Tuesday, November 8, 2011

Sustainable Fashion Supply Chains Using Game Theory

We have conducted a lot of research on sustainable supply chains with applications ranging from products in health care to electric power generation and distribution networks.

An industry, which just recently has started to receive attention because of its impact on the environment, is the fashion and apparel industry.

However, not much research has been conducted as to capturing the scope of the issues and the realities of this industry which includes different brands as well as competition, and even the speed of this industry, as in fast fashion.

A doctoral student of mine, Min Yu, has been working with me in this area for about two years now as part of our research on time-sensitive supply chains, in particular, and sustainability overall.

We will be presenting our latest study, "Sustainable Fashion Supply Chain Management Under Oligopolistic Competition and Brand Differentiation," at the INFORMS Annual Conference next week in Charlotte, North Carolina. This paper is in press in the International Journal of Production Economics, Special Issue on Green Manufacturing and Distribution in the Fashion and Apparel Industries.

In the paper, we developed a new model of oligopolistic competition for 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 and the firms compete until an equilibrium is achieved. Each fashion firm seeks to maximize its profits as well as to minimize its emissions throughout its supply chain with the latter criterion being weighted in an individual manner by each firm, since some firms may care more or less about their impact on the environment.

The competitive supply chain model is network-based and we use both game theory and variational inequality theory for the formulation of the governing Nash equilibrium as well as for the solution of the case study examples. The numerical examples illustrate both the generality of the modeling framework as well as how the model and computational scheme can be used in practice to explore the effects of changes in the demand functions; in the total cost and total emission functions, as well as in the weights.

Our full presentation can be downloaded, in pdf format here.