Thursday, October 7, 2010

Sustainable Fashion Supply Chain Management Under Competition and Brand Differentiation

In an earlier blogpost, I wrote about our recent work in fashion supply chain management and in sustainable supply chain network design.

I am pleased to announce that one of my doctoral students, Min Yu, and I have completed a study of sustainable fashion supply chain management. In the study, which is documented in our research paper, we developed a modeling framework that captures competition in fashion supply chains in the case of differentiated products with the inclusion of environmental concerns. The model assumes that each fashion firm's product is distinct by brand.

Each fashion firm seeks to maximize its profits and to minimize the emissions that it generates throughout its supply chain as it engages in its activities of manufacturing, storage, and distribution, with a weight associated with the latter criterion. The model allows for alternative modes of transportation from manufacturing sites to distribution centers and from distribution centers to the demand markets, since different modes of transportation are known to emit different amounts of emissions.

The competitive supply chain network model advances the state-of-the-art of fashion supply chain modeling in several ways:

1. it captures competition through brand differentiation, which is an important feature of the fashion industry;

2. it allows for each firm to individually weight its concern for the environment in its decision-making, and

3. through a general network framework, alternatives such as multiple modes of transportation can be investigated.

In our paper, we also presented a case study, in which, through a series of numerical examples, we demonstrated the effects of changes on the demand price functions; the total cost and total emission functions, as well as the weights associated with the environmental criterion on the equilibrium product demands, the product prices, profits, and utilities. We noted that the environmental weights could also be interpreted as taxes and, thus, in exploring different values an authority such as the government could assess a priori the effects on the firms' emissions and profits.

The case study also demonstrated that consumers can have a major impact, through their environmental consciousness, on the level of profits of firms in their favoring of firms that adopt environmental pollution-abatement technologies for their supply chain activities.