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InTech-Demand Forecasting in The Fashion Industry A Review
InTech-Demand Forecasting in The Fashion Industry A Review
InTech-Demand Forecasting in The Fashion Industry A Review
Demand Forecasting in
the Fashion Industry: A Review
Regular Paper
DOI: 10.5772/56840
2013 Nenni et al.; licensee InTech. This is an open access article distributed under the terms of the Creative
Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use,
distribution, and reproduction in any medium, provided the original work is properly cited.
www.intechopen.com Maria Elena Nenni, Luca Giustiniano and Luca Pirolo: Demand Forecasting
Int. j.ineng.
the bus.
Fashion Industry:
manag., 2013,A Review
Vol. 5, 1
Special Issue Innovations in Fashion Industry, 37:2013
Thedifficultyinpredictingdemandhasledcompaniesto fashion [6]. Moreover, in the fashion industry,
focusontheimprovementofthesupplychain[3,4]and customer tastes change dynamically and their
thetraditionalnewsvendortypeoverageunderagetrade expectations are varied [7, 8]. Companies are
off.Thisisoneofthefactorsinthesuccessofbrandssuch expectedtomeettherequirementsofthecustomeron
as H&M and Zara, which have the shortest market lead both a product and service level. For instance, fast
times. Over the past few years, fashion companies have fashionhasincreaseditsshareintheapparelmarket,
worked on strategies and inventory, and the framework as customers expect greater variety and frequent
oftheindustryhasbeenradicallychanged. designchanges[9].Retailstoreshaveacriticalrolein
creating brand image and have an influence on
The research question that therefore arises is: does it customer satisfaction [10]. Finally, service level
make sense to continue to study demand forecasting? quality, as noted by Rayman et al. [11] is one of the
Whataretheapproachesandmethodsthatmaybemore majorparametersforcustomersatisfaction.
fittingwiththeactualcontext? Technology: has impacted the fashion industry in
many ways and has contributed to the increase in
Thepurposeofthispaperistodiscusstheactualstateof customerrequirementsthroughadramaticriseinthe
the context in the fashion industry compared with the instantaneous knowledge of new trends and brands.
demand forecasting approaches developed over the last Additionally, it has improved the capability of
few years. The most important literature on forecasting retailers, wholesalers and manufacturers for sharing
demandofrecentyearsisconfrontedwithrecentfindings dataandmakingbetterbusinessdecisions.Outofthis
on strategies of the main supply and demandoriented came two important advances: (i) Automatic
firmsinthefashionindustryandonconsumerbehaviour. replenishment, allowing manufacturers to
Theaimisto understandwhichforecastingmethodsare automatically ship goods when inventory falls below
moreeffectiveunderthecurrentconditions. agreeduponthresholdsand(ii)ValueChainInitiative
(VCI), where standardized codes and linkage have
The main expected findings from the literature review beendevelopedthroughouttheindustry[12].
will aim to propose a new framework for forecasting
demand. As a result of the abovementioned factors, the fashion
industry is now synonymous with rapid change and the
Thepaperisstructuredasfollows:section2isdevotedto organizations flexibility and responsiveness [13]. Recent
analysing the actual supply chain features and firm trendsacrossthefashionindustryare:
context and what have been the main motivating factors Verticalintegrationandoutsourcing:thetraditional
ofchange.Section3introducesanddiscussesindepththe chain of suppliers to manufacturers to retailers to
features of demand. Section 4 yields an analysis of the consumers is blurred. Many companies experience
main works in the literature presented. Section 5 verticalintegrationinanefforttoincreaseefficiency,
summarizes the findings and provides some final eliminate intermediaries and better understand
remarks. Finally, section 6 proposes a new conceptual consumer needs. Other manufacturers choose to
framework for forecasting demand and discusses some have all production outsourced in order to gain a
openissues. competitive advantage [14]. Manufacturers and
retailershavealsorecognizedthatcooperationleads
2.Developmentintheglobalfashionindustry to quicker product development, production and
distributionandhigherprofits.
Thefashionindustryhasbeeninastateoftransitionover Agile Supply Chain: an agile organization
thepast20years[5]duetopressurefrommanyfactors: embedded within an agile supply chain performs
Needs for reducing cost: as with many other better than conventional organizational structures
industries,fashionhasneededtoreduceitscostbase and forecastdriven supply chains that are not
to increase competitive advantage; the main result adequate for meeting the challenges of the fashion
ofthistendencyhasbeentobuymaterialsandmove industry[1517].
productiontodevelopingnationswhereproduction Quick Response: in order to reduce the inventory
ischeaperduetolowerlabourcost. level, fashion retailers have adopted various
Globalization: in terms of both production and measuressuchasthequickresponsepolicy[1821].
retailing,thisisagrowingtrendinmanycompanies Responsiveness is the ability to scale up (or down)
for gaining a substantial cost advantage. However, quickly and the rapid incorporation of consumer
to source product and materials offshore has in preferencesintotheprocessesofasupplychain.
manycasesledtosignificantlylongerleadtimes.
Increase of customer requirements: the market has Relevant from the last trend is the recognized capability
evolved from mass fashion into the segmented of Quick Response to counter the negative impacts of
www.intechopen.com Maria Elena Nenni, Luca Giustiniano and Luca Pirolo: Demand Forecasting in the Fashion Industry: A Review 3
ADI and CV distinguish the different attributes as in Though somewhat dated, the most interesting
Figure 1. Recognizing the demand pattern is useful in contribution comes from Bartezzaghi [48]. In his paper,
ordertoselecttheforecastingtechnique. the author includes the main causes of demand
lumpinessas:
4.Analysisofforecastingapproaches Highnumerousnessofpotentialcustomers
Highheterogeneityofcustomers
Demand forecasting is one of the biggest challenges for Lowfrequencyofcustomerrequests
retailers,wholesalersandmanufacturersinanyindustry, Highvarietyofcustomerrequests
andthistopichasreceivedagreatdealofattentionfrom Highcorrelationbetweencustomerrequests
both researchers and practitioners. The question is
whether the forecasting approaches are applicable and Itiseasytoverifythattheabovementionedfeaturesare
usefulwithinthefashionindustry. common in the fashion industry and it is logical to
presumethatthemainattributeofdemandinthefashion
Traditional forecasting methods, such as exponential industryisinfactlumpiness.
smoothing [34], are designed for smooth, highvolume
demandanddontworkwellwithintermittent,erraticor Bartezzaghi [49] even proposes two approaches for
lumpydemand. managinguncertaintytypicallypresentinlumpydemand:
Early sales: this method exploits information from
Therearemanypapersthatproposetheuseofstatistical actual orders that have already been received for
methods in order to forecast demand [35]. This first futuredelivery.MakingBayesianuseofinformation
group includes the extension of standard methods and from actual orders already received provides some
variants of the Poisson model [36], a model based on degree of correlation between the unknown and
binomialdistribution[37],aswellasCrostonsmodeland knownportionsofthedemand.
itsvariants[28,38,39]andbootstrapmethods[27].Many Order overplanning: another approach for
authors [40, 41] have compared models and the general anticipatingfuturelumpyrequirementsistoexploit
consensus is that performance should vary significantly the early information that a customer generates
according to the level of attributes. Particularly, if the during his purchasing process before he places his
demand pattern has a high level of lumpiness or actual order. Order overplanning uses as
erractiness, which is likely in fashion demand and often forecasting unit each single customer order instead
causespoorperformancewithstatisticalmethods. oftheoveralldemand.
Moreover,Gutierrezetal.2008[42]clearlydemonstrated 5.Finalremarksandfutureresearch
that traditional timeseries methods may not always
captureanonlinearpatternindata.Expertsystems,such Lesson learned from both the context analysis and
as an Artificial Neural Network (ANN), are a logical literature review proposed in this paper is that there are
choiceforovercomingtheselimitations. manydifferentmethodsforandapproachestoforecasting.
However,productandsupplychainfeaturesofthefashion
Many authors have obtained impressive results through industry remain dominant factors. It is therefore not
ANN [43, 44] and we can even count some interesting surprising that the most famous brands have decided to
applications to fashion demand among these [4547]. focus on improving their supply chain performance. This
However, the same authors found that while the ANN doesnotmeanthatZaraorH&Mdonotforecastdemand;
model can yield accurate forecasts, the required more likely, they instead rely on marketing approaches.
forecasting time can be a large barrier to its realworld Mainbarriersinforecastingdemandare:
applications.Thisisbecausethetrainingtimerequiredby Shortsellingseasons
ANN strongly increases according to the complexity or Levelofuncertainty(lumpiness)
variety of the data. This limitation renders it impractical Lackofhistoricaldata
withthefeatureoftheshortsellingseasoninthefashion
industryandtherequirementofresponsiveness,too. The last barrier results from the level of product
innovationthatcanbefoundatteachseasoninfashion.
The last group of papers we have analysed discusses That is the main reason for the considering the order
various techniques in managing the level of uncertainty overlapping method. The idea to use the customer as a
[48,49,30].Suchpapersfocusedonthedevelopmentofa forecastingunithasthepowertoovercomethisproblem.
singlealgorithmorframeworkandattemptedtomeasure Under the hypothesis of a relatively stable set of
the performance of such a framework against existing customers,thehistoricalseriesarethenpopulated.
ones,oftenthroughasimulativeapproach.
www.intechopen.com Maria Elena Nenni, Luca Giustiniano and Luca Pirolo: Demand Forecasting in the Fashion Industry: A Review 5
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