Quick response systems with minimum order quantity in fashion supply chains

Abstract

Both quick response (QR) strategy and minimum order quantity (MOQ) imposition are common practices in the apparel industry. With the use of technology, QR aims at reducing order lead time so that the retailer can be more responsive to market change; therefore the retailer is favourable to its adoption in general. By contrast, the manufacturer may hold a more reserved view on the strategy owing to the implementation cost and possible reduction of order size. For MOQ, the retailer normally would not welcome its imposition as it inevitably reduces his ordering flexibility; however, it justifies production set-up cost and provides certain guarantee of income for the manufacturer. These seemingly conflicting views between channel members on the two practices have prompted us to study their joint influence on the whole supply chain. To the best of our knowledge, little research, if not none, has been conducted to explore the integrated effect of QR and MOQ, especially their impact on the channel coordination issue. It is this gap in the literature that we set out to bridge in this thesis. We employ both empirical and analytical modelling methodologies in this study. We first conduct in-depth interviews with two apparel companies to gain a basic understanding of the current QR and MOQ practices in the apparel industry. We then conduct a structured questionnaire survey with industrialists to further explore their QR and MOQ practices. We formulate and test hypotheses to verify our proposed model on the relationship between QR and MOQ. In parallel, we also investigate QR systems with MOQ mathematically. Specifically we explore the retailer's optimal ordering policy under different QR-MOQ models. With industrial real data, we conduct numerical sensitivity analyses to investigate the impacts of MOQ(s) on the performance of individual channel members and the supply chain. We also tackle the challenge of channel coordination under these systems We find that the optimal ordering policies under QR-MOQ systems are usually complicated because the corresponding expected profit-to-go functions are in general not uni-modal and there may exist multiple local maxima. We propose efficient solution schemes to find the global optimal ordering policies. In addition, our findings show that the presence of MOQ reduces the efficiency of the retailer, the manufacturer, as well as the supply chain in most cases. In light of this, we devise flexible supply contracts to help coordinate the supply chain. We believe that this research provides important academic and managerial insights on the widely observed industrial practices of QR and MOQ. Our research findings fill part of an existing gap in the literature and advance knowledge in this important area. The research not only makes a significant contribution to the literature on supply chain management but also provides helpful guidance to practitioners for making more scientifically sound and wise decisions in supply chains with QR and MOQ.