MANAGING UNCERTAINTIES IN TEXTILE SUPPLY CHAINS

MIHIR DASH1
SANDEEP GUPTA N.

ABSTRACT:
The uncertainty that arises in textile supply chains may be attributed to several
causes. These may be due to the uncertainty in demand caused by changing product variety,
rate of new product innovation, lead-time from design to production, etc., or due to
uncertainty in supply caused by the failure of the firms to deliver the products or raw
materials to the final consumers or intermediate manufacturers, delayed delivery of critical
materials, frequency of changing suppliers of critical materials etc.. There is also an
uncertainty in manufacturing caused by degree of interaction among components, process
yield stability, manufacturing lead time, etc.
This study analyses the impact of uncertainty at different points in the textile supply
chain, and tries to identify the weak points in the supply chain. The design adopted for the
study is descriptive in nature, involving primary data collection from a sample of textile units
in Bangalore city. The data was collected by interviewing the different textile units about
their supply chain practices, the constraints they face in terms of uncertainty, and strategies
adopted by them to resolve those. The paper suggests appropriate strategies and solutions to
manage the uncertainty that occurs in textile supply chains at various nodes and due to varied
reasons.

KEYWORDS: supply chain uncertainty, uncertainty in demand, uncertainty in supply,

uncertainty in manufacturing.

The first author is a senior faculty at Alliance Business Academy, 19th Cross, 7th Main, BTM Layout, II Stage, Bangalore-560076, and can
be contacted by phone on +91-9945182465, or by email at mihirda@rediffmail.com. The second author is a research scholar at the same
institution.

Electronic copy available at: http://ssrn.com/abstract=1338174

1. INTRODUCTION
1.1 SCM IN THE INDIAN TEXTILE INDUSTRY

Entering the new millennium, organizations must consider the issues of increased
competition, rising customer expectations and the demand for increased product variety.
Organizations will simultaneously be forced to decrease profit margins and cope with
changing governmental regulations, such as taxes and tariffs to remain competitive. To
handle these pressures, organizations are forced to consider the impact of operational
decisions on not only their own company but also all members of their supply chain. No
longer will firms compete against each other individually but rather they will compete with
their respective supply chains. Thus, developing close, long-term relationships with both
customers and suppliers can take significant wastes out of the supply chain, and is a
potentially valuable way of securing competitive advantage. As with other business
management principles, SCM also applies to textile and apparel industries. The same general
principles that apply to all businesses apply to the textile and apparel industries, but they are
magnified when the product is fashion because of the nature of fashion product. Fashion
products are unique, dynamic, emotional and cyclical, which makes the rate of change in the
apparel industry much faster than in other businesses. Collaboration and communication are
critical to successfully managing an organization in todays global economy. Unfortunately,
most organizations are operating with a certain degree of supply chain fragmentation,
struggling to create and incorporate new products, people, processes and systems in order to
find and maintain a competitive advantage. Thus supply chain management has emerged as
one of the major areas for companies to gain a competitive advantage. Managing supply
chains effectively is a complex and challenging task, due to the current business trends of
expanding product variety, short product life cycle, increasing outsourcing, globalization of
businesses and continuous advances in information technology. This is the drawback faced
by modern apparel manufacturing companies.
Supply chaining is a method of collaborating horizontally among suppliers, retailers,
and customers to create value. A supply chain is a network of facilities and distribution
options that performs the functions of procurement of materials, transformation of these
materials into intermediate and finished products, and the distribution of these finished
products to customers. Supply chains exist in both service and manufacturing organizations,
although the complexity of the chain may vary greatly from industry to industry and firm to

Electronic copy available at: http://ssrn.com/abstract=1338174

firm. In this world, a smart and fast global supply chain is becoming one of the most
important ways for a company to distinguish itself from competitors.
Various definitions of a supply chain have been offered in the past several years as
the concept has gained popularity. The APICS Dictionary describes the supply chain as
processes from the initial raw materials to the ultimate consumption of the finished product
linking across supplier-user companies; and functions within and outside a company that
enable the value chain to make products and provide services to the customer (Cox et al,
1995).
Another source defines supply chain as, the network of entities through which
material flows. Those entities may include suppliers, carriers, manufacturing sites,
distribution centers, retailers, and customers (Lummus et al, 1997). The Supply Chain
Council (1997) uses the definition: The supply chain - a term increasingly used by logistics
professionals - encompasses every effort involved in producing and delivering a final
product, from the suppliers supplier to the customers customer. Four basic processes - plan,
source, make, deliver - broadly define these efforts, which include managing supply and
demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and
inventory tracking, order entry and order management, distribution across all channels, and
delivery to the customer.
Monczka and Morgan (1997) state that integrated supply chain management is about
going from the external customer and then managing all the processes that are needed to
provide the customer with value in a horizontal way. They believe that supply chains, not
firms, compete and that those who will be the strongest competitors are those that can
provide management and leadership to the fully integrated supply chain including external
customer as well as prime suppliers, their suppliers, and their suppliers suppliers (Monczka
and Morgan, 1997). Another definition states that supply chain is a network of facilities and
distribution options that perform the functions of procurement of raw materials,
transformation of these materials into intermediate and finished goods, and the distribution of
these finished goods to the customers.
From these definitions, a summary definition of the supply chain can be stated as: all
the activities involved in delivering a product from raw material through to the customer
including sourcing raw materials and parts, manufacturing and assembly, warehousing and
inventory tracking, order entry and order management, distribution across all channels,
delivery to the customer, and the information systems necessary to monitor all of these
activities. Supply chain management coordinates and integrates all of these activities into a

Electronic copy available at: http://ssrn.com/abstract=1338174

seamless process. It links all of the partners in the chain including departments within an
organization and the external partners including suppliers, carriers, third-party companies,
and information systems providers.
An important task in managing supply networks is to organize the flow of goods and
information between the different components. This includes both the design of the network
structure (building and configuring the links) as well as the control of the material flow
through the network over time. A major challenge in this respect is the handling of
uncertainty, such as in the customer demand, availability of materials, and variability of
production and transportation times (Liberopoulos et al, 2004).
In supply chain network we must include all the organizations involved in the
production of certain goods or services (from the origin of procurement to final
consumption), and each of the logistical stages within these organizations. Thus, the supply
chain is a network linking and interweaving different supply chains of all the companies
involved in a production process. A diagram depicting the typical supply chain is shown in
Figure 1.1.

Figure 1.1: A Typical Supply Chain

The supply chain activity therefore constitutes complex objects, as it involves

decision-makers from many different companies, who sometimes have no direct relationship
and are place in very different geographical locations; yet the decisions they make are
mutually dependent upon each other. Hence, there is a need for an information system
capable of linking together the different members of the chain so that there is an open
communication between them.
The concept of supply chain is not new. Historically we have moved from physical
distribution to logistics management and then to supply chain management. This major

difference seems to be that supply chain management is the preferred name for the
actualization of integrated logistics, with it acting as an enabler; it is now possible to have
an integrated process view about the logistics and all allied processes related to business.
Ideally the supply chain should be a seamless chain as shown in Figure 1.2.

Fig 1.2 Seamless Supply Chain

Source: B.S. Sahay (1998)

Despite the acceptance of the concept of managing the supply chain and partly due to the
limiting misunderstandings, growth of integrated supply chain management has been slow.
Reasons for the slow growth of integrated supply chain management include the following:

Lack of guidelines for creating alliances with supply chain partners.

Failure to develop measures for monitoring alliances.

Inability to broaden the supply chain vision beyond procurement or product

distribution to encompass larger business processes.

Inability to integrate the companys internal procedures.

Lack of trust inside and outside a company.

Organizational resistance to the concept.

Lack of buy-in by top managers.

Lack of integrated information systems and electronic commerce linking firms.

The supply chain improvements described indicate that supply chain management has

the potential to improve a firms competitiveness. Supply chain capability is as important to a

companys overall strategy as overall product strategy. Supply chain management
encourages management of processes across departments. By linking supply chain objectives
to company strategy, decisions can be made between competing demands on the supply

chain. Improvements in performance are driven by externally-based targets rather than by

internal department objectives.
Managing the supply chain means managing across traditional functional areas in the
company and managing interactions external to the company with both suppliers and
customers. This cross-boundary nature of management supports incorporating supply chain
goals and capabilities in the strategic plan of the company. This focus on integration can then
lead to using the supply chain to obtain a sustainable competitive advantage over
competitors. The impact of managing overall product demand and the supply of product will
impact the profitability of the company. The supply chain strategy can be viewed as the
pattern of decisions related to sourcing product, capacity planning, conversion of finished
product, deployment of finished product, demand management and communication, and
delivery. Linking supply chain strategy to the business strategy involves defining the key
business processes involved in producing a companys product or service.
As economic trends are prosperous and consumers demand diversifies, apparel
market is moving towards more fashionable items. This change requires more product
variety, generating demand uncertainty that is closely related to fashionability and
seasonality of the apparel product. Uncertain demand leads to many managerial problems for
the apparel company, such as production planning, forecasting, inventory management,
production system, and timely distribution. To reduce the risk level due to demand
uncertainty, the supply chain in the apparel industry should undergo innovative changes.
A growing number of factors can make the probability of interruptions happening
more likely, like: terrorist attacks, climatic change, port congestion, supplier failures,
unethical behavior or simply sudden changes in the market realities. All supply chains suffer
the effects of uncertainty. Companies which cope best with uncertainty via an effective
supply chain strategy are most likely to produce internationally competitive bottom-line
performance. Although uncertainty takes many forms, four key areas within a supply chain
structure can represent these. The key segments are the supply side, manufacturing process,
process controls and demand side.
The real problem in managing and controlling complex networks is the uncertainty
that plagues them (Davis, 1993). Uncertainty propagates throughout the network and leads
to inefficient processing and non-value adding activities. This uncertainty is expressed in
questions such as: what will my customers order, how many products should we have in
stock, and will the supplier deliver the requested goods on time and according to the
demanded specifications? The more uncertainty related to a process, the more waste there

will be in the process (Persson, 1995). The presence of uncertainty stimulates the decision
maker to create safety buffers in time, capacity or inventory to prevent a bad chain
performance. These buffers will restrict operational performances and suspend competitive
advantage. Those companies which cope best with uncertainty are most likely to produce
internationally competitive bottom-line performances.
Supply chain uncertainty is based on the five requirements for effective system
management. If one or more of these requirements is not fulfilled, decision makers in the
supply chain will experience uncertainty resulting in ineffectiveness (i.e. not realizing
planned objectives):
(1) The managing system should have an objective and corresponding performance
indicators to manage the supply chain in the right direction.
(2) To estimate future system states one has to have information on the environment and
current supply chain state.
(3) There should be enough information processing capacities to process information on the
environment and supply chain state.
(4) In order to direct the managed system in the right direction one should be able to estimate
the impact of alternative actions. This requires a model of the system, presenting the
relationships between available redesign variables and performance indicators.
(5) There should be enough potential control actions. Each environment-supply chain state
combination requires one or more different control actions to manage the system in the
direction of the objectives.
Supply chain uncertainty refers to decision making situations in the supply chain in
which the decision maker does not know definitely what to decide as he is indistinct about
the objectives; lacks information about (or understanding of) the supply chain or its
environment; lacks information processing capacities; is unable to accurately predict the
impact of possible control actions on supply chain behavior; or, lacks effective control
actions (non-controllability).
1.2 LITERATURE REVIEW

Textile and apparel retailing is a seasonal business. It is synonymous to rapid change,

and as a result, commercial success or failure in the market is largely determined by the
organizations flexibility and responsiveness. Responsiveness is characterized by short timeto-market, the ability to scale up (or down) quickly and the rapid incorporation of customer
preferences into the design process. Therefore to meet the variable demand, manufacturers

must build inventory and then draw them down as customer activity increases. The textile
industry is a complex industry involving unpredictable variation in market trends. The
garment manufacturer has an important role in coordinating production activities according
to the trends in the market. Based on the forecasts and point-of-sale tracking at retail, the
retailer places purchase orders with garment contractors. Then the garment manufacturer
works out his production schedule, and finalizes the delivery and shipping dates to the
retailer. Next the garment manufacturer places fabric orders with the textile manufacturer. A
good understanding of the fashion industry is essential in order to gauge the impact of several
factors on the supply chain.
The textile and apparel supply chain consists of the Retailer, Manufacturer, and
Fabric Supplier. The retailer sells the apparel to the consumer. The manufacturer is the
apparel producer, and in some cases the manufacturer gives the work to subcontractors, who
do the actual apparel manufacturing work in accordance with the quality and construction
specifications issued by the manufacturer. The fabric supplier provides the required fabrics to
the manufacturer. The fabric supplier may have his own production facility or may be a
distributor of fabrics to the apparel manufacturers.

The current way of functioning of the supply chain, shown in Figure 2.1, is a linear process.
The retailer issues orders to the manufacturer after his inventory goes down. The
manufacturer sends orders to the fabric supplier for necessary fabrics to process the retailers
orders. The fabric supplier manufactures the ordered fabrics and delivers them to the
manufacturer. The manufacturer receives the fabrics and other accessories (e.g., zippers,
buttons, labels, etc.) and manufactures the styles and delivers them to the retailer.
Fashion is a broad term which typically encompasses any product or market where
there is an element of style which is likely to be short-lived. Fashion markets typically
exhibit the following characteristics:

1. Short life-cycles the product is often ephemeral, designed to capture the mood of
the moment: consequently, the period in which it will be saleable is likely to be very short
and seasonal, measured in months or even weeks.
2. High volatility demand for these products is rarely stable or linear. It may be
influenced by the vagaries of weather, films, or even by movie stars and cricketers.
3. Low predictability because of the volatility of demand it is extremely difficult to
forecast with any accuracy even total demand within a period, let alone week-by-week or
item-by-item demand.
4. High impulse purchasing many buying decisions by consumers for these products
are made at the point of purchase. In other words, the shopper when confronted with the
product is stimulated to buy it hence the critical need for availability.
The combined effect of these pressures clearly provides a challenge to logistics
management. Traditional ways of responding to customer demand have been forecast-based,
with the resultant risk of over-stocked or under-stocked situations. More recently there has
emerged another trend that has added further complexity and difficulty to the management of
fashion logistics. The growing tendency to source product and materials off-shore has led in
many cases to significantly longer lead-times. While there is usually a substantial cost
advantage to be gained, particularly in manufacturing, through sourcing in low labor cost
areas, the effect on lead-times can be severe. It is not only distance that causes replenishment
lead-times to lengthen in global sourcing. It is the delays and variability caused by internal
processes at both ends of the chain as well as the import/export procedures in between. The
end result is longer pipelines with more inventories in them with the consequent risks of
obsolescence that arise.
The operational characteristics of the linear supply chain have the following drawbacks:
1. The retailer does not have the right styles, which have high consumer demand, at
the right time.
2. The retailer faces stock-outs of the high demand styles.
3. Due to the reordering delay from the retailer, the manufacturer will not have the
right fabrics to process retailer reorders, which will lead to an increase in the manufacturing
delay.
4. The above process leads to excessive inventories and high operational costs at the
manufacturer and fabric supplier.
5. Stock outs, excessive inventories, and increased delays occur at every stage of the
supply chain.

Much of the earlier work done in this field was developed to identify cycles in
fashions. This in turn created insights and also provided tools to help improve the demand
forecasting of fashion products. However, the reality that is now being accepted by all is that
the demand for fashion products cannot be forecast. Instead, we need to recognize that
fashion markets are complex open systems that frequently demonstrate high levels of
chaos. But conventional organizational structures and forecast-driven supply chains are not
adequate to meet the challenges of volatile and turbulent demand which typify fashion
markets today (Christopher, 2000; Christopher et al, 2001). The textile industry faces more
pressure than ever to respond quickly to its market demands. At one end of the supply chain,
the supply of fiber is controlled by suppliers who, due to their own market constraints, may
be compelled to hold or push inventories into the market. On the other end, there is a further
consolidation of retail giants. These retailers require just-in-time responsiveness and goods at
the lowest possible cost. Furthermore, competition is becoming more intensive almost on a
daily basis, resulting in faster and cheaper goods. Managing supply chains effectively is a
complex and challenging task, due to the current business trends of expanding product
variety, short product life cycle, increasing outsourcing, globalization of businesses and
continuous advances in information technology (Lee et al, 1997). Supply chain management
is often referred to as efficient management of the end-to-end process (Lee et al, 1993).
Managing supply chains typically entails efficiently coordinating the flow of information,
products and finances (Swaminathan, 2003).
By their very nature, fashion markets are volatile and difficult to predict, hence the
need for agility. It has been suggested (Harrison et al, 1999) that an agile supply chain has a
number of characteristics. Specifically the agile supply chain is:
Market sensitive it is closely connected to end-user trends
Virtual it relies on shared information across all supply chain partners
Network-based it gains flexibility by using the strengths of specialist players
Process aligned it has a high degree of process interconnectivity between the network
members

Fig 2.2 Foundations for an Agile Supply Chain

The right supply chain strategy, however, is dependent on a number of factors:

The strategy needs to be tailored to meet specific needs of the customers.

A product with a stable and a reliable source of supply should not be managed in the
same way as one with a highly unpredictable demand and an unreliable source of
supply.
Supply chain strategies that are based on a one-size-fits-all or a try-every-thing

mentality will fail. (Austin et al, 1998). Managing a supply chain within a single country is
complicated due to various types of uncertainties in demand, supply and process. In most
developed economies, there are limited uncertainties in availability of basic necessities for
any kind of business such as power, roads, water etc. The case is different in the case of
developing economies. Here the infrastructure is weaker and that poses several newer types
of challenges. It may even cause successful well tested strategies that worked well in
developed economies to fail.
The order-fulfillment process involves the coordination of diverse supply-chain
activities, such as sales commitment, manufacturing, and relationships with suppliers for
purchasing or shipping, that normally take place in several different business units.
Uncertainty cannot be avoided for a finished product, because the processes involve the
many different organizations that comprise the supply-chain network. The mechanism by

which the order-fulfillment process is managed to mitigate the negative effects of uncertainty
is the key to the successful operation of a supply chain (Ho et al, 2005). In light of the
complexity of the interactions among companies in the order- fulfillment process, Davis
concluded that demand, manufacturing, and supply uncertainty were the main problems that
plague the management of order fulfillment (Davis, 1993). Each of these uncertainties must
be thoroughly measured and analyzed if its impact on the order-fulfillment process is to be
fully understood and performance improved.
Uncertainty in Demand:
Variations in customer demand are one source of supply-chain uncertainty. Demand
uncertainty involves unknowns associated with product characteristics or environmental
factors, and this makes it difficult to predict and control the demand for a final product. From
earlier studies, there are many facts on the demand side that must be considered in
determining demand uncertainties, such as rate of new product introduction (Chopra, 2001),
product lifecycle (Fisher, 1997), product variety (Fisher, 1997), lead-time from design to
production, variation of marketing product mix (Lee et al, 1993), number of sales channels,
accuracy of demand forecasts, and predictability of product demand (Vickery et al, 1999).
Uncertainty in Supply:
Failure to deliver as required by the customer is another source of supply chain
uncertainty. It may be caused by a malfunctioning production process at the supplier, late
delivery due to unexpected weather conditions, or unacceptable quality of the delivered
products. Supply uncertainty may be caused due to reasons such as frequency of changing
suppliers of critical materials, complexity of critical materials, complexity of procurement
technology for critical materials, time specificity of materials procurement, delivery
frequency of critical materials, delayed delivery of critical materials, and fluctuations in the
selling price of critical materials.
Uncertainty in Manufacturing:
Variations in manufacturing lead-time are the major source of manufacturing
uncertainty. Manufacturing uncertainties include degree of process interaction, degree of
process decomposition, degree of interaction among components, degree of product
decomposition (Khurana, 1999) and process yield stability.
Supply chains are multi-location entities, and disruptions are almost never purely
localrather, they cascade through the system, with upstream disruptions causing
downstream stock-outs. Supply uncertainty (SU) and demand uncertainty (DU) share several
similarities. In both cases, the problem boils down to not having enough supply to meet the

demand. Firms may use similar strategies to protect against SU and DUfor example, they
may hold extra inventory, utilize multiple suppliers, or try to improve their forecasts of
uncertain events.
Inventory Placement
In supply chain management, a common question is which stages should hold
inventory. Under DU, the tendency is to push inventory as far upstream as possible, since the
cost of holding inventory tends to increase as one move downstream in a supply chain. Under
SU, however, the tendency is reversed: It is preferable to hold inventory downstream, since
such inventory can be used to protect against disruptions anywhere in the supply chain.
Supplier Redundancy
Consider a single firm with a single supplier. The question here is what would be the
value of adding additional, backup, suppliers? Lets suppose that each supplier has sufficient
capacity to meet a reasonable level of demand. Then, under DU, the value of the backup
suppliers is smallthey fill in only when the demand exceeds the capacity, which happens
infrequently. On the other hand, the backup suppliers play a vital role under SU, since they
can provide capacity both to meet demand during a disruption to the primary supplier and to
ramp back up after a disruption.
The Cost of Reliability
A firm that is used to planning primarily for DU may recognize the importance of
planning for SU but may be reluctant to do so if it requires a large up-front investment in
inventory or infrastructure. Fortunately, a small amount of extra inventory goes a long way in
protecting against disruptions.
Shift the de-coupling point
A major problem in all supply chains, but significantly worse for global business, is
that they have little visibility of real demand. Because global supply chains tend to be
extended with multiple echelons of inventory between the point of production and the final
market place they tend to be forecast driven rather than demand driven. In other words
decisions on production and distribution are based upon forecasts or orders (which
themselves do not necessarily reflect demand but rather tend to be based on arbitrary rules
such as re-order points and reorder quantities). The point to which real demand penetrates
upstream in a supply chain is termed the decoupling point. These decoupling points also tend
to dictate the form in which inventory is held. Thus in the example in Figure 2.3 demand
penetrates right to the point of manufacture and inventory is probably held in the form of

components or materials. In the lower example demand is only visible at the end of the chain;
hence inventory will be in the form of finished product (Christopher, 2000).

Fig 2.3 De-Coupling Point and Strategic Inventory

The foremost consideration in incorporating uncertainties into the planning decisions

is the determination of the appropriate representation of the uncertain parameters. Two
distinct methodologies for representing uncertainty can be identified. These are the scenariobased approach and the distribution-based approach. In the former approach, the uncertainty
is described by a set of discrete scenarios capturing how the uncertainty might play out in the
future. Each scenario is associated with a probability level representing the decision makers
expectation of the occurrence of a particular scenario. The distribution-based approach is
adopted by modeling the demand as normally distributed with a specified mean and standard
deviation (Gupta et al, 2003).
In order to help manufacturers of short-life cycle products subject to uncertain
demand, a general planning approach termed as accurate response was developed. This
approach calls for firms to divide their production capacity into two distinct parts:
speculative production capacity employed before the observation of early indicators of
market demand and reactive production capacity employed after early demand indicators are
observed. Accurate response is a risk-based production sequencing strategy whereby
production of low-risk products employs speculative production capacity and production of
high-risk products is postponed until additional market information has been gathered.

Precious reactive production capacity is thus effectively reserved for products attended by the
greatest risk of mismatched supply and demand, and provision is made for companies to
update forecasts as market information is becomes available. The accurate response model
can be employed in the context of limited production capacity and minimum lot size
requirements.
2. DATA AND METHODOLOGY
The uncertainty that arises in textile supply chains may be attributed to several
causes. These may be due to the uncertainty in demand caused by changing product variety,
rate of new product innovation, lead-time from design to production, etc., or due to
uncertainty in supply caused by the failure of the firms to deliver the products or raw
materials to the final consumers or intermediate manufacturers, delayed delivery of critical
materials, frequency of changing suppliers of critical materials etc.. There is also an
uncertainty in manufacturing caused by degree of interaction among components, process
yield stability, manufacturing lead time, etc.
This study investigates the different sources of uncertainty in textile supply chains
and the impact of these sources on supply chain variables. The factors affecting supply chain
uncertainty which were considered were: demand uncertainty, supply uncertainty, cost
uncertainty, equipment failure, supply discontinuity, changing customer preference, new
fashion, and government policy. The supply chain variables considered were: inventory
placement (i.e. which stages should hold inventory in a supply chain), supplier redundancy
(i.e. the value of adding an additional, backup supplier), decoupling point (i.e. the point to
which real demand penetrates upstream), and cost of reliability (i.e. the cost associated with
the planning for unexpected disruptions).
The data used in the study was collected on a sample of 50 textile manufacturing
units, located in and around Bangalore city, using a structured questionnaire, in which the
operations manager of the unit was asked to rate the importance of the different factors
affecting textile supply chain uncertainty and their impact on the different supply chain
variables. A simple Likert scale was used for the rating.

3. ANALYSIS AND INTERPRETATION OF DATA

3.1 IMPORTANCE OF FACTORS AFFECTING UNCERTAINTY IN THE TEXTILE SUPPLY
CHAIN
Table 3.1: Importance of factors affecting uncertainty in the supply chain
FACTOR
Demand Uncertainty
Supply Uncertainty
Cost Uncertainty
Equipment Failures
Supply Discontinuity
Changing Customer Preferences
New Fashions
Government Policies
(Total)

Mean
18.0%
14.8%
12.2%
6.9%
9.9%
16.6%
12.9%
8.7%
100%

Std. Deviation
6.75%
6.96%
7.53%
5.90%
7.40%
8.24%
7.90%
7.02%

Table 3.1 above presents the relative importance of factors affecting uncertainty in
the textile supply chain. The most important factors were demand uncertainty (18.0%),
changing customer preferences (16.6%), supply uncertainty (14.8%), new fashions (12.9%),
and cost uncertainty (12.2%). The least important factors were equipment failures (6.9%) and
government policies (8.7%). The factors can be regrouped into the following categories:
customer-side factors (demand uncertainty, changing customer preferences, and new
fashions, which together account for 47.5% of the total supply chain uncertainty), supplyside factors (supply uncertainty and supply discontinuities, which together account for 24.7%
of the total supply chain uncertainty), production factors (cost uncertainty and equipment
failures, which together account for 19.1% of the total supply chain uncertainty), and
environmental factors (changing customer preferences, new fashions, and governmental
policies, which together account for 38.2% of the total supply chain uncertainty).
3.2 IMPACT OF DEMAND UNCERTAINTY
Table 3.2: Impact of Demand Uncertainty
on inventory placement
on supplier redundancy
on decoupling point
on cost of reliability

Mean
3.780
3.460
2.880
2.480

Std. Deviation
0.9960
1.1290
1.4520
1.1110

Table 3.2 above presents the impact of demand uncertainty on the supply chain
variables. In particular, demand uncertainty has a very high impact on decisions regarding
inventory placement and a moderate impact on supplier redundancy, while it has a low
impact on cost of reliability and on decoupling point. This suggests a tendency of the bull-

whip effect, i.e. slight changes in demand down the supply chain may cause inventory
buildup further upstream the supply chain, but the decoupling point, the point at which real
demand exists upstream in the supply chain, is relatively stable to this.
3.3 IMPACT OF SUPPLY UNCERTAINTY
Table 3.3: Impact of Supply Uncertainty
on inventory placement
on supplier redundancy
on decoupling point
on cost of reliability

Mean
3.440
3.100
2.580
2.500

Std. Deviation
1.1460
1.4180
1.3410
1.3130

Table 3.3 above presents the impact of supply uncertainty on the supply chain variables.
Supply uncertainty has a moderate impact on inventory placement and supplier redundancy,
and a low impact on cost of reliability and decoupling point. In particular, supply uncertainty
has a lower impact than demand uncertainty on inventory placement, supplier redundancy,
and decoupling point.
3.4 IMPACT OF COST UNCERTAINTY
Table 3.4: Impact of Cost Uncertainty
on decoupling point
on cost of reliability
on inventory placement
on supplier redundancy

Mean
2.760
2.680
2.640
2.600

Std. Deviation
1.5720
1.4350
1.4810
1.5390

Table 3.4 above presents the impact of cost uncertainty on the supply chain variables.
Cost uncertainty has a moderate to low impact on all of the supply chain variables. The
impact of cost uncertainty is highest on decoupling point, followed by cost of reliability and
inventory placement.
3.5 IMPACT OF EQUIPMENT FAILURES
Table 3.5: Impact of Equipment Failures
on cost of reliability
on inventory placement
on supplier redundancy
on decoupling point

Mean
2.140
2.120
2.080
1.820

Std. Deviation
1.5780
1.6370
1.6140
1.5740

Table 3.5 above presents the impact of equipment failures on the supply chain
variables. Equipment failure has a low impact on all of the supply chain variables. In
particular, equipment failure has a very low impact on decoupling point. The impact of

equipment failure is highest on cost of reliability, followed by inventory placement and

supplier redundancy.
3.6 IMPACT OF SUPPLY DISCONTINUITIES
Table 3.6: Impact of Supply Discontinuities
on inventory placement
on supplier redundancy
on cost of reliability
on decoupling point

Mean
2.800
2.680
2.440
2.080

Std. Deviation
1.7960
1.8560
1.7280
1.5890

Table 3.6 above presents the impact of supply discontinuities on the supply chain
variables. Supply discontinuity has a moderate to low impact on all of the supply chain
variables. The impact of cost uncertainty is highest on inventory placement, followed by
supplier redundancy and cost of reliability.
3.7 IMPACT OF CHANGING CUSTOMER PREFERENCES
Table 3.7: Impact of Changing Customer Preferences
on inventory placement
on supplier redundancy
on decoupling point
on cost of reliability

Mean
3.860
3.480
3.180
2.680

Std. Deviation
1.1780
1.2660
1.5350
1.1680

Table 3.7 above presents the impact of changing customer preferences on the supply
chain variables. In particular, changing customer preference has a very high impact on
decisions regarding inventory placement and a moderate impact on supplier redundancy and
decoupling point, while it has a low impact on cost of reliability. This reflects the impact of
demand uncertainty, except that changing customer preference has a higher impact on
decoupling point than demand uncertainty.
3.8 IMPACT OF NEW FASHIONS
Table 3.8: Impact of New Fashions
on supplier redundancy
on inventory placement
on decoupling point
on cost of reliability

Mean
3.280
3.200
2.580
2.540

Std. Deviation
1.7270
1.6540
1.5790
1.5010

Table 3.8 above presents the impact of new fashion on the supply chain variables. In
particular, new fashion has a moderate impact on supplier redundancy and inventory
placement, while it has a low impact on cost of reliability and on decoupling point.

3.9 IMPACT OF GOVERNMENT POLICIES

Table 3.9: Impact of Government Policies
on cost of reliability
on decoupling point
on inventory placement
on supplier redundancy

Mean
1.82
1.68
1.62
1.56

Std. Deviation
1.574
1.463
1.398
1.232

Table 3.9 above presents the impact of government policy on the supply chain
variables. Government policy has a very low impact on all of the supply chain variables,
reflecting its very low importance as a factor in textile supply chain uncertainty.
3.10 IMPACT ON INVENTORY PLACEMENT
Table 3.10: Impact on Inventory Placement
Changing Customer Preferences
Demand Uncertainty
Supply Uncertainty
New Fashion
Supply Discontinuities
Cost Uncertainty
Equipment Failures
Government Policies

Mean
3.86
3.78
3.44
3.20
2.80
2.64
2.12
1.62

Std. deviation
1.178
0.996
1.146
1.654
1.796
1.481
1.637
1.398

Table 3.10 above presents the impact of different factors on inventory placement.
Inventory placement decisions are highly affected by changing customer preferences and
demand uncertainty, and moderately affected by supply uncertainty and new fashion.
Government policy and equipment failure, on the other hand, have a very low impact on
inventory placement.
3.11 IMPACT ON SUPPLIER REDUNDANCY
Table 3.11: Impact on Supplier Redundancy
Changing Customer Preferences
Demand Uncertainty
New Fashion
Supply Uncertainty
Supply Discontinuities
Cost Uncertainty
Equipment Failures
Government Policies

Mean
3.48
3.46
3.28
3.10
2.68
2.60
2.08
1.56

Std. Deviation
1.266
1.129
1.727
1.418
1.856
1.539
1.614
1.232

Table 3.11 above presents the impact of different factors on supplier redundancy.
Supplier redundancy is moderately affected by changing customer preferences, demand
uncertainty, new fashion, and supply uncertainty. Government policy and equipment failure,
on the other hand, have a very low impact on supplier redundancy.

3.12 IMPACT ON COST OF RELIABILITY

Table 3.12: Impact on Cost of Reliability
Changing Customer Preferences
Cost Uncertainty
New Fashion
Supply Uncertainty
Demand Uncertainty
Supply Discontinuities
Equipment Failures
Government Policies

Mean
2.68
2.68
2.54
2.50
2.48
2.44
2.14
1.82

Std. Deviation
1.168
1.435
1.501
1.313
1.111
1.728
1.578
1.574

Table 3.12 above presents the impact of different factors on cost of reliability. None
of the factors have much of an impact on cost of reliability. Government policy and
equipment failure, in particular, have a very low impact on supplier redundancy. Changing
customer preferences and cost uncertainty have the highest impact on cost of reliability.
3.13 IMPACT ON DECOUPLING POINT
Table 3.13: Impact on Decoupling Point
Changing Customer Preferences
Demand Uncertainty
Cost Uncertainty
Supply Uncertainty
New Fashion
Supply Discontinuities
Equipment Failures
Government Policies

Mean
3.18
2.88
2.76
2.58
2.58
2.08
1.82
1.68

Std. Deviation
1.535
1.452
1.572
1.341
1.579
1.589
1.574
1.463

Table 3.13 above presents the impact of different factors on decoupling point.
Changing customer preferences has a moderate impact on decoupling point. None of the
other factors have much of an impact on decoupling point. Government policy and
equipment failure, in particular, have a very low impact on decoupling point.
3.14 OVERALL IMPACT
Table 3.14: Overall Impact
Inventory placement
Supplier redundancy
Decoupling point
Cost of reliability

Mean
3.4956
3.2250
2.8322
2.7686

Std. Deviation
.47704
.62712
.64368
.51530

Table 3.14 above presents the overall impact of different factors affecting textile
supply chain uncertainty. Inventory placement is the most affected by supply chain
uncertainty followed by supplier redundancy, decoupling point and cost of reliability.
Overall, however, there is only a moderate impact of supply chain uncertainty on all the
supply chain variables.

A paired-samples t-test was performed to assess the statistical significance of the

above results. It was found that the impact on inventory placement was significantly higher
than the impact on supplier redundancy, which in turn was significantly higher than the
impact on decoupling point and on cost of reliability. There was no significant difference in
the impact on decoupling point and on cost of reliability. In particular, this means that, when
taking decisions regarding supply chain, inventory management plays a major role, followed
by supplier decisions.

4. DISCUSSION
Collaboration and communication are critical to successfully managing an
organization in todays global economy. Unfortunately, most organizations are operating
with a certain degree of supply chain fragmentation, struggling to create and incorporate new
products, people, processes and systems in order to find and maintain a competitive
advantage. Thus supply chain management has emerged as one of the major areas for
companies to gain a competitive advantage. Managing supply chains effectively is a complex
and challenging task, due to the current business trends of expanding product variety, short
product life cycle, increasing outsourcing, globalization of businesses and continuous
advances in information technology. This is the drawback faced by modern apparel
manufacturing companies.
As economic trends are prosperous and consumers demand diversifies, apparel
market is moving towards more fashionable items. This change requires more product
variety, generating demand uncertainty that is closely related to fashionability and
seasonality of the apparel product. Uncertain demand leads to many managerial problems for
the apparel company, such as production planning, forecasting, inventory management,
production system, and timely distribution. To reduce the risk level due to uncertainty both in
the demand and supply side, the supply chain in the apparel industry should undergo
innovative changes.
Inventory placement, a major attribute that affects the efficient functioning of the
supply chain is the placement of the inventory in different stages of the supply chain. Due to
the short life-cycle and the seasonal nature of the fashion products, inventory management
becomes very critical. The research carried out to identify the various factors affecting
inventory placement shows that changing customer preferences has a very high impact on it.

This poses a big problem to the retailers, distributors and all the other players involved.
Piling up of stock is costly as it involves holding cost, yet having less stock may ultimately
end up in companies/businesses losing their sales in view of stock outs. Even if there is a
requisite amount of stock, the customers preferences might change causing the stock in hand
to be obsolete. So this is a risk that must be managed properly. Uncertainty in demand may
prompt the different players in the supply chain to hold more inventories. Last but not the
least is the impact of new fashions. In the Indian scenario, new fashions are dictated by
movie stars and cricketers. So any eye-catching and appealing new fashion trend may make
the existing inventories a burden.
Supplier Redundancy; the cost of adding an additional, backup supplier is also
affected by changing customer preferences in a big way. New fashion trends, may necessitate
the manufacturers to add additional suppliers to meet the demand. But the short lived trends
may prove costly. When there is a demand uncertainty, the value of the backup suppliers is
smallthey fill in only when the demand exceeds the capacity, which happens infrequently.
On the other hand, the backup suppliers play a vital role under supply uncertainty, since they
can provide capacity both to meet demand during a disruption to the primary supplier and to
ramp back up after a disruption. New fashions dictate the number of suppliers to hold.
The general trend of most companies is to plan either for demand uncertainty or
supply uncertainty. This is so because; the strategies to adopt for both are quite contradictory.
Having more inventories may account for supply uncertainty but to avoid demand
uncertainty it is advisable to have less inventories. The cost of reliability is the cost
associated with sticking to a particular strategy.
The point to which real demand penetrates upstream is called the decoupling point.
In other words decisions on production and distribution are based upon forecasts or orders
(which themselves do not necessarily reflect demand but rather tend to be based on arbitrary
rules such as re-order points and reorder quantities). The decoupling point is affected by
changing customer preferences moderately. Demand uncertainty and cost implications also
have an impact but not as much as changing customer preferences.
The primary objective of this paper is to study the impact of uncertainties on the
functioning of the supply chain. Based on the research, the most important factor is the
changing customer preferences, followed by demand and supply uncertainties. Due to the
dynamic nature of the fashion industry, which changes almost on a daily basis, proper
planning is essential. Traditional forecast driven supply chains are not quick enough to
respond to the changes in the market conditions. To adapt to these changes, companies must

adopt quick response systems and accurate response framework which postpones adding
value to the product until the last possible moment. This is called postponment.
Some general recommendations that arise from the research are summarized as
follows:

Adopt quick response systems to respond faster to market conditions.

Change from forecast driven planning to market driven planning. This will enable the
companies to provide better products keeping in view the customers preferences.

Account for customer preferences and new fashions in the production planning and
design stages.
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