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Mathematical Problems in Engineering
Volume 2014, Article ID 954235, 10 pages
http://dx.doi.org/10.1155/2014/954235
Research Article

Supply Chain Contracts in Fashion Department Stores: Coordination and Risk Analysis

1School of Glorious Sun of Business and Management, Donghua University, Shanghai 200051, China
2Department of Decision Sciences, School of Business, Macau University of Science and Technology, Wai Long Avenue, Taipa, Macau
3Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong

Received 2 May 2014; Accepted 11 July 2014; Published 6 August 2014

Academic Editor: Xiaohang Yue

Copyright © 2014 Bin Shen et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

In the fashion industry, department stores normally trade with suppliers of national brands by markdown contract whilst developing private labels with cooperated designers by profit sharing contract. Motivated by this real industrial practice, we study a single-supplier single-retailer two-echelon fashion supply chain selling a short-life fashion product of either a national brand or a private label. The supplier refers to the national/designer brand owner and the retailer refers to the department store. We investigate the supply chain coordination issue and examine the supply chain agents’ performances under the mentioned two contracts. We find the analytical evidence that there is a similar relative risk performance but different absolute risk performances between the national brand and the private label. This finding provides an important implication in strategic interaction for the risk-averse department stores in product assortment and brand management. Furthermore, we explore the impact of sales effort on the supply chain system and find that the supply chain is able to achieve coordination if and only if the supplier (i.e., the national brand or the private label) is willing to share the cost of the sales effort.