Performance improvement: an active life cycle product management

The management of the supply chain has gained importance in many manufacturing firms. Operational 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 the firm operating in a non-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 more efficiently direct the production. The real option application usually analysed in literature does not take into account that the demands of products are well-defined by the product life cycle. Working on a fashion sector, the life cycle pattern is even more relevant because of an expected demand that grows according to a constant rate that does not capture the demand dynamics of the underlying fashion goods. Thus, the primary research objective of this article 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 presented here that considers fashion product characterised by uncertain stages of the production cycle.