INTEGRATING SUSTAINABILITY IN LUXURY FASHION SUPPLY NETWORKS: AN EMPIRICAL INVESTIGATION OF LEATHER AND SILK

Hakan Karaosman,Patsy Perry,Alessandro Brun,Gustavo Morales-Alonso 글로벌지식마케팅경영학회 2017 Global Fashion Management Conference Vol.2017 No.07

State of the Art: Sustainability Integration in the Luxury Fashion Industry Introduction to Luxury Fashion ‘Luxury’, which comes from the Latin word ‘luxus’, refers to exaggerated life, glamour, comfort and wealth (Dubois, Czellar & Laurent, 2005). In the ancient world, luxury was associated with wealth, exclusivity, and power. After the 17th century, European countries’ economic democratization contributed to the reduction of existing sumptuary laws. Trade increased and larger segments of the population began to afford luxury products. Consequently, luxury moved from being limited to serve the common good to being a satisfaction of private needs. At the end of the 19th century, following the second industrial revolution, luxury earned its modern meaning of being enjoyable beyond the necessities of life (Fionda and Moore, 2009). The democratization of luxury resulted in mass luxury in which luxury brands have extended themselves to affordable offerings (Cristini et al., 2017). Luxury was long associated with the premium quality (Brun and Castelli, 2013), whereas today the technical reproduction of luxury is indulged by mass-produced brands (Cristini et al, 2017). Thus, one could argue that commercial drivers have taken over the industry whereby executives are increasingly seeking ways to transform creativity into profitability. Accordingly, the luxury market has experienced noticeable growth. The global luxury goods market reached a value of € 1.081B, with a growth rate of 4%, in 2016 (Bain & Company, 2016). Nevertheless, despite growth and high profit margins, the global fashion market is affected by macroeconomic, socio-political and natural events. For example, the short-term doubling in cotton prices brought many problems in 2011. Furthermore, scarce natural resources and rising commodity prices greatly challenge the ability of luxury fashion companies to remain profitable. The new luxury paradigm of being more accessible challenges not only sustainability but also operational aspects. The reputation of the luxury industry suffers from consumer concerns over poor labour standards in production, blood diamonds, irresponsible gold-mining practices and animal cruelty in global production networks (Hennigs et al, 2013; Moore, 2011). We therefore question how and to what extent luxury could play a positive role in our mass-consuming generation to slow down the pace for materialism and to better implement sustainability in globally dispersed production networks. Whilst sociologists, marketing and branding experts, have shown interest in luxury management, researchers in the field of operations and supply chain management have paid little attention to the topic: the first paper in the field appeared less than a decade ago (Brun et al., 2008), and furthermore, as of January 2017, there appear to be only 87 papers published in Scopus-indexed journals with ‘‘supply chain OR oper*’’ AND ‘’luxury’’ in the keywords. Henceforth, the current financial, environmental, economic and cultural crises could be considered significant drivers for how luxury operations could be advanced in the move toward sustainability. The focus of this paper is luxury personal goods such as fashion and accessories. The Relevance of Sustainability for Luxury Fashion Following the supply chain revolution of the 1990’s (Mohanty and Prakash, 2013) and the removal of the Multi-Fibre Arrangement in 2005, the fashion industry has become a global force in production and distribution. Globalisation has led to increasing outsourcing of production by fashion companies to a network of suppliers and subcontractors. The industry is characterized by shorter product life cycles and highly volatile market demand (Choi, 2013) alongside downward price pressure, international sourcing, high product variety and low predictability (Perry and Towers, 2013). To this end, fashion companies rely on sophisticated information and logistics systems to remain competitive in the market. Nonetheless, the fashion industry is somewhat inflexible toward major external changes outside the organizations’ direct control (Kozlowski et al., 2015). There is also a potential conflict between corporate responsibility and overarching commercial pressures in the fashion industry (Perry et al., 2015). According to the definition of sustainable development by The United Nations World Commission on Environment and Development (WCED, 1987), current needs should be met without endangering future generations’ rights to satisfy theirs. Luxury fashion companies must therefore acknowledging resource scarcity and other sustainability issues, and take collective actions for an authentic shift to create unique and sustainable businesses. To be profitable and sustainable, “luxury companies must adjust their definition of excellence that is no longer associated with shallow glamour but with positive engagement and deeper values” (Hennigs et al, 2013, p.33). An Overview of Sustainable Supply Chain Management (SSCM) Sustainability in SCM has captured academics’ interest since the early 1990s. Despite the growing interest, some fundamental issues still need to be addressed to provide novel models. The majority of the practices that make up green supply chain management (GSCM) models are modifications of existing practices (Pagell and Wu, 2009). However, earlier studies also stress that these programs might not be sufficient to become sustainable. Hence, it would be insightful to examine which components and which practices are required to make ‘sustainable’ chains. Social sustainability also requires deeper consideration. Wu and Pagell (2011) investigated how organizations deal with short-term pressures to remain economically viable during sustainability implementation, but did not consider social aspects of sustainability. Lee and Klassen (2008) identified the important drivers and enablers which promote environmental management capabilities in SME suppliers, but did not address social sustainability or specific measures for suppliers’ environmental management capabilities. Zhu and Cote (2004) and Vachon and Klassen (2006) demonstrated how to extend green practices, but again social aspects were not encompassed. Similarly, Caniato et al (2012) identified drivers that push companies to adopt green practices, various practices that could be used to advance environmental sustainability and environmental performance indicators measured by fashion companies. However, the social component was excluded. The recognition of corporate social responsibility (CSR) as a business activity is highlighted by the launch of ISO 26000; nonetheless, as illustrated earlier, extant SCM literature has mostly neglected the social aspects of sustainability. Despite a number of studies on aspects including social responsibility and consumer trust (Castaldo et al., 2008), sustainability reporting (Lozano and Huisingh, 2011), sustainable supply management (Ageron, Gunasekaran, & Spalanzani, 2012), and supplier selection problems (Jia et al., 2015), social issues demand more investigation (Perry and Towers, 2013). Sustaining an efficient global supply chain without compromising social responsibility (Perry et al., 2015). Embedding social and environmental management into SCM is needed yet challenging. Significant progress has been made in studies of the buyer-supplier relationship over the past decades, however despite some notable exceptions on green SCM (Zhu and Cote 2004; Zhu et al. 2008; Yu et al. 2014), the development of SSCM literature appears to focus on a single entity rather than the entire chain or network. Social and environmental performance of suppliers is an area of mounting concern, and collectively, sufficient coordination between supply chain partners is greatly needed. Many small and medium-sized suppliers encounter challenges in responding to environmental pressures due to limited capabilities and available resources (Lee and Klassen, 2008), and the most critical environmental and social issues in supply chains are generated by suppliers located in the second tier or further upstream (Tachizawa and Wong, 2014). Therefore, a holistic examination of the entire chain is required. In this vein, Pagell and Wu (2009) examined the chain as an entirety by explicitly addressing both environmental and social outcomes and by asking what unique behavioural patterns are needed for SSCM. However, the adoption of some of the practices is quite limited, which suggests the existence of additional contingencies. Their study called for future studies to explore the role of specific industries e.g. textiles. To this end, Ho and Choi (2012) investigated why fashion companies go green and evaluated sustainable supply chains. Nevertheless, the study was a single case study and did not consider potential differences in terms of antecedents affecting small and large companies. Curwen et al. (2013), interestingly, sought to document current challenges the fashion and apparel industry faces while developing sustainable apparel. Yet again, an imperative need arises to further explore the connections among product design, production processes and supply chain stages through a multidisciplinary approach. On the whole, the phenomena of sustainability has been interpreted in a variety of ways, ranging from a philosophical perspective to business management approaches (Ahi and Searcy, 2013), but more research is needed to show more than how to be ‘less unsustainable’. Traditional business research must go beyond studies focusing on profit with a rather short-term orientation and instead embrace components of how to create truly sustainable businesses. Considering the aforementioned gaps observed in the extant literature, the following research questions were formulated to investigate the phenomena of social and environmental sustainability at supply chain level within the luxury context, where ethical aspects are becoming increasingly critical for success (Brun and Castelli, 2013). RQ1: How do luxury fashion companies integrate sustainability into their supply networks? RQ2: How do contingent factors impact sustainability integration in luxury fashion supply networks? RQ3: Which behavioural patterns could be used to develop a sustainable supply chain configuration for the luxury fashion industry? Research Methodology Data was drawn from case studies of two Italian supply chains producing luxury silk and leather goods, encompassing 10 companies, with a focus on the individual supply chain as the level of analysis. These two supply chain were theoretically sampled to provide diversity in organizational characteristics and supply network relationships that could explain different approaches to the integration of sustainability into the entire chain. The research design followed Yin (1994) and previous studies in operations and SCM. Face to face interviews were conducted with senior managers of different functions in each supply chain during 2015-16. In most of the companies, responsibility for sustainability was divided and integrated into the jobs of multiple managers, meaning that there was no single individual assigned to sustainability. Additionally, the managers interviewed were often in charge of one or more functions, which helped reduce the number of interviews but increased interview content. The interview topic guide was developed from the literature review, and the theoretical constructs underpinning the interview protocol were then used to create an initial coding scheme for data. Data analysis was done inductively, by developing a framework from the cases while exploiting the theoretical concepts in the categorization of codes. The coding process was followed for all cases as an iterative process to assure consistency. Coding was not considered complete until a consensus was reached on each construct. Data analysis involved within and cross-case analysis. Results: Toward a Framework for Sustainable Luxury Supply Chains This study explored the luxury fashion industry from supply chain and operations management standpoint. Findings revealed seven key categories by which luxury fashion companies integrated environmental and social sustainability into their operations: Category 1: Sustainable product design, Category 2: Operations management, Category 3: Performance measurement, Category 4: Sourcing management, Category 5: Decent work and labour management, Category 6: Commitment to sustainability and organisational perceptions and Category 7: Longevity of suppliers. Firstly, natural resource scarcity was acknowledged by all 10 companies. To this end, some practices, including use of eco-friendly materials, hazardous chemical elimination, textile waste reuse, were applied to the fashion design stage with an attempt to mitigate the environmental impact of subsequent operations. Life cycle assessment (LCA was observed to be a significant tool among sample companies. Nonetheless, higher investment costs to employ more innovative solutions and to advance laboratory tests, higher prices for more ecological materials, and lack of knowledge in terms of fibre and textile components due to supply chain complexity prevented companies from advancing product stewardship. Regarding operations management, water emerged as a significant area where sample companies implemented incremental techniques, including natural tanning, on-site wastewater treatment, water purification and water reuse. Nevertheless, vertical integration, which was getting weaker in the luxury fashion industry, resulted in fashion companies having difficulties in the execution of their suppliers’ environmental performance. Practices implemented in this category were individual company attempts rather than collective action plans. It was not quite feasible to mitigate the environmental impact of independent networks where the buying firm outsourced its business functions to third party suppliers. In order to deal with lack of control and monitoring, sustainability must be understood as a concept to be integrated into the core business strategy with measurable indicators. Furthermore, traceability emerged as a pivotal topic. However, the complexity of global luxury fashion supply chains brought complications. Both supply chains showed that there was lack of knowledge about products’ production history. Due to globalization, countries with low operational costs appeared to leverage their competitive advantage. Changing market conditions resulted in the loss of, for example, silk production in Italy. Silkworm cultivation did not take place in Italy any longer, resulting in confusion regarding outsourced materials’ environmental and social records. High product variety and fragmentation of the production network made it difficult for companies to ensure full traceability. To this end, trust and knowledge transfer were weak, which could be improved to link non-economic goals with financial objectives. Another interesting result was that supplier audits were mostly made within first tier direct suppliers’ facilities. In some cases suppliers were provided with online self-assessment tools that were monitored by buying firms. Yet, buying firms and manufacturers required more efficient inspection methods and more realistic mitigation strategies. Ensuring social sustainability is hindered by complications such as lack of visibility and financial burdens. Consequently, technical and motivational dynamic capability development needed to be proactively initiated by focal companies. As stressed by earlier studies, sustainability must be a shared effort within all functions of a company and across its supply network. Sustainability could be disseminated across the chain only when all supply chain actors, including retailers, suppliers and sub-contractors, connect, understand and collaborate with each other. Correspondingly, it became clear that sustainability management required strong organizational commitment for which an alignment between financial and non-financial goals was greatly required. Hence, education and training activities received growing attention. In conclusion, the sample companies asked their supply chain partners to become sustainable for two main reasons, (i) to make the chain stronger, and (ii) to jointly learn and improve performance. Long-term relationships and supplier stability, as evidenced in the leather supply chains, could cultivate trust, which would result in advanced organizational and operational performance improvements. Supplier engagement and collaboration associated with knowledge dissemination could further enable companies to improve sustainability, and lastly innovation capabilities were imperative.

THE STANDARDISATION-LOCALISATION DILEMMA OF BRAND COMMUNICATIONS FOR LUXURY FASHION RETAILERS’ INTERNATIONALISATION INTO CHINA

Sindy Liu,Patsy Perry,Christopher Moore 글로벌지식마케팅경영학회 2014 Global Marketing Conference Vol.2014 No.7

This paper considers the standardisation-localisation debate and analyses qualitative data from 22 luxury fashion retailers to reveal the decision-making process for marketing strategies that support entry into China, in terms of balancing the ‘global-local dilemma’ in an emerging marketplace alongside the need to maintain exclusivity of brand image across markets.

THE STANDARDISATION-LOCALISATION DILEMMA OF BRAND COMMUNICATIONS FOR LUXURY FASHION RETAILERS’ INTERNATIONALISATION INTO CHINA

Sindy Liu,Patsy Perry,Christopher Moore 글로벌지식마케팅경영학회 2014 Global Marketing Conference Vol.2014 No.6

This paper considers the standardisation-localisation debate and analyses qualitative data from 22 luxury fashion retailers to reveal the decision-making process for marketing strategies that support entry into China, in terms of balancing the ‘global-local dilemma’ in an emerging marketplace alongside the need to maintain exclusivity of brand image across markets.

Assessment of Knitted Fabric Smoothness and Softness Based on Paired Comparison

Ivana Salopek Čubrić,Goran Čubrić,Patsy Perry 한국섬유공학회 2019 Fibers and polymers Vol.20 No.3

The purpose of this study is to conduct an in-depth analysis of customer preferences for single jersey knit fabricsregarding the attributes of smoothness and softness, in order to build up a holistic picture of purchase preferences. A paired comparison test was conducted for the subjective human assessment of single jersey knitted fabrics which were designed to differ in a single factor only. A sample of 140 evaluators were recruited and assigned into seven demographic groups according to age, gender and education level, with 20 evaluators in each group. It was shown that fabrics produced of viscose and polyester or with addition of elastane yarn are perceived smoother than 100 % cotton fabrics without elastane. Regarding the gender groups, the discrepancy is seen between the results obtained for smoothness and softness, especially within the male evaluators. Also, it was shown that evaluators with completed secondary education do not make higher differences in the perception of attributes, both smoothness and softness.

COOPETITION IN FASHION SUPPLY CHAINS

Piyya Muhammad Rafi-Ul-Shan,David B. Grant, University of Hull,Patsy Perry 글로벌지식마케팅경영학회 2017 Global Fashion Management Conference Vol.2017 No.07

Introduction This paper presents an exploratory investigation into the use of coopetition by fashion supply chains (FSCs) as a sustainable, risk-reduction strategy and enabler for competitive advantage. Bengtsson and Kock (2000) proposed coopetition as a state where two companies cooperate in some activities, such as a strategic alliance, while at the same time competing with each other in other activities. While coopetition is usually considered as a horizontal integration strategy (Hingly et al., 2011), it might also be used vertically in a supply chain and possibly including third-parties to alleviate issues of confidentiality (Dari, 2010). Such lose relationships and partnerships may also be undertaken between companies for joint product development, to share research and development (R&D) costs, to restore corporate image, to increase environmental responsiveness of suppliers, for differentiation, to reduce costs, to reduce supply chain waste, and to develop sustainable materials, alternative or substitutes (Caniato et al. 2012). In a dynamic business environment such as fashion the ability to integrate processes across the functional boundaries of a company is considered a key to competitive advantage (Sull and Turconi, 2008). It is also important for companies in FSCs to share a common goal and work in the same direction to achievement supply chain integration (Fernie and Grant 2015). De Brito et al. (2008) suggested that the best performing companies effectively manage internal and external relationships between functions and organizations through improved coordination and highlighted a need for partnering with supply chain partners and different stakeholders including working groups in the industry, relationships management, having highly skilled people, and resource sharing especially in transport equipment and warehousing and the use of coordination tools such as collaborative planning, forecasting and replenishment (CPFR). While such alliances build up relationships and partnerships for the betterment of all partners (Lacoste, 2014), many companies remain reluctant to share too much for fear of affecting their trade secrets or competitive advantage, and so maintain a corporate transactional mindset (Grant, 2005). Thus, there is a need to investigate whether FSC firms are aware of or using coopetition principles, and if not whether they have a propensity to do so. Research Design Our investigation was exploratory as it addresses the how and why questions consistent with criteria for qualitative research (Bryman and Bell, 2015). Our unit of analysis for conducting this study was seven UK FSC case companies (CCs). Our sample was selected based on criteria of having in the UK a manufacturing or sourcing base and a retail or wholesale presence and some major operations such as customer service, distribution and warehousing and a brief description of each CC is provided in Table 1 below (Yin, 2014). Data were collected via semi-structured interviews with 68 people across the seven CCs. These were supported further supported by a number of means, for example, visits to the manufacturing sites, head offices and other important operational places, navigating around the working environment, specifically the factory or shop floor and distribution centers, making observations and chatting to workers in the factory cafes, car parks and surrounding areas. Both within-case and cross-case analysis analyses were conducted and three themes emerged: capacity sharing, cooperation for risk reduction or a response to an adverse event, and information sharing to build relationships. We now discuss details pertaining to each theme in detail. Findings Capacity sharing: Time-based competition, demand volatility, increased disruptions and retailer pressures are some of the reasons that stimulated fashion companies and supply chains to share capacity. However, the case companies also believed high supply chain cost led fashion supply chains to benefit from each other’s resources and leave competition for the shop floor or better customer service. CC1 respondents mentioned that at a particular time they had to replace their ‘plasticisers’ and during this replacement process CC1 used competitor ‘plasticisers’ and hides. CC1, CC2 and CC4 respondents mentioned that their companies also gets help from its competitors in the international market to source skilled labor force in case of full capacity. They further mentioned the use of machines, sharing raw materials, technology, warehouse, containers, testing facilities and other facilities at competitors’ plants in different countries: “We can’t do everything on our own, especially on a global basis, so we talk to our colleagues and if they have those facilities we will ask their help; we will pay less and they will get what they have invested for” (CC1 supply chain manager). CC2, CC3, CC4 and CC6 respondents further mentioned that departments which were formerly perceived as competing each other are now sharing workforce according to demand. Respondents also suggested that problems of quotas, price fluctuations, raw material shortages, customs and distribution could be overcome by sharing materials and capacity with competitors: “If China goes over their export quotas we could be left with fibers stuck in China indefinitely until the quotas have re-balanced so in the interim its managed by sharing materials with competitors here in the UK or in our suppliers’ markets” (CC2 sourcing manager). CC2 and CC4 respondents also mentioned how in the past their companies managed to retain a cluster by offering people a business space in their premises. CC4 also offers apprenticeships to other manufacturers and suppliers, reflecting the company’s belief that the industry needs to pool resources. CC3 and CC5 respondents mentioned that sometimes their companies derives benefits of economies of scale in terms of raw materials and some sub-processes by sharing capacity with competitors: “We buy in bulk to get economies of scale, sometimes just to make sure we don’t run out of supply but there are quite a lot of businesses in our product category so we always have someone to share to get rid of dead money” (CC3 sourcing manager). CC5 and CC7 also mentioned that their companies also use supply chain partners’ facilities such as quality checks, storing products at their sites and arranging capacity for CC5 and CC7. Cooperation for risk reduction: Respondents from CC6 described many instances where coopetition emerged when supply risk or disruptions occurred. One disruption shut down trading but CC6 was able to resume trading in just two days, partly due to the help from its competitors, customers and outside service providers. Respondents mentioned that a high street retailer offered space in its warehouse, another sent its workforce to help evacuate materials and another sent containers, while a service provider converted all standard orders into next day delivery. Within CC6 itself, drivers were willing to work extra hours, even at the weekends and some other departments also sent their workforce to help the logistics and distribution functions, which were affected most by this incident. Respondents also mentioned the frequent use of containers, materials, suppliers, factories and vehicles of competitors and some facilities at main sources: “If they’ve got a container let’s say 60% and we have got the other 40%, we don’t want another whole container; we will join the retailer, historically, you wouldn’t even talk to them because they are competitors, you know, compete on shop front” (supply chain manager). Information sharing to build relationships: Increasing sustainability risks and motives for costs savings, resource development, to avoid legal penalties, to be pro-active and to develop supply chain knowledge drove the case companies to information sharing, building relationships even with competitors and with organizations outside the industry. Case companies shared many practices and processes where they demonstrated an increased move to share information and relationship building with competitors. Respondents from CC1, CC2, CC3, CC4 and CC6 mentioned their companies have established close relationships and constantly share information with companies that were perceived as biased towards the industry or competitors in the past, such as NGOs, companies on CSR, external companies for testing and auditing, working groups in the industry and material and service providers. Respondents mentioned that this has helped them to manage issues such as legislation, working standards, ethics, national and international regulations, country laws and law on chemical use, testing and auditing, to develop supply chain knowledge, to identify sustainability risks and to design their mitigation strategies. Respondents further mentioned that, over the years, their companies have increased information sharing and relationship building with competitors who helped the company with market analysis and to re-shape its business strategies: “I think information sharing with some of those forces, where it was once perceived as a threat is now considered essential, you will manage most of your risks beforehand” (CC2 project manager). CC3 and CC5 respondents maintained that fashion in general and fast fashion in particular requires having as many sources of information as possible, as this will help businesses to increase the number of options. This will further help their companies to explore alternatives and substitutes, ultimately minimizing risks such as dependency and improving customer service: “You need to talk to your partners, talk to your competitors, talk to those who have the slightest relevance to what you do; you need to be open minded; this will increase your options and then you can say yes, I can sustain, I can continue” (CC3 ethical compliance manager). CC2 and CC4 respondents mentioned building relationships with some European premium quality manufacturers who were perceived as competitors in the past. Respondents mentioned that the company is also trying to build strong relationships with small and medium companies of its type in the UK so that a common strategy can be developed for the government to help revive the UK textile and garment industry: “As an industry we’re joining together, whether we are joining together with our competitors or what could be perceived to be a competitor or not, it doesn’t really matter, the fact is we are joining together to pool our resources in terms of trying to attract new people into the industry and get some help from the government”(CC4 supply chain manager). However, CC5 respondents expressed concern about sharing trends or design related information to some competitors of its size but admitted that CC5 also gets help from its competitors: “He (supply chain manager) will pick up the phone and let them know which trend is in demand, which colour customers like; in the beginning I found it unusual but then I saw some of them coming to us and asking for some units to try” (CC5 design manager). CC6 respondents mentioned that a recent disruption has demonstrated how important it is to have relationships, even with competitors. Respondents reported that their service providers converted standard deliveries into next day just because they perceived CC6 as a family and it was good relationships with them that enabled CC6 to provide good customer service and maintain its image as a responsible online fashion retailer: “We had relationships with them so they were willing to go to the extra mile; we see them as a family organization although some might say competitors” (CC6 supply chain manager). Conclusions The literature asserted the need for coopetition in order to survive and compete in a demand driven and volatile market place however issues of maintaining confidentiality and competitive advantage may inhibit companies in FSCs from adopting coopetition principles. However, our study found that due to increased uncertainties, disruptions and risk the seven CCs we investigated have embraced coopetition in some way as a strategy mechanism to manage their supply chains. Thus, we conclude that coopetition appears to be a driver to stimulate organizational capacity sharing, risk reduction and information sharing to build relationships with multiple stakeholders even if they are competitors. However, we note that this study was exploratory and only investigated seven FSC companies in the UK and hence the findings may not be generalized across all companies. Further research should expand this line of enquiry to do so.