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Fast Fashion: Quantifying the Benefits

In: Innovative Quick Response Programs in Logistics and Supply Chain Management

Author

Listed:
  • Warren H. Hausman

    (Stanford University)

  • John S. Thorbeck

Abstract

For short-life-cycle or fashion industries, the concept of supply flexibility, also known as postponement or “fast fashion,” has high potential for significant increases in both profits and market capitalization for brands and retailers. First, we present a model to analyze the benefits of supply flexibility (in particular, reduced stockouts and markdowns) on operational financial metrics: revenue, cost, and profit. Assuming conservative improvements of 5% of revenue in both reduced markdowns and reduced stockouts from implementing supply flexibility, the resulting estimates of profit percent increases range from 22 to 28%. Next, the price/earnings ratio for 53 firms in fast-fashion or short-product-life-cycle businesses is used to estimate the corresponding increase in market capitalization. The results are percentage increases in market cap ranging from 30 to 37%; these increase even further to 35–43% if one anticipates a 15% reduction in inventory levels due to improved supply flexibility.

Suggested Citation

  • Warren H. Hausman & John S. Thorbeck, 2010. "Fast Fashion: Quantifying the Benefits," International Handbooks on Information Systems, in: T. C. Edwin Cheng & Tsan-Ming Choi (ed.), Innovative Quick Response Programs in Logistics and Supply Chain Management, pages 315-329, Springer.
    • Handle: RePEc:spr:ihichp:978-3-642-04313-0_16
    DOI: 10.1007/978-3-642-04313-0_16
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    Cited by:

    1. Marcus Adam, 2018. "The Role of Human Resource Management (HRM) for the Implementation of Sustainable Product-Service Systems (PSS)—An Analysis of Fashion Retailers," Sustainability, MDPI, vol. 10(7), pages 1-27, July.
    2. Bin Shen & Tsan-Ming Choi & Chris Kwan-Yu Lo, 2015. "Enhancing Economic Sustainability by Markdown Money Supply Contracts in the Fashion Industry: China vs U.S.A," Sustainability, MDPI, vol. 8(1), pages 1-14, December.
    3. Bin Shen & Qingying Li, 2015. "Impacts of Returning Unsold Products in Retail Outsourcing Fashion Supply Chain: A Sustainability Analysis," Sustainability, MDPI, vol. 7(2), pages 1-14, January.
    4. Wagner, Stephan M. & Grosse-Ruyken, Pan Theo & Erhun, Feryal, 2018. "Determinants of sourcing flexibility and its impact on performance," International Journal of Production Economics, Elsevier, vol. 205(C), pages 329-341.

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