Fashion Supply Chain Optimization: Linking Make-to-Order Purchasing and B2B E-Commerce

Fashion Supply Chain Optimization: Linking Make-to-Order Purchasing and B2B E-Commerce

Torben Tambo (Aarhus University, Denmark) and Ole Egebjerg Mikkelsen (Lillebaelt Academy of Professional Higher Education, Denmark)
Copyright: © 2016 |Pages: 21
DOI: 10.4018/978-1-4666-9720-1.ch001
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Abstract

In global, short-life-cycle supply chains, the Make-to-Order (MTO) principle of purchasing is dominant in securing the match between customers' commitment and ordered goods. Risk can be addressed by linking knowledge on inbound logistics to the market by use of e-business solutions. This chapter describes a multi-method approach using both traditional B2B and B2C methods of sales initiatives as an e-business system connecting inbound and outbound supply chains. Initiatives can be reverse auctions, time limited discounts, co-selling, bundling, short campaigns supported with letters, e-mails, giveaways, discount schemes, and payment conditions. Interlinking is to secure full transparency at any given point in time. The discussed solution has the potential of diverting goods to retailers instead of warehouses with the probable effect of increasing revenue of both wholesale and retail with 5 – 10%. Concurrently, the attention created from selling on-ship creates side effects like higher store replenishment rate and attracts frequent shoppers interested in continuously new offerings.
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Introduction

Out of many of the global supply chains, fashion (garment, clothing, apparel) is considered as one of the very interesting and challenging supply chains almost fully globalised with Asia playing a dominant role in supplying to buyers in Europe and US. Buyers acting under tremendous uncertainty affected by season, taste, branding, and ever changing market conditions (Caniato et al. 2013, Christopher 1997, Palmer & Markus 2000). The risk of having un-optimal supply chains is overwhelming, and any initiative to reduce waste and loss is mostly welcomed by buyers which are typically represented by brand-owning companies (Steinfield et al. 2011, Vedamani 2006, Wong et al. 2006, Abernathy et al. 2003, Cox & Britain 2004).

In fashion supply chains the make-to-order principle is dominated by long supply chains and short product life cycles (Patil et al. 2010, Brun & Castelli 2008, Hübner 2011). Order surplus is a challenge for most fashion companies as it can significantly impact return on investment (ROI) on each purchase order. Speeding up fashion supply chain (“Fast fashion”) and going from 4 – 6 annual seasons to concepts of continuous replenishment (Turker & Altunas, 2014), changes the agenda of the industry. Patterns of risk of obsolescence change. Collaboration, especially collaboration automated using electronic system, are seen to improve quality and effectiveness of the supply chain (Humphreys et al., 2014; Chang & Graham, 2012). Studies show concerns among smaller actors, but also potentials for risk-minisation (Caldwell et al., 2013). E-business models linking brand-owners (Kaureema et al. 2010), the supply chain and stores can be used to actively improve the business case of each shipment.

This chapter describes a multi-faceted approach to surplus reduction using a B2B e-business platform to intelligently expose unsold goods during the supply chain with the aim of optimizing allotment, reducing stock surplus, avoid speculation from stores against the brand-owner, and make the goods en-route a more active part of the supply chain.

In make-to-order (MTO) sales, the most items on a purchase order would obviously stem from a sales order (Wu & Chiang 2009, Webster & Weng 2008). However, customers are not static and cancellation of orders, financial uncertainty, new store openings, changes in taste and several other issues might lead to over-supply with unsold goods on a purchase order. Unsold goods can be stocked, but with rapid shifts in consumer taste and seasons buzz, the risk of having to sell stocked goods with heavy discounts is obvious. Goods, which have been only a few months in a warehouse, have a risk of being given to charity. In increased replenishment cycles, and with a tendency that seasons are dissolved – at least from a supply chain view – it is temptation to introduce MTO orders without actual or confirmed orders, or orders based on salesmen expectation, or orders based on automatic store replenishment programs. Such orders will naturally have to be formally sold after they have been manufactured and during transportation. Coupling B2B e-business with inbound e-business systems helps obtaining better coordination and henceforth optimisation of the supply chain (Walters 2008).

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