Risk Management: Rethinking Fashion Supply Chain Management for Multinational Corporations in Light of the COVID-19 Outbreak

Abstract

Through an international business risk management lens, the widespread and catalytic implications of the 2020 COVID-19 pandemic on the supply chains (SCs) of fashion multinational corporations (MNC) are analyzed to contribute to existing research on supply chain management (SCM). While a movement towards agile, networked supply chain models had been in consideration for many firms prior to the outbreak, the pandemic highlights issues inherent in supply chains that employ concentrated production. We examined the current state of fashion supply chains, risks that have arisen historically and recently, and existing risk mitigation methods. We found that while lean supply chain management is primarily favored for its cost and waste reduction advantages, the structure is limited by the lack of supply chain transparency that results as well as the increasing demand volatility observed even before the COVID-19 outbreak. Although this problem might exist in the agile supply chain, agile supply chains combat this by focusing on enhancing communication and buyer-supplier relationships to improve information exchange. However, this structure also entails an associated increase in inventory and inventory costs. The COVID-19 pandemic has caused supply and demand disruptions which have resonating effects on supply chain activities and management, indicating a need to build flexibility to mitigate epidemic and demand risks. To address this, several strategies that firms can adopt to control for such risks are outlined and key areas for further research are identified which consider parties both upstream and downstream of the fashion supply chain.

The Challenges and Opportunities Created by a Global Pandemic's Effects on Consumer Shopping Behavior Within the Fashion Retail Industry

“…The need for retailers to rethink agility in their supply chains has been identified by several scholars (McMaster et al, 2020;Pantano et al, 2020;Sheth, 2020). During the pandemic, rigid supply chains left retailers unable to respond quickly to rapid changes in consumer demand (McMaster et al, 2020). Luxury brands and retailers offering workwear were left with an excessive amount of inventory, while some retailers selling loungewear and activewear could not produce enough to keep up with increased demand (Ibid).…”

“…Increasing agility will require increased collaboration and communication with all members of the supply chain (Ibid). With shorter lead times, retailers could restock products throughout the season in response to customer demand instead of placing large orders in advance based on predicted demand (McMaster et al, 2020).…”

“…As McMaster et al (2020) indicate, building agility is expensive for retailers, and it may be not wise for retailers to completely rebuild their supply chains or distribution methods in response to an extremely rare event such as the pandemic. Retailers will need to make strategic decisions based on their company's unique capabilities and resources.…”

“…The first signs of the COVID-19 disruption in the US fashion retail industry came from overseas (McMaster et al, 2020). Global fashion corporations are subject to risks such as late deliveries, long lead times, and stock-outs or overstock (Ibid).…”

“…Additionally, retailers had to decide how to navigate social distancing guidelines with employees in factories and implement new procedures to ensure safe deliveries of merchandise to customers. These factors caused supply chain disruptions in the form of delayed or cancelled orders (Ivanov, 2020;McMaster, 2020).…”