Turker and Altuntas (2014) portrays that Supply Chain Risk Management is a process in which the threats to supply chain continuity and profitability is identified, monitored, detected and mitigated. Managing authorities are implemented effective strategies to manage both exceptional as well as everyday risk in supply chain management. Chan et al. (2017) also depicts that supply chain risk management is key to supplier management as it allows organization to avoid risks like cost volatility, non-compliance fines and supply disruption.
The prime objective of this business report is to critically analyze the supply chain risk management process for a fashion industry along with the potential benefits of managing risk in a supply chain.
Ho et al. (2015) highlighted the fact that marketers often misinterpret that supplier risk is only one aspect of supply chain management risk but other factors like countries originate from or flow through for supply products, sourced items, sensitivity of the intellectual property and the logistical hubs can also be the reason for risk. Thus, it is essential to protect supply performance outcomes and set performance metrics for monitoring the progress in the supply chain management (Christopher, 2016). One such performance metric is to formulate a "balanced scorecard" for product sourcing beyond cost.
Wisner et al. (2014) mentioned that supply chain management risk can be of two types- external risks and internal risks
The external risk comprised of demand risk that is related to create due to misunderstanding in customer or end-customer demand, supply risks that is risk in flow of product within the supply chain and business risks that signifies the jeopardy in management financial instability (Mangan et al. 2016). The external risk also comprised of environmental risk and physical risk that resembles outside risk like flood, earthquakes and risk of supplier’s physical facilities respectively.
Late deliveries are one of the crucial supply chain management risks and require extra cost to the organization in order to meet the customer demands. In such cases, these suppliers have to use air freight as opposed to sea freight, which is much cheaper option (Heizer & Barry, 2013). Caro and Martínez-de-Albéniz (2015) moreover depicts that missed sales opportunities also results in huge losses. These risks are high for fast fashion industry as fast fashion trends last for weeks compared to usual trends that lasts for months or year.
Fernie (2014) highlight that younger millennial are the major target audience and follower of fast fashion and in most of the cases, they are influenced by superstars and actors. Chopra and Sodhi (2014) on the other hand argues that not all millennial likes a same style. Thus, risk for random change in their demands regarding fashion apparels have to face by the suppliers.
The change in rapid demands needs budget for designing apparels and this needs costs for different textile materials, leather materials and other raw items for making accessories. Purvis et al. (2013) depicts that this sudden fluctuation in the budget planning is considered to be as risk.
It is evident that not all organization has their manufacturing units in their home and sometimes they have to import the final products from other territories (Shen et al. 2016). In such situations, if environmental calamity occurs like flood, earthquake, landslide or hail-storms, the supply chain management also get impacted that result in loss of products and delay.
The internal risk comprises of business managerial risks like in personnel, management, reporting structures. Waters and Rinsler (2014) furthermore affirm that internal risk also encompasses manufacturing risks and mitigation risks that resembles disruptions of internal operations and adopted inappropriate solution for occurred risk respectively. Lastly, risk of inadequate assessment and planning is also an internal risk that signifies to the planning and control risks.
Choi (2017) portrays that improper or outdated technology for manufacturing fast fashion accessories and products not only take much time to formulate new items but it need investment of additional charges for continuous maintenance of the machineries.
In this context, Madhani (2015) state that the materials that is used in fast fashion industry are expensive and hence working personnel have the tendency to theft the raw or completed products from the production line and this results in fewer end products to be reached to destinations. Madhani (2013) moreover depicts that insufficient training in manufacturing goods among the workers also slow down the product line.
Perry et al. (2014) suggested that fast fashion industrialist should identify each raw material prior to starting the manufacturing of final products. In this way, the managing authorities will able to identify the root cause of the raised risk.
It is the liability of the managers to identify the future risk relation with their business operations like formulating of raw textiles and leathers, hiring third party outsourcing for raw materials as well as final fashion products (Clark, 2014). Nayak et al. (2015) also said that the scenario for risk occurrence and potential solution should also be listed by an organization.
Thus, after assessing all the potential risk factors and their probable solution risk mitigation factors should be implemented so that the identified risk scenario can never be occurred (Li et al., 2014).
Effective risk management plan allows managers to detect the source of risk and that can be avoided in later phase of the business. Moreover Caro and Martínez-de-Albeniz (2015) portrays that risk management plans also provide insights and support to the Board of Directors to identify risks from their experience. However, this result in building a better defense to class-actions that allows an organization to avid risk for future disruptions. In addition to that, risk analysis also shows that the risk management plans are not concentrated to the supply of products but it also focuses on the market demands and fluctuations (Clark, 2014). Ho et al., (2015) on the other hand affirms that adversities like supply disruption, cost volatility and non-compliance fines results in millions of loss in an organization which furthermore affects the organizational brand and reputation. These understanding can be gained through effective formulation of risk management plans.
Fast fashion industrialist can utilize automation software like ERP and PLM systems for managing their fast-paced supply chain operations (Fernie, 2014). Madhani (2013) also highlight the solution for installation of cameras for monitoring all the activities in inventories and factory. In this way, the internal risk of shrinkage can be detected and loss of some raw and final products can be mitigated. This automation software can also alert the brand in real time in case if some order gets delayed.
Perry et al. (2014) depicts that supply chain transparency can be improved if an employee is hired for every factory with with a concerned fast fashion organization is associated. This approach allows organization to evaluate the business ethics of their partners and every sourcing location.
Thus, it can be concluded that, risk management plan are crucial for business and especially in supply chain approaches. It is also concluded that adopting automation and software allows businesspeople to monitor all the activities in the inventories and factories. Internal and external risk can also be overcome through proper risk management plan by the marketers and implement the probable solution to the identified potential risk.
Caro, F., & Martínez-de-Albéniz, V. (2015). Fast fashion: business model overview and research opportunities. In Retail Supply Chain Management (pp. 237-264). Springer US.
Chan, A. T., Ngai, E. W., & Moon, K. K. (2017). The effects of strategic and manufacturing flexibilities and supply chain agility on firm performance in the fashion industry. European Journal of Operational Research, 259(2), 486-499.
Choi, T. M. (2017). Quick response in fashion supply chains with retailers having boundedly rational managers. International Transactions in Operational Research, 24(4), 891-905.
Chopra, S., & Sodhi, M. S. (2014). Reducing the risk of supply chain disruptions. MIT Sloan management review, 55(3), 73.
Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Clark, J. (2014). Fashion Merchandising: Principles and Practice. Palgrave Macmillan.
Fernie, J. (2014). 02 Relationships in the supply chain. Logistics and retail management: Emerging issues and new challenges in the retail supply chain, 35.
Heizer, R., & Barry, R. (2013). Operation Management, Sustainability and Supply Chain management (Vol. 11). Pearson, UK.
Ho, W., Zheng, T., Yildiz, H., & Talluri, S. (2015). Supply chain risk management: a literature review. International Journal of Production Research, 53(16), 5031-5069.
Li, J., Choi, T. M., & Cheng, T. E. (2014). Mean variance analysis of fast fashion supply chains with returns policy. IEEE Transactions on Systems, Man, and Cybernetics: Systems, 44(4), 422-434.
Madhani, P. M. (2013). Fast fashion retailing. In Fast Fashion Systems: Theories and Applications (pp. 35-55). CRC Press.
Madhani, P. M. (2015). Enhancing customer lifetime value in fast fashion retailing with RFID initiatives. International Journal of Business and Globalisation, 15(2), 205-237.
Mangan, J., Lalwani, C., & Lalwani, C. L. (2016). Global logistics and supply chain management. John Wiley & Sons.
Nayak, R., Singh, A., Padhye, R., & Wang, L. (2015). RFID in textile and clothing manufacturing: technology and challenges. Fashion and Textiles, 2(1), 9.
Perry, P., Fernie, J., & Wood, S. (2014). The international fashion supply chain and corporate social responsibility. Logistics and Retail Management, 4th edition, Kogan Page, London, 77-99.
Purvis, L., Naim, M. M., & Towill, D. (2013). Intermediation in agile global fashion supply chains. International Journal of Engineering, Science and Technology, 5(2), 38-48.
Shen, B., Chan, H. L., Chow, P. S., & Thoney-Barletta, K. A. (2016). Inventory management research for the fashion industry. International Journal of Inventory Research, 3(4), 297-317.
Turker, D., & Altuntas, C. (2014). Sustainable supply chain management in the fast fashion industry: An analysis of corporate reports. European Management Journal, 32(5), 837-849.
Waters, D., & Rinsler, S. (2014). Global logistics: New directions in supply chain management. Kogan Page Publishers.
Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A balanced approach. Cengage Learning.
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