Strategic Logistics Decision Making under Uncertainty: Application for the Fashion Industry

Chen Xi

Abstract

Enterprises must make strategic level decisions in order to manage uncertainty, customer service and cost in the supply chain to be successful in the highly competitive market. This project explores the relationships between strategic level decisions for selected product, operational and demand variables. The strategic decision considered here are the push inventory deployment, which is schedule-driven verse pull inventory deployment, which is demand-driven.

This project aims to first, conduct a comparative study of existing push and pull inventory deployment optimization models, and then to develop optimization models for constructing the optimal mix of the pull and push deployments. Applying them to the fashion industry that has high variability and unpredictable demand will test the proposed models. Analytical Hierarchy Process method would serve the purpose of qualitatively comparing the strategies in the first part of the research. Then the strategies would be converted into mathematical terms and been compared theoretically. The second half of the research completes the job. With taking the character of fashion industry into account of the research, thus the result is highly practical and applicable to the fashion industry.

Through the research, we find that there is theoretical reason supporting the success of the Agile Strategy in the fashion industry. In other words, it is a better choice constructing the supply chain as demand-driven, allowing small amount of re-order. This conclusion is drawn under the given character of fashion industry, namely highly uncertain demand, short product life cycle, and often frequent pricing decisions. At the same time, it is critical to produce less than forecast mean demand, as only in this way the flow of product in the supply chain is fast enough to meet the fast changing fashion environment.