Coordinating a multi-echelon apparel supply chain in the presence of supply and demand uncertainty

Abstract

In this paper, we focus on designing a coordinated apparel supply chain deviating from conventional two -level setting. For the sake of realistic depiction, we present the apparel supply chain by incorporating afour-level structure under demand and supply uncertainty. Existing works under stochastic demand andrandom yield are limited to the two and three-level setting. The proposed supply chain comprises anapparel retailer, an apparel manufacturer, a textile firm, and a cotton firm. The apparel retailer and thecotton firm faces demand uncertainty due to customer preferences, changing trends, etc. and supplyuncertainty because of adverse weather, technological changes, etc. respectively. Real life instances suchas the demand volatility in the fashion apparel market, draught in USA (2012), weak monsoons in India(2012), and impact on supply chain performance justify it. In this setting, we conclude that wholesaleprice contract cannot coordinate the textile supply chain. Following the supply contract mechanism, here, we show how buyback contact between apparel retailer and apparel manufacturer can coordinate thesupply chain. Also, application of a risk sharing contract between the textile firm and the cotton firm canbe useful to improve the cotton firm's profitability in case of high loss-making scenario. © IEOM Society International. © IEOM Society International.