Impacts of Returning Unsold Products in Retail Outsourcing Fashion Supply Chain: A Sustainability Analysis

Abstract

Abstract:Retail outsourcing with a return policy is quite commonly adopted in the fashion supply chain. Under the return policy, the supplier as a brand owner may focus on production, and then outsource retailing to the retailer. In the meanwhile, the retailer may receive some support money from the supplier for subsidizing the loss of unsold products at the end of the selling season and be asked for shipping back. Motivated by this real practice in the fashion industry, we examine a two-echelon supply chain with one supplier and one retailer under the return policy. Several interesting findings are obtained from our analysis. First, we find that when the supply chain achieves channel coordination, the cost of physical return is at least partially borne by the supplier, no matter who is responsible for it in reality. Second, we find that the cost of physical return is significantly affecting the sustainability factors such as the expected amount leftover (which represents environmental friendliness), the expected sales to expected goods leftover ratio (which implies both environmental friendliness and economic sustainability), and the rate of return on investment (which indicates economic sustainability). Third, from a sustainability perspective, we find that the pure wholesale price contract is more sustainable than the coordinating return policy. A numerical study by the real company data is conducted and managerial insights from analysis are discussed.

Game Theoretic Analysis of Carbon Emission Abatement in Fashion Supply Chains Considering Vertical Incentives and Channel Structures

“…By considering the products returns in the clothing industry, seeking the optimal pricing, ordering and/or returning policies are the mainly usual topics focused in recent literature [34][35][36][37]. Similarly, Choi and Chiu [38] further include the consumers' environmental awareness into previous settings.…”

From a Systematic Literature Review to a Classification Framework: Sustainability Integration in Fashion Operations

“…What was observed, interestingly, is that the return policy has been widely adopted in reverse FSCs, in which the retailer could return the unsold products and the supplier could re-sell or recycle them in a sustainable manner. However, it was found that, when there are more product returns, the degree of sustainability would be instinctively lower [52]. It was further explained that, if the cost of physical return is lower, the anticipated quantity of goods leftover is higher; so is the expected rate of return on investment.…”

“…Providing a career path and better skilled human resource management [11,44] Developing programs including working age beyond regulations [11] Protecting female workforce [11] Society Enabling an open book accounting [11] Undertaking philanthropic donations to local communities [11] Rehabilitating ex-LTTE soldiers to work in new plants [11] Appendix D Energy Energy efficiency at supplier facilities [19] The return policy to reduce energy consumption [19,52] Water Minimal impact on water resources at supplier facilities [19] Effluents & Waste The return policy to reduce pollution [19,52] Compliance Environmental certification of suppliers [2,43] Traceability [48] Procurement certification [25] Occupational health and safety [26] Transport Transport optimization [19,25,43,44,51] Use of full-load capacity [25] Closed loop SC [50] Rent based Closed loop SC [63] Automated logistics processes [48] Supplier Environmental Assessment Supplier/partner selection based on green and sustainability practices [43,66,67] Green projects with suppliers [43] Energy and resource management system to advance environmental data collection [51] Social Labour Practices & Decent Work…”

“…It was further explained that, if the cost of physical return is lower, the anticipated quantity of goods leftover is higher; so is the expected rate of return on investment. This could infer that a low logistic cost to return unsold products might not be beneficial to SC sustainability [52].…”

Sustainability Analysis of Supply Chains with Fashion Products under Alternative Power Structures and Loss-Averse Supplier

“…Reference [5] clarify main concerns of sustainable fashion as (1) sustainable production and remanufacturing, (2) green marketing, (3) green information sharing, and (4) green attitude and education. Reference [17] adopt the sustainability indexes defined in [9] to study a supply chain with fashion products under retail outsourcing where the unsold products can be returned to the supplier. They also study issues about supply chain contracts by comparing the performances of return policy (i.e., buy-back contract) and wholesale price contract.…”