The coordination of fashion supply chains with a risk-averse supplier under the markdown money policy

Bin Shen, Tsan Ming Choi, Yulan Wang, Kwan Yu Lo

Research output: Journal article publicationJournal articleAcademic researchpeer-review

98 Citations (Scopus)


Motivated by the popular markdown money policy (MMP) in the textiles and clothing (TC) industry, in this paper, we explore how this policy performs in a two-stage TC/fashion supply chain with an upstream risk-averse manufacturer (supplier) and a downstream risk-neutral retailer. Specifically, we investigate both the optimal decisions of the risk-averse supplier with respect to the MMP contract parameters and the optimal ordering decision of the risk-neutral retailer so that the whole supply chain can be coordinated (i.e., optimized). We then conduct a numerical study with the real data from two companies to explore the performance of the optimal MMP proposed in our paper. Important insights and specific implications to the industry practitioners are discussed.
Original languageEnglish
Pages (from-to)266-276
Number of pages11
JournalIEEE Transactions on Systems, Man, and Cybernetics Part A:Systems and Humans
Issue number2
Publication statusPublished - 11 Nov 2013


  • Apparel supply chain
  • Markdown money policy (MMP)
  • Mean-variance (MV) analysis
  • Risk averse

ASJC Scopus subject areas

  • Control and Systems Engineering
  • Software
  • Human-Computer Interaction
  • Computer Science Applications
  • Electrical and Electronic Engineering

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