A fast fashion system combines quick response production capabilities with enhanced product design capabilities, to both design "hot" products that capture the latest consumer trends and exploit minimal production leadtimes to match supply with uncertain demand. We develop a model of such a system, and compare its performance to three alternative systems: quick response-only systems, enhanced design-only systems, and traditional systems (which lack both enhanced design and quick response capabilities). In particular, we focus on the impact of each of the four systems on "strategic" or forward-looking customer purchasing behavior, i.e., the intentional delay in purchasing an item at the full price to obtain it during an end-ofseason clearance. We …nd that enhanced design helps to mitigate strategic behavior by o¤ering consumers a product they value more, making them less willing to risk waiting for a clearance sale and possibly experiencing a stock-out. Quick response mitigates strategic behavior through a di¤erent mechanism: by better matching supply to demand, it reduces the chance of a clearance sale. Most importantly, we …nd that while it is possible for quick response and enhanced design to be either complements or substitutes, the complementarity e¤ect tends to dominate. Hence, when both quick response and enhanced design are combined in a fast fashion system, the …rm typically enjoys a greater incremental increase in pro…t than the sum of the increases resulting from employing either system in isolation, roughly by a factor of two in our numerical experiments. Furthermore, complementarity is strongest when customers are very strategic. We conclude that fast fashion systems can be of signi…cant value, particularly when consumers exhibit strategic behavior.

We consider a retailer that sells a product with uncertain demand over a finite selling season. The retailer sets an initial stocking quantity and, at some predetermined point in the season, optimally marks down remaining inventory. We modify this classic setting by introducing three types of consumers: myopic consumers, who always purchase at the initial full price; bargain-hunting consumers, who purchase only if the discounted price is sufficiently low; and strategic consumers, who strategically choose when to make their purchase. A strategic consumer chooses between a purchase at the initial full price and a later purchase at an uncertain markdown price. In equilibrium, strategic consumers and the retailer make optimal decisions given their rational expectations regarding future prices, availability of inventory, and the behavior of other consumers. We find that the retailer stocks less, takes smaller price discounts, and earns lower profit if strategic consumers are present than if there are no strategic consumers. We find that a retailer should generally avoid committing to a price path over the season (assuming such commitment is feasible)--committing to a markdown price (or to not mark down at all) is often too costly (inventory may remain unsold) even in the presence of strategic consumers; the better approach is to be cautious with the initial quantity and then mark down optimally. Furthermore, we discuss the value of quick response (the ability to procure additional inventory after obtaining updated demand information, albeit at a higher unit cost than the initial order). We find that the value of quick response to a retailer is generally much greater in the presence of strategic consumers than without them: on average 67% more valuable and as much as 558% more valuable in our sample. In other words, although it is well established in the literature that quick response provides value by allowing better matching of supply with demand, it provides more value, often substantially more value, by allowing a retailer to control the negative consequences of strategic consumer behavior.strategic consumer behavior, quick response, dynamic pricing, game theory

We analyze the sourcing decision of a buyer choosing between two supplier types: responsible suppliers are costly but adhere to strict social and environmental responsibility standards, while risky suppliers are less expensive but may experience responsibility violations. A segment of the consumer population, called socially conscious, is willing to pay a higher price for a product sourced from a responsible supplier, and may not purchase in the event of a responsibility violation from a risky supplier. We identify four possible sourcing strategies that a buyer might employ: low cost sourcing (sourcing from the risky supplier), dual sourcing, responsible niche sourcing (sourcing from a responsible supplier and selling only to socially conscious consumers), and responsible mass market sourcing (sourcing responsibly and selling to all consumers). We determine when each strategy is optimal, and show that efforts to improve supply chain responsibility that focus on consumers (by increasing their willingness-to-pay for responsibility or increasing the number of consumers that are socially conscious) or increasing supply chain transparency may lead to unintended consequences such as an increase in risky sourcing. Efforts that focus on enforcement and penalizing the buyer, however, never backfire and always lead to more responsible sourcing and less risky sourcing.

doi 10.1287/mnsc.1110.130

W e study sourcing in a supply chain with three levels: a manufacturer, tier 1 suppliers, and tier 2 suppliers prone to disruption from, e.g., natural disasters such as earthquakes or floods. The manufacturer may not directly dictate which tier 2 suppliers are used but may influence the sourcing decisions of tier 1 suppliers via contract parameters. The manufacturer's optimal strategy depends critically on the degree of overlap in the supply chain: if tier 1 suppliers share tier 2 suppliers, resulting in a "diamond-shaped" supply chain, the manufacturer relies less on direct mitigation (procuring excess inventory and multisourcing in tier 1) and more on indirect mitigation (inducing tier 1 suppliers to mitigate disruption risk). We also show that while the manufacturer always prefers less overlap, tier 1 suppliers may prefer a more overlapped supply chain and hence may strategically choose to form a diamond-shaped supply chain. This preference conflict worsens as the manufacturer's profit margin increases, as disruptions become more severe, and as unreliable tier 2 suppliers become more heterogeneous in their probability of disruption; however, penalty contracts-in which the manufacturer penalizes tier 1 suppliers for a failure to deliver ordered units-alleviate this coordination problem.