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SSRN Id1338174
SSRN Id1338174
MIHIR DASH1
SANDEEP GUPTA N.
ABSTRACT:
The uncertainty that arises in textile supply chains may be attributed to several
causes. These may be due to the uncertainty in demand caused by changing product variety,
rate of new product innovation, lead-time from design to production, etc., or due to
uncertainty in supply caused by the failure of the firms to deliver the products or raw
materials to the final consumers or intermediate manufacturers, delayed delivery of critical
materials, frequency of changing suppliers of critical materials etc.. There is also an
uncertainty in manufacturing caused by degree of interaction among components, process
yield stability, manufacturing lead time, etc.
This study analyses the impact of uncertainty at different points in the textile supply
chain, and tries to identify the weak points in the supply chain. The design adopted for the
study is descriptive in nature, involving primary data collection from a sample of textile units
in Bangalore city. The data was collected by interviewing the different textile units about
their supply chain practices, the constraints they face in terms of uncertainty, and strategies
adopted by them to resolve those. The paper suggests appropriate strategies and solutions to
manage the uncertainty that occurs in textile supply chains at various nodes and due to varied
reasons.
1
The first author is a senior faculty at Alliance Business Academy, 19th Cross, 7th Main, BTM Layout, II Stage, Bangalore-560076, and can
be contacted by phone on +91-9945182465, or by email at mihirda@rediffmail.com. The second author is a research scholar at the same
institution.
Entering the new millennium, organizations must consider the issues of increased
competition, rising customer expectations and the demand for increased product variety.
Organizations will simultaneously be forced to decrease profit margins and cope with
changing governmental regulations, such as taxes and tariffs to remain competitive. To
handle these pressures, organizations are forced to consider the impact of operational
decisions on not only their own company but also all members of their supply chain. No
longer will firms compete against each other individually but rather they will compete with
their respective supply chains. Thus, developing close, long-term relationships with both
customers and suppliers can take significant wastes out of the supply chain, and is a
potentially valuable way of securing competitive advantage. As with other business
management principles, SCM also applies to textile and apparel industries. The same general
principles that apply to all businesses apply to the textile and apparel industries, but they are
magnified when the product is fashion because of the nature of fashion product. Fashion
products are unique, dynamic, emotional and cyclical, which makes the rate of change in the
apparel industry much faster than in other businesses. Collaboration and communication are
critical to successfully managing an organization in today’s global economy. Unfortunately,
most organizations are operating with a certain degree of supply chain fragmentation,
struggling to create and incorporate new products, people, processes and systems in order to
find and maintain a competitive advantage. Thus supply chain management has emerged as
one of the major areas for companies to gain a competitive advantage. Managing supply
chains effectively is a complex and challenging task, due to the current business trends of
expanding product variety, short product life cycle, increasing outsourcing, globalization of
businesses and continuous advances in information technology. This is the drawback faced
by modern apparel manufacturing companies.
Supply chaining is a method of collaborating horizontally among suppliers, retailers,
and customers – to create value. A supply chain is a network of facilities and distribution
options that performs the functions of procurement of materials, transformation of these
materials into intermediate and finished products, and the distribution of these finished
products to customers. Supply chains exist in both service and manufacturing organizations,
although the complexity of the chain may vary greatly from industry to industry and firm to
Despite the acceptance of the concept of managing the supply chain and partly due to the
limiting misunderstandings, growth of integrated supply chain management has been slow.
Reasons for the slow growth of integrated supply chain management include the following:
The supply chain improvements described indicate that supply chain management has
the potential to improve a firm’s competitiveness. Supply chain capability is as important to a
company’s overall strategy as overall product strategy. Supply chain management
encourages management of processes across departments. By linking supply chain objectives
to company strategy, decisions can be made between competing demands on the supply
The current way of functioning of the supply chain, shown in Figure 2.1, is a linear process.
The retailer issues orders to the manufacturer after his inventory goes down. The
manufacturer sends orders to the fabric supplier for necessary fabrics to process the retailer’s
orders. The fabric supplier manufactures the ordered fabrics and delivers them to the
manufacturer. The manufacturer receives the fabrics and other accessories (e.g., zippers,
buttons, labels, etc.) and manufactures the styles and delivers them to the retailer.
Fashion is a broad term which typically encompasses any product or market where
there is an element of style which is likely to be short-lived. Fashion markets typically
exhibit the following characteristics:
The uncertainty that arises in textile supply chains may be attributed to several
causes. These may be due to the uncertainty in demand caused by changing product variety,
rate of new product innovation, lead-time from design to production, etc., or due to
uncertainty in supply caused by the failure of the firms to deliver the products or raw
materials to the final consumers or intermediate manufacturers, delayed delivery of critical
materials, frequency of changing suppliers of critical materials etc.. There is also an
uncertainty in manufacturing caused by degree of interaction among components, process
yield stability, manufacturing lead time, etc.
This study investigates the different sources of uncertainty in textile supply chains
and the impact of these sources on supply chain variables. The factors affecting supply chain
uncertainty which were considered were: demand uncertainty, supply uncertainty, cost
uncertainty, equipment failure, supply discontinuity, changing customer preference, new
fashion, and government policy. The supply chain variables considered were: inventory
placement (i.e. which stages should hold inventory in a supply chain), supplier redundancy
(i.e. the value of adding an additional, backup supplier), decoupling point (i.e. the point to
which real demand penetrates upstream), and cost of reliability (i.e. the cost associated with
the planning for unexpected disruptions).
The data used in the study was collected on a sample of 50 textile manufacturing
units, located in and around Bangalore city, using a structured questionnaire, in which the
operations manager of the unit was asked to rate the importance of the different factors
affecting textile supply chain uncertainty and their impact on the different supply chain
variables. A simple Likert scale was used for the rating.
Table 3.1 above presents the relative importance of factors affecting uncertainty in
the textile supply chain. The most important factors were demand uncertainty (18.0%),
changing customer preferences (16.6%), supply uncertainty (14.8%), new fashions (12.9%),
and cost uncertainty (12.2%). The least important factors were equipment failures (6.9%) and
government policies (8.7%). The factors can be regrouped into the following categories:
customer-side factors (demand uncertainty, changing customer preferences, and new
fashions, which together account for 47.5% of the total supply chain uncertainty), supply-
side factors (supply uncertainty and supply discontinuities, which together account for 24.7%
of the total supply chain uncertainty), production factors (cost uncertainty and equipment
failures, which together account for 19.1% of the total supply chain uncertainty), and
environmental factors (changing customer preferences, new fashions, and governmental
policies, which together account for 38.2% of the total supply chain uncertainty).
3.2 IMPACT OF DEMAND UNCERTAINTY
Table 3.2: Impact of Demand Uncertainty
Mean Std. Deviation
on inventory placement 3.780 0.9960
on supplier redundancy 3.460 1.1290
on decoupling point 2.880 1.4520
on cost of reliability 2.480 1.1110
Table 3.2 above presents the impact of demand uncertainty on the supply chain
variables. In particular, demand uncertainty has a very high impact on decisions regarding
inventory placement and a moderate impact on supplier redundancy, while it has a low
impact on cost of reliability and on decoupling point. This suggests a tendency of the bull-
Table 3.3 above presents the impact of supply uncertainty on the supply chain variables.
Supply uncertainty has a moderate impact on inventory placement and supplier redundancy,
and a low impact on cost of reliability and decoupling point. In particular, supply uncertainty
has a lower impact than demand uncertainty on inventory placement, supplier redundancy,
and decoupling point.
3.4 IMPACT OF COST UNCERTAINTY
Table 3.4: Impact of Cost Uncertainty
Mean Std. Deviation
on decoupling point 2.760 1.5720
on cost of reliability 2.680 1.4350
on inventory placement 2.640 1.4810
on supplier redundancy 2.600 1.5390
Table 3.4 above presents the impact of cost uncertainty on the supply chain variables.
Cost uncertainty has a moderate to low impact on all of the supply chain variables. The
impact of cost uncertainty is highest on decoupling point, followed by cost of reliability and
inventory placement.
3.5 IMPACT OF EQUIPMENT FAILURES
Table 3.5: Impact of Equipment Failures
Mean Std. Deviation
on cost of reliability 2.140 1.5780
on inventory placement 2.120 1.6370
on supplier redundancy 2.080 1.6140
on decoupling point 1.820 1.5740
Table 3.5 above presents the impact of equipment failures on the supply chain
variables. Equipment failure has a low impact on all of the supply chain variables. In
particular, equipment failure has a very low impact on decoupling point. The impact of
Table 3.6 above presents the impact of supply discontinuities on the supply chain
variables. Supply discontinuity has a moderate to low impact on all of the supply chain
variables. The impact of cost uncertainty is highest on inventory placement, followed by
supplier redundancy and cost of reliability.
3.7 IMPACT OF CHANGING CUSTOMER PREFERENCES
Table 3.7: Impact of Changing Customer Preferences
Mean Std. Deviation
on inventory placement 3.860 1.1780
on supplier redundancy 3.480 1.2660
on decoupling point 3.180 1.5350
on cost of reliability 2.680 1.1680
Table 3.7 above presents the impact of changing customer preferences on the supply
chain variables. In particular, changing customer preference has a very high impact on
decisions regarding inventory placement and a moderate impact on supplier redundancy and
decoupling point, while it has a low impact on cost of reliability. This reflects the impact of
demand uncertainty, except that changing customer preference has a higher impact on
decoupling point than demand uncertainty.
3.8 IMPACT OF NEW FASHIONS
Table 3.8: Impact of New Fashions
Mean Std. Deviation
on supplier redundancy 3.280 1.7270
on inventory placement 3.200 1.6540
on decoupling point 2.580 1.5790
on cost of reliability 2.540 1.5010
Table 3.8 above presents the impact of new fashion on the supply chain variables. In
particular, new fashion has a moderate impact on supplier redundancy and inventory
placement, while it has a low impact on cost of reliability and on decoupling point.
Table 3.9 above presents the impact of government policy on the supply chain
variables. Government policy has a very low impact on all of the supply chain variables,
reflecting its very low importance as a factor in textile supply chain uncertainty.
3.10 IMPACT ON INVENTORY PLACEMENT
Table 3.10: Impact on Inventory Placement
Mean Std. deviation
Changing Customer Preferences 3.86 1.178
Demand Uncertainty 3.78 0.996
Supply Uncertainty 3.44 1.146
New Fashion 3.20 1.654
Supply Discontinuities 2.80 1.796
Cost Uncertainty 2.64 1.481
Equipment Failures 2.12 1.637
Government Policies 1.62 1.398
Table 3.10 above presents the impact of different factors on inventory placement.
Inventory placement decisions are highly affected by changing customer preferences and
demand uncertainty, and moderately affected by supply uncertainty and new fashion.
Government policy and equipment failure, on the other hand, have a very low impact on
inventory placement.
3.11 IMPACT ON SUPPLIER REDUNDANCY
Table 3.11: Impact on Supplier Redundancy
Table 3.11 above presents the impact of different factors on supplier redundancy.
Supplier redundancy is moderately affected by changing customer preferences, demand
uncertainty, new fashion, and supply uncertainty. Government policy and equipment failure,
on the other hand, have a very low impact on supplier redundancy.
Table 3.12 above presents the impact of different factors on cost of reliability. None
of the factors have much of an impact on cost of reliability. Government policy and
equipment failure, in particular, have a very low impact on supplier redundancy. Changing
customer preferences and cost uncertainty have the highest impact on cost of reliability.
3.13 IMPACT ON DECOUPLING POINT
Table 3.13: Impact on Decoupling Point
Mean Std. Deviation
Changing Customer Preferences 3.18 1.535
Demand Uncertainty 2.88 1.452
Cost Uncertainty 2.76 1.572
Supply Uncertainty 2.58 1.341
New Fashion 2.58 1.579
Supply Discontinuities 2.08 1.589
Equipment Failures 1.82 1.574
Government Policies 1.68 1.463
Table 3.13 above presents the impact of different factors on decoupling point.
Changing customer preferences has a moderate impact on decoupling point. None of the
other factors have much of an impact on decoupling point. Government policy and
equipment failure, in particular, have a very low impact on decoupling point.
3.14 OVERALL IMPACT
Table 3.14: Overall Impact
Mean Std. Deviation
Inventory placement 3.4956 .47704
Supplier redundancy 3.2250 .62712
Decoupling point 2.8322 .64368
Cost of reliability 2.7686 .51530
Table 3.14 above presents the overall impact of different factors affecting textile
supply chain uncertainty. Inventory placement is the most affected by supply chain
uncertainty followed by supplier redundancy, decoupling point and cost of reliability.
Overall, however, there is only a moderate impact of supply chain uncertainty on all the
supply chain variables.
4. DISCUSSION
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