Performance improvement: an active life cycle product management

The management of the supply chain has gained importance in many manufacturing firms. Operation flexibility can be considered a crucial weapon to increase competitiveness in a turbulent marketplace. It reflects the ability of a firm to properly and rapidly respond to a variable and dynamic environment. For the firm operating in a fashion sector the management of the supply chain is even more complex because the product life cycle is shorter than that of firm operating in a not-fashion sector. The increase of firm flexibility level can be reached through the application of the real option theory inside the firm network. In fact real option may increase the project value by allowing managers to direct more efficiently the production. The real option application usually analyzed in literature doesn’t take into account that the demand of products are well-defined by the product life cycle. Working on a fashion sector the life cycle pattern is even more relevant because an expected demand that grows according a constant rate doesn’t capture the demand dynamics of the underlying fashion good. Thus, the primary research objective of this paper is to develop a model useful for the management of investments in a supply chain operating in a fashion sector where the system complexity is increased by the low level of unpredictability and stability that is proper of the mood phenomenon. Moreover, unlike the traditional model, a real option framework is here presented that consider fashion product characterized by uncertain stages of the production cycle.