Ethical fashion supply chain operations: product development and moral hazards

Corporate social responsibility (CSR) is critical. As a part of CSR, fashion companies have to decide whether to be ethical or not during the product development process. Motivated by real-world practices, we conduct a gametheoretic modeling analysis and derive the firms’ optimal decisions (including ethical operations (ETO) adoption, pricing, and product greenness level) in fashion product development. We identify a key moderating factor which governs how an increase of basic market demand significantly affects the optimal product greenness level and how an increase of basic production cost influences the optimal retail price. Furthermore, we find that there is a threshold that plays a critical role in determining whether the optimal retail price and product greenness level are higher or lower with the adoption of ETO. We prove that when the fixed payment from the retailer to the manufacturer under the ETO case is set to be sufficiently small, the retailer prefers to adopt ETO and requests the manufacturer to follow. We propose three practical measures (including the use of technologies) to help encourage the supply chain members to invest in ETO willingly. We finally consider the probable occurrence of moral hazard problems and explore the managerial implications.</p

Integration strategies of luxury rental operations: is it wise to operate with the manufacturer or co-operate with the competitor?

Luxury rental operations are increasingly popular nowadays. In this study, we develop game-theoretical models to examine the optimal renter’s integration strategies (RISs) in a luxury supply chain with conspicuous consumers. The luxury supply chain consists of one manufacturer, one seller and one renter. Based on observed industrial practices, we compare three RISs, namely non-integration (the renter works on his own), vertical integration (the renter operates with the manufacturer) and horizontal integration (the renter co-operates with the seller). The main findings are as follows. First, integration is not always a wise strategy for the renter. When the proportion of conspicuous consumers (PCC) is sufficiently high, the renter should work on his own. When the PCC is lower than a threshold, the optimal RIS depends on the trade-off between the double-marginalisation and retail competition effects. Second, we evaluate the environmental impacts of RISs and uncover that the environmental effects depend on the product types’ environmental impact. We further identify the conditions how a dominating situation with respect to profitability and environmental impact can be achieved (called ‘PE dominating’). Third, we investigate the effects of consumer segmentation on the optimal RIS. Managerial implications are discussed.</p

Will the presence of ‘fashion knockoffs’ benefit the original-designer-label product supply chain?*

Fashion knockoffs, which refer to the copycat behaviours of some brands in fashion apparel, are widely seen. It is commonly believed that the presence of fashion knockoffs harms the original-designer-label (ODL) product seller. Motivated by the industrial interviews and real-world observations, we build game-theoretical models to examine the impacts of fashion knockoffs on the ODL product supply chain and its agents with the consideration of risk attitudes. Explicitly, in the basic model, we consider a common manufacturer producing for both a knockoff product seller and a risk sensitive ODL product seller. The ODL product seller and the knockoff product seller make pricing decisions to optimise their own profits. We interestingly find that the presence of fashion knockoffs benefits the ODL product supply chain and its agents when (i) the ODL product seller is risk averse and the ratio of demand uncertainty is relatively small or (ii) the ODL product seller is risk seeking and the ratio of demand uncertainty is sufficiently large. The findings indicate that a risk averse (seeking) ODL product seller is more prone to benefit from the presence of fashion knockoffs when selling fashionable (classic) products.</p

A recovery planning model for online business operations under the COVID-19 outbreak

This study analytically develops a new recovery planning optimisation model for managing the impacts of the recent COVID-19 outbreak for online business operations. Firstly, a mathematical model for the ideal plan is designed and then extended to generate a recovery plan in a finite planning horizon that maximises total profit. Recovery plans are generated considering two scenarios, namely the dynamic and uncertain situations. For the dynamic situation, a realistic system with time-dependent and dynamic demand, supply, and warehouse capacity for investigating the impacts of the COVID-19 outbreak is developed using several measures, such as collaborating with emergency suppliers, increasing warehouse capacity, and considering back-orders and lost sales to form recovery strategies. For the uncertain situation, demand, supply, and warehouse capacities are considered as uncertain variables. Further, an innovative solution approach using an adapted differential evolution technique, which is capable of (i) generating long-term recovery plans and (ii) solving both small- and large-scale problems, is developed. The results are illustrated using numerical analyses and simulation experiments. A sensitivity analysis is also conducted. In practice, the proposed optimisation model will assist the decision-makers of online business operations facing the COVID-19 outbreak to decide the optimal recovery plans.</p