Publications: Textiles, Apparel & Retailing


A number of the pieces mentioned below are available from this site. A link is provided at the end of each listing for which there is a pdf available. Please note that the documents on this page are organized by category.

FLEXIBLE SUPPLY OPTIONS

Reducing Risk of Fashion Merchandise Using Flexible Supply Options. Presentation made to the Apparel Industry. New York. October 3, 2008.
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Modeling Flexible Supply Options for Risk-Adjusted Performance Evaluation. A thesis presented by Anthony P. Volpe to The Department of Division of Engineering and Applied Sciences in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the subject of Applied Mathematics, Harvard University Cambridge, Massachusetts. May 2005. Flexible Supply Options (FSOs) represents a class of supply sources that provide the buyer, usually a manufacturer, with the flexibility required to react to continuously improving demand information. They are primarily intended for settings where traditional replenishment is impractical, and are used to complement a reduced initial order quantity from the standard low-cost supplier. Formally, FSOs are defined as a source of finished goods inventory apart from the primary low-cost means characterized by: (1) the option price, or initial investment required to reserve a unit of capacity; (2) the exercise price, which is a variable charge for each unit requested; and (3), a finite lead-time to complete an order. A manufacturer derives value from FSOs primarily by utilizing early season sales data to better plan for demand later in the time horizon. Exercising the appropriate number of options to augment the existing inventory effectively reduces the inventory risk normally faced in a single-order environment. A number of risk-sharing contracts binding manufacturers and their suppliers have been proposed in the supply-chain literature and put into practice. These are useful examples of FSO’s, and include Options-Futures Contracts, Options-only Contracts, Backup Contracts, and Quantity flexibility contracts. However, one point of emphasis here will be the generalization of this strategy to include any alternative means of production with a very short lead-time compared to the standard low-cost supplier, including in-house, off-line production processes. A one period, two-stage Markov Decision Model is created to study the potential benefits of FSO’s. Closed-form solutions for determining profit-maximizing order quantities and exercising policies are developed, along with a series of useful insights that govern the strategic use of FSO’s. Value-at-risk (VaR) is then proposed as a suitable risk measure for various supply strategies and is used to demonstrate an additional benefit of FSO strategies; namely, that less investment is exposed throughout the selling season. VaR can also be used to adjust an FSO strategy to appeal to various levels of risk aversion. The model is then extended to incorporate multiple time periods and decision nodes, necessitating the use of simulation to formulate illustrative approximations.
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RETAILING

[TITLE OF CHAPTER?], a chapter of the book titled Technology, Public Policy, and Retailing written by HCTAR authors Abernathy and Volpe.
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LEAN RETAILING IN THE APPAREL INDUSTRY

“Ratcheting Up: Linked Technology Adoption in Supply Chains,” by Margaret Hwang Smith and David Weil, to appear in an upcoming issue of Industrial Relations, published by the University of California at Berkeley. It is generally assumed that a firm will adopt complementary technologies simultaneously. Apparel industry data indicate that, because of the close links between suppliers and retailers, there was a ratchet-up adoption of complementary information technologies. The consequence was that a rapid regime shift occurred without explicit coordination or planning. One implication is that the study of technology adoption may need to be more widely conceptualized to incorporate the relationships between upstream manufacturers and downstream retailers.
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“Retailing and Supply Chains in the Information Age,” by Frederick H. Abernathy, John T. Dunlop, Janice H. Hammond, and David Weil, appeared in Technology in Society, v.22(1), 2000, pp. 5-31. This article describes how information technologies have reconfigured retailing and in turn the operation of a core US manufacturing industry, apparel. "Lean retailers" exchange point-of-sales information with their suppliers and require them to replenish orders quickly based on actual sales. This shifts part of the risk arising from changing consumer tastes from retailers and onto suppliers. We argue that manufacturers must reshape planning methods, cost models, inventory practices, production operations, and sourcing strategies. We then show that suppliers that adopt comprehensive changes to manufacturing perform better along a number of dimensions compared to firms that have not. This article provides an excellent overview of HCTAR research contained in the book A Stitch in Time.

“Diffusion of Modern Manufacturing Practices: Evidence from the Retail-Apparel Sector,” by Margaret Y. Hwang and David Weil, June 1997, examines how the apparel industry is being affected by information technology-based changes in the manufacturing and retailing of products. Based on detailed business-unit level data, we show that observed heterogeneity in the adoption of modern manufacturing practices by apparel business units can be explained by changes in retail customer requirements for rapid replenishment of products. The incentive to adopt new practices is further increased by complementarities between manufacturing practices. Finally, sequential rather than simultaneous adoption of complementary practices occur as firms respond to changes in product demand.
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“The Information-Integrated Channel: A Study of the U.S. Apparel Industry in Transition,” by Frederick H. Abernathy, John T. Dunlop, Janice H. Hammond, and David Weil, appeared in the Brookings Papers on Economic Activity: Microeconomics 1995. This paper contains a detailed summary of some of the preliminary findings of the HCTAR apparel industry survey as well as a description of economic and operations research theories that relate to our findings.

“Executive Summary of Preliminary Findings, Harvard Center for Textile and Apparel Research Study of the U.S. Apparel Industry,” by Frederick H. Abernathy, John T. Dunlop, Janice H. Hammond, and David Weil, April 1995, provides a brief summary of the preliminary findings of the HCTAR apparel industry survey that appear in the Brookings Paper.

“Quick Response in Retail/Manufacturing Channels,” by Janice H. Hammond, Chapter 8, Globalization, Technology and Competition: The Fusion of Computers and Telecommunications in the 1990s, edited by Stephen P. Bradley, Jerry A Hausman, and Richard L. Nolan, HBS Press, 1993. This chapter describes the impetus for the quick response movement, current trends in quick response implementation, and the technological underpinnings of quick response implementations and delineates key implementations steps.

“Coordination as the Basis for Quick Response: A Case For Virtual Integration,” by Janice H. Hammond, Harvard Business School Working Paper, 1992. This paper introduces and defines the general concept of channel coordination, and describes why coordination mechanisms among channel partners are needed to preclude "myopic optimization" by individual channel partners. Coordinating mechanisms allow a channel to move closer to optimal channel performance by eliminating redundant activities, reallocating tasks and activities to parties best able to perform them reallocating decision-making authority, altering the type of information gathered and how it is used, and in general increase the performance of a system by viewing the channel as a system to be optimized rather than a set of individual entities. The paper draws a distinction between "virtual integration"—using information and task coordination improve channel performance—and "vertical integration"—improving channel performance via ownership of key components of the channel. Examples from the textile and apparel industry are cited in the paper.

PRODUCT IDENTIFICATIONS AND STANDARDS

“Twenty-five Years Behind Bars,” edited Alan L. Haberman, Cambridge, MA: Harvard University Press, 2001. The proceedings of a Smithsonian Institution-sponsored symposium mark the 25th anniversary of the introduction of the now-ubiquitous bar code. The book is a collection of papers that examine the adoption and influence of a technology that continues to change radically the workings of commerce, transportation, warehousing and retailing on a worldwide scale. Price: $25. Available from Harvard University Press.

“Revolution at the Checkout Counter: The Explosion of the Bar Code,” by Stephen A. Brown. Cambridge, MA: Harvard University Press, 1997. Available from Harvard University Press.

OPTIMAL PRODUCTION & SOURCING STRATEGY

“Reducing Risk of Fashion Merchandise Using Flexible Supply Options.” PowerPoint used in presentation to the Apparel Industry. NYC, October 3, 2008. Flexible Supply Options is a sourcing strategy that says but a small amount overseas at the least expensive supplier and then buy capacity locally to be used for addition product to be built quickly if the product is a big seller.
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“Scheduling and Ordering Production Policies in a Limited Capacity Manufacturing System: The Multiple Replenishment Products Case,” by Soundouss Bouhia and Frederick H. Abernathy, July 10, 2003. This paper formulates production policies to maximize the performance of an apparel manufacturing system that replenishes basic items characterized by a flat average demand. The simulation-based model compares a number of production strategies and chooses an ordering and scheduling policy that increases the overall performance of the supply chain. In doing so, different supplier configurations (i.e., different capacity resources and cost structures) are compared and the optimal strategy is selected to maximize the supplier’s profit while maintaining a high order fill rate and minimizing the risk of carrying inventory.
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“On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand,” by Baris Tan and S.B.Gershwin, May, 2001. A system for placing value upon out-sourcing with specific contractors was developed by studying a manufacturing firm that relies upon a combination of in-house capacity and production by subcontractors to meet fluctuating demand.
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“On Using Capacity Options in Lean Retailing,” by Baris Tan, February 2001. This paper investigates the strategy of temporary increases in production capacity through contingent contractual agreements with short-cycle manufacturers in order to manage the risks associated with demand uncertainty. It introduces the idea of “capacity options” as a way to structure production agreements.
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“Control Your Inventory in a World of Lean Retailing,” by Frederick H. Abernathy, John T. Dunlop, Janice H. Hammond, and David Weil, appeared in the Harvard Business Review, November/December 2000. Despite ever more demanding retailers and rampant product proliferation, manufacturers have stayed with dangerously indiscriminate production schedules and sourcing strategies. A new approach leaves less money on the table.

“Who Holds the Bag?: The Impact of Information Technology and Workplace Practices on Inventory,” Margaret Y. Hwang and David Weil appeared in the 50th Annual Proceedings of the Industrial Relations Research Association, (Madison, WI: IRRA, 1998.) This paper examines how the adoption of information technology and changes in workplace practices affect the level of inventories held by firms in the U.S. apparel industry. We hypothesize the total inventory of apparel manufacturers will decrease as a deeper set of related practices are adopted. Specifically, we evaluate how the adoption of four information technology and manufacturing practices affects inventory position. The study draws on a combined data set that links detailed, business unit level information regarding firm level practices collect by the authors with Department of Commerce micro-data from the Longitudinal Research Database.

“Customer Demand and Scheduling for Clothing Manufacturers,” by Gregory Diehl, Frederick H. Abernathy, and Janice H. Hammond, July 1998. This is a paper which analyzes the demand profiles for a clothing manufacturer/retailer and a clothing manufacturer. We also consider the scheduling problems of a clothing manufacturer. The scheduling problem is related to classical inventory problems but is viewed from a manufacturer’s perspective rather than a retailer’s perspective. We also discuss a number of real life complexities that highlight the need for a different approach from the classic problem.

“Design and Scheduling of Apparel Manufacturing Systems with Both Slow and Quick Production Lines,” by Janice H. Hammond, Z.-Bo Tang, and Frederick H. Abernathy, appeared in Proceedings IEEE Conference on Decision and Control, December, 1994. This paper proposes a model and solution procedure for a hybrid production system that combines a traditional large batch, long lead-time "bundle" production system with a fast, flexible, small lot “modular” production system in order to achieve both the productivity benefits of the bundle system and the speed and flexibility of the quick line. To implement an effective combination these two system types, the paper addresses the following questions: What percentage of overall production capacity should be allocated to the quick production line? What scheduling policy should be employed for the two lines? These two questions are posed so as to maximize the “system profitability” of the entire manufacturing-retailer system. Results from a test problem are provided.

ACCURATE RESPONSE FORECASTING

Accurate response is an approach that helps companies forecast demand and plan production in order to minimize the costs of stock-outs and markdowns. This approach is particularly suitable for companies selling products with high demand uncertainty and short product cycles.

“Making Supply Match Demand in an Uncertain World,” by Marshall Fisher, Janice H. Hammond, Walter Obermeyer, and Ananth Raman, Harvard Business Review, May/June 1994. this article discusses the impetus for accurate response, including the growing product proliferation and shortening product life cycles that make products previously considered to be staple goods acquire many of the forecasting and production planning challenges typically associated with fashion items. The paper includes a case study describing the implementation and benefits of an accurate response program at skiwear manufacturer Sport Obermeyer, using results of the model to illustrate the impact on a firm’s profitability of increasing the amount of reactive capacity.

“Accurate Response, the Key to Profiting from Quick Response,” by Marshall Fisher, Janice H. Hammond, Walter Obermeyer, and Ananth Raman, Bobbin Magazine, February 1994. This paper describes the benefits of an accurate response program, outlines the logic behind the use of reactive capacity, and provides a simple heuristic that companies can use that provides some of the benefit of the more sophisticated accurate response algorithm. Concepts and results are illustrated with data and examples from skiwear manufacturer Sport Obermeyer.

“Reducing the Cost of Demand Uncertainty Through Accurate Response to Early Sales,” by Marshall Fisher and Ananth Raman, forthcoming, Operations Research, Special Issue on New Directions for Operations Management Research. This technical pavper describes the mathematical underpinnings of an accurate response program.

Case Study: Sport Obermeyer, by Janice H. Hammond and Ananth Raman, Harvard Business School case study, describes the implementation of an accurate response program at skiwear manufacturer Sport Obermeyer.

GLOBAL STUDIES

The Future of the Apparel and Textile Industries: Prospects and Choices for Public and Private Actors, by Fred Abernathy, Anthony Volpe, and David Weil, 2005. The expectation that Chinese apparel and textile exports will swamp the U.S. and EU retail markets now that international quotas on those products have been eliminated has fueled much of the discussion of the future of these industries. Although imports from China have surged since the elimination of quotas on January 1, 2005, this conventional wisdom masks important choices that remain for public and private policies over time. In particular, two factors will continue to have major effects on the location of apparel and textile production going forward. First, public policy choices will continue to influence sourcing location, in particular as they relate to tariffs and regional trade polices as well as policies affecting the linkages between countries. Second, the lean retailing model that now prevails requires apparel suppliers to replenish basic and fashion basic products on a weekly basis. As that retailing model became dominant in the 1990s, so too did the advantage of sourcing these apparel items closer to the U.S. market so that products could be manufactured and delivered more rapidly from a smaller finished goods inventory. Even though costs remain a driving factor, we show that proximity advantages for certain classes of products will continue in a post-quota world as retailers raise the bar ever higher on the responsiveness and flexibility required of their suppliers.
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Apparel Apocalypse? The Americas' Textile Industries Won't Die When Quotas Do, by Frederick Abernathy and David Weil, Novemeber 18, 2004. Washington Post Op-Ed piece.
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The Apparel and Textile Industries after 2005: Prospects and Choices, by Fred Abernathy, Anthony Volpe, and David Weil, 2004. Fears that Chinese apparel and textile exports will swamp the US retail market now that international quotas on those products have been eliminated have fueled much of the discussion of the future of these industries. Although the end of quotas will alter global competition, this conventional wisdom regarding the complete dominance of China is overstated and masks important choices that remain for public and private policies. In particular, two factors will have major impacts on the location of apparel and textile production going forward. First, public policy choices will continue to affect sourcing location, in particular as they relate to tariffs and regional trade polices as well as policies affecting the linkages (e.g. infrastructure investment) between countries. Second, the lean retailing model that now prevails requires apparel suppliers to replenish products on a weekly basis. As that retailing model became dominant in the 1990s, so too did the advantage of sourcing certain apparel items closer to the U.S. market so that products could be manufactured and delivered more rapidly. This also explains how some segments of the U.S. apparel industry have survived even in the face of cheaper labor elsewhere in the world. Even though costs remain a driving factor, we show that proximity advantages for certain classes of products will continue in a post-quota world as retailers raise the bar ever higher on the responsiveness and flexibility required of their suppliers.
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The Influence of Quotas, Tariffs and Bilateral Trade agreement on Post 2005 Apparel Trade, by Claire Chiron, 2004. Textile and Clothing imports into the United States have doubled in volume between 1995 and 20031, coinciding with the progressive liberalization of the quota regime under the World Trade Organization Agreement on Textile and Clothing (ATC). The ATC organized the gradual abolition, over a 10-year period (1995-2005) of all volume quotas on Textile and Apparel products, in force since the Short Term Cotton Arrangement, which regulated the Textile and Apparel trade through product-specific, bilateral agreements. While the phased-in approach has allowed importing country to delay liberalization of highervalue products, 2005 will inexorably mark the end of all quotas on all products for WTO members. There remains, however, important limits to complete liberalization: status of non-WTO members representing as much as 7% of US imports in 20022, specific restraining measures with regards to China and protracted tariff preferences through regional trade agreements. In this sense, Textile and Apparel liberalization will remain very much an ongoing process after 2005.
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Globalization in the Apparel and Textile Industries: What is New and What is Not?, by Frederick H. Abernathy, John T. Dunlop, Janice H. Hammond, and David Weil, December 2002. It would be disingenuous to deem globalization of the textile and apparel industries a recent phenomenon. The movement of textile and apparel products across international boundaries predates recent decades or even the twentieth century. Indeed, international trade in apparel and textile goes back well before the periods described above and has been a favorite example of the gains from trade used by economists going back to David Ricardo. So what is all the fuss about the globalization of the textile and apparel industries? This paper argues that new forms of retail distribution and the continuing impact of product proliferation together lead to new forces in the sourcing of products destined for the U.S. market.

In particular, along with traditional factors like wages, exchange rates, tariffs, and for the moment quotas (phased out in 2005), these "new forces" lead to a shift of sourcing for some products to countries in closer proximity to large, affluent domestic markets like the U.S. The paper analyzes trade data at the country- and product-level to examine this view and finds evidence that much of the change in sourcing that occurred in the mid- to late 1990s can be traced back to the effects of the new forces.This has important implications of the impact of the end of quotas in 2005 on international trade flows in apparel and textiles.
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An Overview of the Turkish Textile and Apparel Industry, by Baris Tan, December 2000 (updated 12/02).This paper presents an overview of the Turkish textile and apparel industry by using statistics from 1999. Imports and exports, production capacity and utilization, production and demand, and industry structure in the Turkish textile and apparel industry are all analyzed in detail. In addition, there is a preliminary assessment of the competitiveness of the Turkish textile and apparel industry based on its cost structure, productivity, lead times, delivery performance and quality.
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A Closer Look at the New Filiere: The Establishment Surveys in Roanne and Cholet, by Bruno Courant and Elisabeth Parat, September 2000
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Changing Practices in the U.K. Apparel Supply Chain: Results of an Industry Survey, by Lynn Oxborrow, April 2000
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The Development of the China Apparel Industry, by Gu Qingliang, November 1999.
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Beyond Needles and Thread: Changing Supply Chains in the U.K., by Lynn Oxborrow, November 1999
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E –E-COMMERCE

E-Commerce in the Textile and Apparel Industries, by Jan Hammond and Kristin Kohler, prepared for "The E-Business Transformation: Sector Developments and Policy Implications" September 2000.
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HCTAR, Harvard Center for Textile and Apparel Research. 29 Oxford Street, Pierce Hall 318, Cambridge, MA 02138