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Risk identification map for a Fashion Retail Supply Chain

Conference Paper · September 2015

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 Risk identification map for a Fashion Retail Supply Chain

Giada Martino*, Marcello Fera**, Raffaele Iannone*,

Debora Sarno*, Salvatore Miranda*

* Department of Industrial Engineering, University of Salerno, via Giovanni Paolo II 132, 84084, Fisciano (SA) –
Italy ([email protected], [email protected], [email protected], [email protected])
** Department of Industrial and Information Engineering, Second University of Naples, Via Roma 29, 81031,
Aversa (CE) – Italy ([email protected])

Abstract: In today’s global markets, characterized by extremely fast changes in technology and customer’s demand,
and by product life cycle getting shorter and shorter, a single firm has not the ability to be competitive if it is not
included in a network that, operating as a single entity, is able to react to demand dynamism and volatility. Therefore,
existing supply chains, structured in a global sourcing view, are highly vulnerable to perturbations resulting from a
strong dependence on other network’s players, such as suppliers or logistics providers. Consequently, the need for
communication and cooperation is always increasing. In this complex and competitive context, properly assessing and
managing risks connected to the different stages of the value chain, as well as external and not directly controllable
risks, means being able to ensure continuity in supply. This paper focuses on the particular field of the fashion retail
industry since its highly unpredictable demand and extremely short life cycle make it very important to analyse risks
connected to the supply chain. This work defines the objectives of the supply chain and identifies risk factors related
to each working phase of a fashion company that manages an extended network of wholesalers, direct-operated and
franchising mono-brand stores. Although it just represents a preliminary study, final purpose of our research project
is to define a decision support system for the prioritization and management of all the identified risk factors.

Keywords: Fashion Retail, Clothing Industry, Risk Assessment, Risk Management, Supply Chain

1. Introduction information flow between main company and

upstream enterprises. They depend on the structure of
The increasing trend towards globalization and outsourcing the supply network since risks increase if the company
is leading many industrial sectors to entrust relevant parts is dependent from few key suppliers, if it works in a
of their business to suppliers often located in developing global sourcing perspective, etc.;
countries. These phenomena are causing loss of control - Demand Risk: which are external to the main company
and of full visibility of the supply chains, thus increasing and include any possible interference to the material
risks connected to any possible changes or disruptions. Risk and information flow between central company and
sources do not exclusively reside in the effects of external the market, across all the other enterprises between
events, such as legal restrictions or natural disasters, but them. Typical risks are connected to the volatility of
also in the impact of internal changes of strategies, business demand or bullwhip effect.
models and interaction with the actors of the supply - Process Risk: “process” refers to the sequence of
network. managerial and value added activities internal to the
To assess the risk profile for a company, it is useful to company. These processes are directly dependent on
highlight the main risk sources within the supply chain that company’s assets, on reliability of transports and
can be grouped into five categories, as shown in Figure 1 communications; therefore the connected risks refer
(Mason-Jones & Towill, 1998): to the interruption of these processes.
- Control Risk: control systems are the set of procedures
that rule the processes and the relationships with other
network’s actors. These risks are internal to the
company and are related to procurement, production
or inventory policies.
- Environmental Risk: is related to external factors which
result from economic, socio-political, technological or
natural events.
It is important for managers to understand that the risk
profile is directly influenced by strategic decisions.
Figure 1: Risk sources in the Supply Chain
Therefore, rather than catalog every possible risk, the first
step of a proper risk management is the analysis of internal
- Supply Risk: which are external to the main company processes in order to isolate most critical and relevant
and include those elements disturbing material and weakness factors. After that, it is possible to monitor
external environment in order to detect warning signs and, literature study in this field and to the cooperation with one
consequently, develop mitigation plans or alternative of the major fashion companies in the South of Italy, we
strategies. Main purpose is to strengthen the “resilience” of were able to define all the processes and understand
the operational structure, which is the ability to quickly possible critical issues.
recover after an adverse event which disturbs or interrupts We are referring to a company that operates with an
the normal activity of the supply chain. extended network of:
In the highly dynamic context of the Fashion and Apparel
Industry (Lanzilotto, et al., 2014), the proper assessment - wholesalers: they are supply chain actors that directly buy
and management of the supply chain risks can be crucial products from the main company during the sales
for its efficiency. For example, due to the adoption of campaign and then sell them to multi-brand stores.
traditional long-term demand forecasts, any change or They represent an intermediate ring between
fluctuation may lead to over-stock – producing excessive producers and market;
quantities that quickly become obsolete or out of fashion –
- franchising stores: they are mono-brand stores not
or stock-out – undersizing actual sales volume resulting in directly managed by the company. They are allowed to
an image damage and lost sales. Another possible risk is
use company’s brand and distribute its products by
given by the offshoring trend which, from one side, ensures
directly buying them. It means that all the risks
a substantial cost advantage but from the other, contributes connected to under- or over-stocks are borne by the
to lengthen lead-time. This leads to the extension of store itself;
replenishment times and consequently to the difficulty of
- direct-operated stores: they are stores directly managed by
quickly respond to any delay along the chain or change in
the main company. It means that all the decisions, and
market demand.
consequently the risks connected, on purchasing and
distribution are centralized;
Despite fashion retail is receiving increasing researcher’s
attention, in particular concerning supply chain - outlet stores: in these direct-operated stores, the
management (Iannone, et al., 2015) (Iannone, et al., 2013), company sells previous season’s unsold stocks at
literature does not show relevant studies related to risk significantly discounted prices. They allow to absorb
management. Only few works have been proposed in last the risk of over-stocks.
years, such as the one by Xiaofen & Wei (2012) that All the main processes performed in a typical Fashion
identifies four main risk areas related to external Retail Supply Chain are listed and described in detail in
environment, customer and suppliers cooperation and to Table 1. We also reported the indicative time range during
the enterprise itself. which each of these processes is performed for the two
Despite focusing on the risks that a company may traditional selling seasons: Fall Winter (F/W) and
encounter when implementing green initiatives, Wang et al. Spring/Summer (S/S).
(2012) instead, mainly analyse supply chain structure and The processes are then divided into:
performance, in terms of quality, flexibility and costs.
Other research works, then, analyse risks connected to - Pre-Season phase: as the name implies, this phase
outsourcing (Hon Kam, et al., 2011) or those related to involves all the activities performed before the
social and environmental aspects (Freise & Seuring, 2015). beginning of the real selling season, starting from the
It is clear that none of them proposes a detailed and creation of the collection from the Styling Office and
structured analysis of all the risk factors connected to each ending with the deliveries of the finished product to
supply chain process. Then, based on these considerations, clients and stores;
this paper wants to fulfill this gap and become a reference - In-Season phase: it starts with the first sales recorded in
framework for future risk assessment and management the stores and involves all the selling season including
studies in this field. The present paper aims, in fact, at discounts period until the shipment of unsold goods
identifying all the risk factors connected to each process to the central warehouse;
and to each objective of a typical Fashion supply chain, by - Post-Season phase: it involves all the activities necessary
defining a complete and general map. for the correct management of the unsold items and
Then, after a brief literature review on the risk management their delivery to factory outlet stores.
approaches in the fashion retail industry (section 2), we will
introduce the problem and identify all the specific 3. Main targets identification
processes of a traditional fashion company (section 3).
Section 4 is dedicated to the identification of the main Main criticalities of the fashion industry lies in the ability to
supply chain objectives while the core of the research work, promptly capture customers’ tastes and transfer them into
i.e. the risk map, is described in detail in section 5. successful products. This implies reducing time-to-market
and whole logistics costs in order to avoid a strong price
2. Process Analysis for a Fashion Company markdown at the end of the selling season due to rapid
changes in trends.
First step for the identification of the risk map was the
definition of all the processes and material and informative
flows typical of the fashion industry. Thank to a deep
 Table 1 Main processes in a Fashion Retail Supply Chain
Time range
Process Description
F/W S/S
Fashion products are characterized by high volatility and unpredictability (Wang, et al., 2012) and their consume is highly impulsive and subjective (Newman
Sept to Mar to Market trend & Foxall, 2003). In this step, several professional profiles are involved: fashion designers, style consultants, cool-hunters, fashion bloggers and reporters.
Dec Jun Forecasting Their main task is to analyse and forecast market trends for the following season according to main fabrics fairs, emerging street style and movie or pop star
trend.
Creation of Seasonal It is a highly time-consuming activity and provides as output a wide variety of clothing items but not all of them will be then produced (Bandinelli, et al.,
Oct to Apr to
collection 2013). It is a process that can be hardly rationalised from a management perspective since the company needs to offer a wide variety to customers during the
Jan Jul
sales campaign.
Feb to Aug to Definition of main It is the stage of selection of the items that mainly express the mood of the seasonal collection and that will be surely recommended to the wholesalers and
Mar Sept assortment shown in the most representative stores. This selection is responsibility of the Commercial Department and Styling Office.
Collection presentation The collection is presented in the most important sector fairs (Milano Fashion Week, Premiere Vision in Paris, etc.) and after that, the sales campaign can
PRE-SEASON

Feb to Aug to
and beginning of sales start. In this period, the company can record orders from wholesalers. All the clients undergo a financial assessment and then their orders can be approved
Apr Oct
campaign after the solvency check. Mostof these orders may be affected by some changes even after conclusion of this campaign.
Mar to Sep to This phase is almost contemporary to the previous one. Orders already forwarded to production for which there is an insolvency problem, are hold as
Production orders launch
Jun Dec “suspended orders”. They will be not delivered to the client but will be made available for other clients’ orders even during the selling season.
Apr to Materials procurement In this study we suppose that supply of fabrics and accessories is directly borne by the main company. It may happen that this process is, instead, performed
Oct to
Jun and dispatch to by suppliers according to customer’s specifications. In this phase, often material do not pass through the central warehouse but are directly delivered from
Dec
production plants fabric’s suppliers to producers.
When receiving finished products in the central warehouse or logistic center, two main checks are performed: (i) quantity check: delivery notes must match
Jun to Dec to Finished products with items actually received; (ii) quality check: through a random check warehouse staff is able to identify possible defects on an entire batch of items. Specific
Aug Feb receiving defects on a single item, such as a missing button, can only be found in stores, thus increasing the possibility of returned goods.
In addition, since loading/unloading processes are not automated in most cases, during this phase warehouse manpower can be overloaded, thus leading to a
lengthening in material handling operations and possible delays in deliveries to customers.
Jul to Jan to Deliveries to customers The personalized kits of items to send to stores and clients are prepared by warehouse staff or, in some cases, by producers themselves. From one side, it
Sep Mar and stores results in a leaner material handling process, but on the other, it leads to not optimised transports, since some packages are half-empty.
IN-SEASON

It is the actual selling season. During this period no other production orders are launched. In order to meet actual demand, company can ship to stores on-
Sep to Mar to
Sales to final customers hand inventories, such as those items stuck in the warehouse due to the “suspended orders”. In addition, movements of clothing items from one store to
Feb Aug
another are also allowed.

Mar to At the end of the selling season, the central warehouse receives unsold stocks both from stores and wholesalers according to specific commercial
Sep to Returns of unsold stock
POST-SEASON

May agreements. This step is similar to the “Finished products receiving” one since both quality and quantity check must be performed and the same overloading
Nov from stores and clients
problems may arise.
Jun to Dec to Outlet assortment Returned items must be refurbished and priced with outlet discounts. In some cases, in order to offer a wider assortment and attract customers, the company
Jul Jan preparation launches a specific production of items destined to outlet stores, using left-over fabrics and simple manufacturing.
Jul to Jan to
Deliveries to outlet stores This step is similar to the “Deliveries to customers and stores” one even if quantities to handle are significantly lower.
Sep Mar
Based on these considerations, we identified main targets - long-term horizon for the analysis, which makes it
of a fashion retail supply chain: difficult to foresee consumers behavior;
1. Market driven orientation: it is the first approach that a - inefficient item classification: since it is difficult to
fashion company intends to pursue. According to it, achieve high forecasting accuracy for single items,
the whole supply chain is driven by real and current it is necessary to group them into product
market needs (Walters, 2006), releasing from the total categories (for example “clothing” or
dependence from demand forecasts. The attainment
“accessories”) in order to better reflect consumers
of this target depends from two sub-targets:
purchasing behavior;
a) Market sensitivity improvement, intended as the ability - unstable demand: purchases are driven by
to recognise market needs, thank to reliable
emotionality and subjectivity leading to high
demand forecasts, and to quickly respond to
demand changes; volatility and unpredictability of demand;
- market heterogeneity, i.e. high consumer
b) Brand attractiveness; it is defined as the intrinsic
segmentation for each sales market, for example
capacity of a brand to attract market interest. In
our context, the company experience this based on socio-demographic aspects;
attractiveness through stores and clients network - different purchase behavior in each area: given the
using their ability of attracting customers. breadth of the international market, cultural
2. Cost reduction: the target of profit maximization from a differences between different Countries may
production/logistics perspective results in cost result in a different perception of the brand value;
reduction of all the activities along the value chain. - competitive initiatives, such as more frequent
This is strictly connected to: collection launches or marketing campaigns;
a) Time based competition: refers to time reduction of - lack of historical data for fashion items, which are new
all supply chain processes, since any delay may products introduced in the seasonal collection.
cause a late launch of the seasonal collection and For these items we cannot draft forecasts
the consequent loss of market share; according to real historical data since they are not
b) Material flow management, paying particular available;
attention not only to quantities and types of items - Absence of in-store marketing analysis, such as
in transit along the chain but also to correct data consumers interviews, in order to test customer
management and exchange between actors.
satisfaction;
3. Brand internationalization and market expansion, with the - No comparison with fabric suppliers to share
main purpose of controlling new markets and target information on trends for the new season;
consumers.
- Many actors between company and market: an extended
4. Environmental sustainability: this issue has receiving network of wholesalers and distributors makes it
increasing attention, leading to the use of recycled more difficult to have quick and reliable
fabrics and the adoption of new programs for
feedbacks on final users’ purchasing behavior;
monitoring environmental impact.
- Bullwhip effect, due to poor market visibility and
4. Fashion and Apparel Supply Chain Risk lack of information sharing between supply chain
Identification actors. This leads to high inventory levels to cover
demand variability;
The core of the present research work is the identification - “on-off” purchases, referring to a situation of total
of the risk factors for all the supply chain processes. They absence of logistics-productive integration or
are characterized in reference to each company’s target
previously introduced and described in detail as follows. cooperation with suppliers, neither in demand
forecasting nor in collection design;
- No record of lost sales, which may lead to improve
4.1 Market driven orientation risk factors demand forecasting for the following seasons;
The ability to catch customer’s tastes is expressed by a - Different contractual terms for returns from wholesalers,
reliable demand forecasting process and by a reactive which complicates the definition of product
approach to sudden changes in demand during the selling assortment to send to outlet stores.
season. Given the need to draft forecasts well ahead of the
selling season and given the uniqueness of the fashion
products whose success depends on cultural and emotional A company reactive to changes in real demand must rely
aspects, elements that may lead to errors and risks are on a flexible suppliers network and must be constantly
several and mainly related to the Pre-Season phase. These updated on actual sales status, allowing to promptly identify
are: any possible deviations. These concepts are outlined in the
following risk factors:
 - lack of information from wholesalers on actual sales - Inefficient advertising campaign: fashion trends and
status for each item; tastes are highly influenced by marketing,
- few different suppliers: a broader suppliers network advertising and social networking initiatives;
may allow to respond quicker to an order by - Limited assortment in outlet stores, which is also
selecting the appropriate supplier; variable according to returns quantity at the end
- exclusive use of “up-front” buying, i.e. purchasing and of the season.
reception of the total product quantity before the
4.2 Cost reduction risk factors
beginning of the selling season, by exclusively
basing orders on forecasts; The Cost Reduction objective can be outlined into two
- No use of real demand as replenishment driver, which different sub-targets. From a Time perspective, the
does not allow to replenish stores with actually reduction for the processes of collection development,
requested products; transports, orders management and material handling,
allows to enter the market with the right product at the right
- No sold/foreseen deviation analysis, which does not
time. This factor is crucial in the fashion industry due to the
allow to adjust orders and replenishments plans
very short product life cycle. Then, factors that may cause
according to actual demand;
a long time to market are:
- Replenishments solely based on stocks: this implies that
no other orders are launched during the selling - Inefficient interaction styling office/marketing office: the
season but the company responds to any possible styling office must translate market information
change in market demand with on-hand into the new collection;
inventories, which may represent “orders - Inefficient interaction styling office/suppliers, that can
suspended” or returned goods. simplify the process of fabrics selection and
guarantee higher product quality;
From Brand Attractiveness perspective, instead, the proper
- Delays in closing sales campaign and increase in
management of the stores network may determine the
distributors orders, may cause delays in production
success of the commercial campaign and define the
orders launch and lead to errors in dimensioning
reputation perceived by clients. Then, crucial factors are:
orders themselves;
- Many new product launches failed, i.e. products - Forecasting error for some items, providing wrong
designed by the Styling Office that do not meet guidelines to the styling office;
customers taste; - Process misalignment between actors, meaning the
- Poor offer differentiation and excessive focus on difficulty of defining “no border” connections
continuative items, implying lack of attention in between supply chain actors, avoiding delays and
following trends that may lead to always offer over-stocks;
similar items over time; - Production and delivery of the whole purchase lot before the
- Customization in international markets, given the selling season and Production of more items by a single
important cultural diversity between Countries; supplier, which may lead to overload and delivery
- Design of only two collections a year, without infra- delays;
seasonal “flash” collection that may allow to - Poor “virtual integration” without a database and
differentiate offer; information sharing system;
- Poor diversification of sales channels, intended as - Orders launch close to the selling season, implying that
different kinds of stores, location or sales any possible delay from this stage on will cause
channels (e-commerce); delays in deliveries to stores;
- Wholesaler’s reputation inconsistent with brand image and - Long production lead time, Delivery delays of raw
unable to attract customers from the target materials and Sole use of foreign suppliers, are all
market; factors that may involve an extension in
- Deviation between offered and expected product quality, throughput time;
which may lead to customer dissatisfaction; - Wrong delivery scheduling, which may lead either to
- In-store Out-of-Stock, caused by under-estimation of overload the warehouse or to out-of-stock for
demand; deliveries to stores;
- In-store shopping experience, which allows to offer, - Delays in transports and import/export procedures,
beyond core activity, other additional services that caused for example by mismatch between the
enhance the shopping experience (eg. restaurant shipping documents and number, volume and
and play areas); weight of the physical packages;
- Lack of “key” sizes in stores: the absence of the size - Use of low cost transports mainly for international
requested by the customer leads to a transports;
dissatisfaction even greater that the total absence - Inefficient item division in warehouse, Limited
of the item itself; storage/material handling capacity and No automated
- Low service level, due to delivery lots with missing warehouse, that may create a bottleneck for product
items or sizes, caused for example by production flow causing longer delivery times;
defects;
 - Short delivery times for foreign clients, which usually - Forced markdowns due to late deliveries or due to over-
require advanced deliveries unlike the national stock: it is due to short product life cycle. The
market; reduction of the selling price is not related to
- Urgent deliveries and Frequent replenishments, in order marketing strategies then represents a cost for the
to adapt products availability according to actual company;
demand; - Misalignment between virtual and physical inventory, due
- Replenishment of items appropriate to weather conditions: to errors or delays in material handling operations;
for complex collections, which involve many - Lost sales due to stock out, for any sudden
clothing items of different warmness, the unpredictable change in trend;
company prefers to have at stock items - Items exchange between stores: in order to meet
appropriate to the temperature of the moment, in customers request. These additional and possibly
order to be able to respond quickly to customers’ unnecessary movements must be always
requests; guaranteed in any case;
- Long lead time between returns and resending to customers: - Overload at the end of the season, for the reception of
it is related to defective goods and not to unsold unsold goods. It is similar to the pre-season
goods. In this case, there is the risk of late overload due to the reception of production lots;
resending of refurbished items with a possible - Difficult returns identification without a detailed archive
rejection by the customer; and Deviations between delivery notes and actual
- Returns procedures not shared with multibrand customers, deliveries, that lead to errors in exactly identifying
which may complicate and delay the management items and delays in warehouse operations;
of unsold stocks; - Returns of entire lots for high defective percentage, that
- Late deliveries to outlet stores: even if they only sell requires additional refurbishment, material
unsold items of the previous season or minimally handling and transport operations;
defective products, they have to be replenished on - Deliveries in single solutions to outlet stores, causing
time before the beginning of the selling season. overload both for physical and manpower
resources.
At the same time, an efficient Material Flow Management
implies an appropriate material movement along the supply 4.3 Brand internationalization and market expansion
chain duly supported by a continuous information sharing risk factors
among all actors. Critical factors in this context are:
Market expansion is ensured by continuous product and
- No accurate quality control in laboratories/suppliers, process innovation which allows to meet requests of
which may also lead to Excessive defective percentage different customer targets and increase service level. In
often verifiable only in stores, causing returns addition, an international expansion plan allows to access
from clients; to new markets and increase brand prestige. In this
- Limited flexibility and production capacity of suppliers perspective, possible critical issues are:
that do not allow quickly changes in production
orders; - Unstable political/economic conditions in target markets:
excessive macro-economic variability impacts on
- No optimization due to strong differentiation of orders in
purchasing possibilities;
terms of sizes and colors;
- Unappropriated selection of stores location, inconsistent
- No control on production progress status able to
with brand image. The location must be accurately
guarantee the respect of the delivery schedule;
chosen in order to attract the largest number of
- Poor raw material quality resulting in an appropriate
people from the chosen market;
value for money and a consequent customer
- High number of international competitors and Poor
dissatisfaction;
diversification from competitor’s products, represent an
- Need to optimize lots delivered by different suppliers: these
obstacle in brand strengthening and recognition;
lots may be already divided into customers orders,
- Wrong selection of international distributors, whose task
thus leading to not optimized transports for
is to develop the market and seek new customers;
almost empty packages;
- Inability to expand clientele in already controlled
- Overload for receiving entire production lot: it is typical
markets due to inappropriate trend forecast;
of traditional companies that are based on
“planned” manufacturing. They do not distribute - No sharing procedure for sales plans by main company, in
supplies during the selling season, but they receive order to allow supplier to adapt and adjust
whole production lots before it; processes according to retailers needs;
- High safety stock due to unreliable demand forecast, - Weak infrastructures in new markets and Inadequate
which may lead to high holding costs and forced logistic system for international expansion, hampering
price markdowns; transports and all other logistics operations due to
inefficient facilities;
- Errors in clients assortment, leading to unnecessary
transport and material handling operations for - Poor brand recognition abroad, that can represents a
returns management; stop in purchases.
Table 2 Risk map for the Pre-Season phase
Target MARKET DRIVEN ORIENTATION COST REDUCTION BRAND INTERNATION. ENVIRONMENTAL
Process Improvement in Market Sensitivity Brand Attractiveness Time-based competition Material flow mng & MARKET EXPANSION SUSTAINABILITY
Long-term horizon
Unstable political/economic
Inefficient item classification
conditions in target markets
Unstable demand
Market Market heterogeneity
Unappropriated selection of Lack of attention to
trend Different purchase behaviour in each area
stores location “green” consumers
Forecasting Competitive initiatives
Lack of historical data for fashion items
High number of international
Absence of in-store marketing analysis competitors
No caparison with fabric suppliers
Many new product launches failed Inefficient interaction Styling
Poor offer differentiation Office/Marketing Office No use of organic
Creation of
Poor diversification from fabrics, recyclable
Seasonal Excessive focus on continuative items
Inefficient interaction Styling competitor’s products materials or local
collection Customisation in international markets
Office/Suppliers resources (eco-design)
Design of only two collections a year
Assortment Many actors between company and market Poor diversification of sales channels
presentation Delays in closing sales Wrong selection of
Wholesaler’s reputation inconsistent
& sales Lack of information from wholesalers campaign international distributors
with brand image
campaign Increase in distributors orders Inability to expand clientele
Production Bullwhip effect
Forecasting error for some No sharing procedure for
orders Few different suppliers
items sales plans by main company
launch “On-Off” purchases
Process misalignment No accurate quality control Limited use of excess
between actors in laboratories/suppliers fabrics
Production of more items by No IT support to
Limited flexibility
Materials a single supplier production
procurement Production & delivery of No optimisation due to Long distances between
& dispatch Deviation between offered and whole lot before the sell. seas. order differentiation raw materials & finished
to expected product quality Poor “virtual integration” Limited production capacity products producers
production Orders launch close to the Excessive defective No assessment/control
plants selling season percentage on suppliers
Long production lead time environmental policies
No control on production
Delivery delays Excessive production
progress status
Sole use of foreign suppliers waste
Wrong delivery scheduling Poor raw materials quality
Inefficient item division in Need to optimise lots of
Finished warehouse different suppliers
products Exclusive use of "up-front buying" Delays in transports and Overload for receiving
receiving import/export procedures entire production lot
Use of low cost transports High safety stocks due to
Limited storage/material unreliable demand forecasts No packaging
handling capacity Weak infrastructures in new recovery/recycling
No use of real demand as replenish. driver In store Out of Stock No automated warehouses Errors in clients assortment
markets
Deliveries to Short delivery times for Forced markdowns due to
No sold/foreseen deviation analysis In-store shopping experience
customers foreign clients late deliveries
Inadequate logistic system for
and stores Lack of “key” sizes in stores Urgent deliveries Misalignment between
international expansion
Replenishments solely based on stocks Frequent replenishments virtual and physical
Low service level
inventory
4.4 Environmental sustainability risk factors It is clear that the most critical issues concern all the
processes performed before the selling season, since
In recent years, there is growing attention by consumers on
traditional companies define their collection, forecasting
Environmental Sustainability in all its aspects, from production
and orders well before the introduction of the products into
to transports and recycling. Then, many company are
the market. Then any possible error or deviation in this
launching their sustainable initiatives, such as Levi’s with its
stage will be reflected and amplified during the actual selling
entire Spring/Summer 2013 collection in recycled PET or
season.
H&M with its use of sustainable materials, reduction of
transport emissions and of electricity use. With this
5. Conclusions and future perspectives
purpose, main risk factors are:
- Lack of attention to “green” consumers: they are a Fashion retail industry, characterized by high dynamism
market segment that considers environmental and demand volatility and by very short product life cycle,
impact significant for fashion products, raw is becoming more and more interesting for researchers in
materials and manufacturing techniques used; supply chain management and, in particular, in risk
- No use of organic fabrics, recyclable materials or local management. In this context, integration and cooperation
resources (eco-design): they should be introduced in of all actors in a supply network represent the key elements
the collection development already in the for improving performances of the entire value chain.
conceptual phase and are necessary to create a Focusing on a traditional fashion company that is based on
sustainable closed loop supply chain; “planned” manufacturing, i.e. producing according to
- Limited use of excess fabrics with the purpose of “orders on hand” and sales forecasts well ahead of the
reducing waste; selling season, we defined all the production and logistics
- No IT support to production (eg. To cutting), that may processes and identified the main targets.
help in reducing wastes compared to manual Market driven orientation is definitely one of the main
operations; objective in the fashion industry which is constantly seeking
- Long distances between raw materials and finished for customers tastes and needs. On the other hand, the
products producers, leading to increasing transport constant research for Cost Reduction and, in general, for the
emissions; optimization of times and flows is not specific for fashion
- No assessment/control on suppliers environmental policies: retailing but is shared by all industries. Likewise, the spread
in order to be effective, all plans and policies must to global market and Brand Internationalization is a common
be shared with all suppliers and logistics issue and is a basic element in defining a company success.
operators; In the end, the Environmental Sustainability theme is
becoming essential for attracting the always increasing
- Excessive production waste, due to production errors
“green” market share.
or to non-optimal use of raw materials;
With these perspectives, the proposed risk map highlights
- No packaging recovery/recycling: packaging is the a high number of factors related to each process and to
major part of waste and the most difficult to each supply chain objective, especially in the Pre-Season
recycle, the re-use must be encouraged. phase in which all purchasing and delivery plans must be
defined.
All the above-mentioned risk factors are related to a
process, as indicated in Table 2 for the Pre-Season phase
and in Table 3 for the In- and Post-Season.

Table 3 Risk map for the In-Season and Post-Season phases

Target MARKET DRIVEN ORIENTATION COST REDUCTION BRAND ENVIRONM.
Improvement in Brand Time-based Material flow INTERNATION. & SUSTAIN.
Process Market Sensitivity Attractiveness competition management MKT EXPANSION
Replenishment Lost sales due to stock-out
Sales to Inefficient of items Forced mark down due to
No record of lost Poor brand
final advertising appropriate to over-stock
sales recognition abroad
customers campaign weather Items exchange between
conditions stores
Overload at the end of the
Long lead time
season
between returns
Difficult returns
Returns of and resending to
Different identification without a
unsold customers
contractual terms detailed archive
stock from
for returns from Returns Deviations between
stores and
wholesalers procedures not delivery notes and actual
clients
shared with deliveries
multibrand Returns of entire lots for
customers high defective percentage
Outlet Limited assortment
assortment in outlet stores
Deliveries Late deliveries Deliveries in single
to outlet solutions
 The In-Season processes, instead, are crucial in defining the Wang, K., Gou, Q., Sin, J. & Yue, X., 2012. Coordination
agility of the supply chain and its ability to promptly adapt of a fashion and textile supply chain with demand
to changes in market demand. At last, the correct variations. Journal of Systems Science and Systems Engineering,
management of factory outlet stores in the Post-Season
21(4), pp. 461-479.
phase, allows to absorb the risks of demand over-
estimation.
Wang, X., Chan, H. K., Yee, R. W. & Diaz-Rainey, I.,
It is clear that all the risk factors are strictly connected to
each other and mutually influencing, then defining a simple 2012. A two-stage fuzzy-AHP model for risk assessment
hierarchical structure can be not enough for the clear of implementing green initiatives in the fashion supply
definition of all the aspects in this complex framework. chain. International Journal of Production Economics, pp. 595-
For this reason, future step of the proposed research work 606.
is the definition of homogeneous cluster of risk factors and
identification of their influence relationships. These two Xiaofen, J. & Wei, C., 2012. Evaluation of Supply Chain
steps will allow the implementation of the Analytic Risk and Its Empirical Analysis for Apparel Processing
Network Process (ANP) method for the prioritization of Enterprises. Journal of Convergence Information Technology ,
the risk factors.
August.

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