks. In general, products have a ten week life cycle in the fashion industry (Xiao & Jin, 2011) In a particular extreme case to achieve competitive advantage, Zara decided on having 20 selling season’s in a year, reducing the product life cycle of the item, -from offering in the store to discount selling – to two and a half weeks (Zhelyazkov, 2011).
High volatility ‘ Products such as clothing have a very high volatility (Wong, Arlbjorn, Hvolby, & John, 2006). The variances that influence the demand of the product are hard to define. Factors that influence these high levels of volatility can range from every-day things such as the weather to new trends and style’s set by pop-icons.
Low predictability ‘ it is extremely difficult, if possible at all, to forecast the demand of the product in a given time period. This is a consequence of the customer order decoupling point as presented in figure 3 (Hoekstra & Romme, 1992). This point is defined as how far the demand is visible within the supply chain, or in other words in which part of the supply chain does the consumer have influence on the item that he buys? The decoupling point in the fashion supply chain is very close to the consumer. This means companies have little to no insights in their future demand and cannot make accurate forecasts because of the volatile nature of the products.
Figure 2: customer order decoupling point.
High impulse purchasing ‘ there is a critical need for availability because the decision to buy the product often comes at the point of purchase (the store). The experimental nature of the products in the fashion industry often lead to unpredictable consumer behavior. Browsing buying or impulse buying is often the case in the apparel industry (Park, Kim, Funches, & Foxx, 2012).
These are the four most important characteristics when it comes to the fashion supply chain. However, these are only the characteristics that concern the supply chain. The businesses (e.g. fashion retailers) themselves might add to the complexity of the supply chain. For instance, in the example of Zara additional cost need to be made and higher responsiveness needs to be achieved in order to realize the 20 selling season’s.
RQ 2: The agile supply chain
Now that some aspects of the fashion industry have been discussed the concept of agility needs to be further explored. There are certain key elements of the management of an agile supply chain. A fundamental framework is shown in figure 4. This version of the framework is an adaptation by (Christopher, Lawson, & Peck, 2004) and first developed by (Harrison, Christopher, & van Hoek, 1999). The model describes the agile supply chain as a combination of different concepts. It can be said that market sensitivity is one of the more important ones in an agile supply chain, where monitoring demand feedback, tapping in on consumer wishes and capturing emerging trends is needed to achieve competitive advantage in the target market. Often in more complex supply chains competitive advantage is achieved by acting as a network orchestrator. In this role of orchestrator the business in question tries to get each individual company to focus on the core competencies of the network supplier. In this case the partners’ capabilities are used to their maximum potential and achieves the highest value for the overall supply chain. This type of networked based supply chain is discussed in many literature studies and concludes that when organizations invest in supply chain partners, exchange information, and combine other resources, a higher profit can be achieved for each individual party than when working alone within the supply chain (Handfield & Bechtel, 2002). To achieve this type of collaboration in the supply chain some type of process integration is needed. Inventory can be co-managed in order to prevent negative effects such as the bullwhip-effect. This effect arises when there is a need to forecast at each individual level of the supply chain, creating larger inventory’s chain wide (Bayraktar, Koh, Gunasekaran, Sari, & Tatoglu, 2008). At the beginning of the chain product design needs to be discussed with all the relevant partners and supply must be synchronized in order to limit inventory. This day and age process integration is often coupled to virtualization of the processes. Some type of information sharing is needed to collaborate between the different parties. A virtual supply network enhances collaborative planning, an shares information of real demand, which in turn is connected to market sensitivity. End-to-end visibility in the supply chain is one of the most important advantages that comes with virtualization. Literature suggests that improved visibility within the supply chain not only improves own decision making and is essential for operating performance but also is critical to supply chain performance as a whole (Baratt & Oke, 2007) .
Figure 4: Agile supply chain theoretical framework
In chapter 3 some two research questions have been answered using the existing literature. This chapter will report on how the two concepts link together and provide an answer on the main research question: What are the problems the European fashion industry faces and how can an agile supply chain deal with these problems?
The literature shows four problematic characteristics when dealing with the fashion supply chain. These are: Short lifecycles, high volatility, low predictability and high impulse purchasing. The agile supply chain leads us to believe that this type of supply chain strategy is correct in order to deal with these problems. How exactly can the agile supply chain help with these problems?
As shown in the theoretical framework the agile supply chain has some key elements that influence the way the supply chain reacts to some of the characteristics problems that the fashion supply chain faces. The main and most important positive characteristic of the agile supply chain is that it can react to a volatile marketplace in order to satisfy customer demand. One way to do this is build up large stocks, but high inventory costs and negative constraints such as the bullwhip-effect is not something that business want for an efficient supply chain. When the lead time each player in the supply chain has to wait, between receiving demand from its customer and delivery from its supplier, is optimally minimized the supply chain is known to be agile. (Mason-Jones & Towill, 1999)
The fashion industry is a competing market in which the business need to have a good management structure in order to provide better service for their final customer. Also, they need to have good management of relationships and partners within the supply chain of network to add value to the supply chain as a whole (Christopher & Towill, 2000). In other words they need to be more agile.
After these solutions general solutions the agile supply chains serves to provide some solutions specifically for the fashion industry supply chain as well. First of which, is the postponement strategy. Because the supply chain is agile it is possible to delay final assembly of products and to perform final activities closer to the customer order decoupling point (figure 2). Some activities that are normally associated with the production can be performed downstream in the supply chain. This way the business can hold lower inventory because the supply chain is aimed at customizing products instead of holding large inventory to respond to the customer orders (Cooper, 1993). There are other types of postponement as well such as such as centralization of inventories (European distribution centers), or logistics postponement (van Hoek, 1998). All however, have the same goal: to lesser the inventory in the supply chain and quickly respond to changes in customer demand.
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