Measuring and mitigating the effects of cost disturbance propagation in multi-echelon apparel supply chains

Abstract

Supply chains operating in informal sector of emerging economies are mostly characterised by inefficiencies, highly price sensitive customers, fragmented markets, frequent operational disturbances, and members with irrational profit seeking behaviour (naïve members). We focus on cost disturbances and measure their effects in terms of demand variation (QV) in muti-echelon informal supply chain. We show how naïve members contribute to amplification and transmission of QV across the supply chain. Strategic members (characterised by rational profit seeking behaviour) on the contrary, dampens the transmission of QV. Efficient reconfiguration solutions are proposed which minimize the QV for a specific cost disturbance scenario. Rational profit seeking behaviour is one of the criteria for selecting members in this reconfiguration. Rapid reconfiguration in these supply chains is possible due to the existence of informal contracts. A robust deviation reconfiguration solution is also proposed which performs satisfactorily over entire disturbance scenario set. Goodness of this solution is evaluated according to two metrics; namely cost penalty and robust efficiency. Lastly, an illustrative case study on apparel supply chain is presented and it is inferred from the discussion that large aggregators are both cost and robust efficient, hence their presence in supply chain improves performance of robust solution along the two metrics (cost penalty, robust efficiency).