Sustainability Analysis and Buy-Back Coordination in a Fashion Supply Chain with Price Competition and Demand Uncertainty

Abstract

Supply chain sustainability has become significantly important in the fashion industry, and more and more fashion brands have invested in developing sustainable supply chains. We note that dual channel system comprising a brand-owned direct channel and retail outsourcing channel is quite common in the fashion industry, and in the latter, buy-back contract is popular between brands and retailers. Therefore, we build a stylized dual channel model with price competition and demand uncertainty to characterize the main properties of a fashion supply chain. Our foci are the sustainability analysis and the channel coordination mechanism. We first design a buy-back contract with return cost to coordinate the channel. We then study supply chain sustainability and examine the effect of two key influencing factors, i.e., price competition and demand uncertainty. Interestingly, we find that a fiercer price competition will lead to a more sustainable supply chain. From the perspective of supply chain managers, we conclude that (1) if managers care about environmental sustainability, fierce price competition is not a suggested strategy; (2) if managers care about economic sustainability, fierce price competition is an advantageous strategy. We also find that high demand uncertainty results in a less sustainable supply chain, in both an environmental and economic sustainability sense.