A simulation study of a two-echelon apparel supply chain with forecasting error

Accurate Response (AR) strategy was implemented in a one-echelon apparel supply chain including manufacturer and retailers in Obermeyer´s case. Both the overproduction and underproduction of the manufacturer are cut down to a lower level than before. This paper proposes to extend their supply chain into two-echelon that considering the customer´s demands. A simulation model written in Matlab 7.0 is developed to investigate how the forecasting error between the retailers´ predictions and the customers´ actual demands impacts the AR strategy. Two major stages are included in the simulation procedure. Stage 1 studies the performance of AR strategy using the developed simulation model. Stage 2 investigates how the forecasting error between the retailers´ estimations and the customers´ actual demands influences the performance of AR strategy. 8 levels of forecasting error are input into the simulation model to calculate the overestimation and underestimation of the retailers, the overproduction and underproduction of the manufacturer. For each level of error, ten experiments are conducted based on different error distributions stochastically generated. The result of the simulation shows that with forecasting error of retailers, the mean overproduction and underproduction of manufacturer increases significantly. This result shows the limitation of the AR strategy in apparel supply chain. It also indicates the importance of information sharing and in-season replenishments to the performance of the apparel supply chain.