Supply chain movement risk in the sneaker industry: an empirical study

Quality & Quantity https://doi.org/10.1007/s11135-021-01166-y Supply chain movement risk in the sneaker industry: an empirical study Che‑Wei Chang1 Accepted: 11 May 2021 © The Author(s) 2021 Abstract In light of the COVID-19 pandemic and the Sino–US trade war, this study proposes a grey sharing decision-making evaluation model for production base movement and the sustainable operation of enterprises in the footwear industry. First, a focus group technique was employed; personnel from the footwear industry, corresponding government agencies, and the academic community were invited to jointly identify the most important criteria when considering a production base movement. The group listed seven criteria: labor cost, materials, exchange rate fluctuation, tariff, supply chain, transfer cost, and the government. The grey situation decision-making algorithm based on group knowledge and entropy were used to identify the most suitable country for production base movement. Keywords Supply chain management · Focus group · Entropy · Grey situation decisionmaking algorithm 1 Introduction The footwear industry is labor-intensive, and is affected by various factors such as land resources, labor costs, material supply, environmental protection, and sales markets. Consequently, in pursuit of profit maximization, major consumer markets, footwear manufacturers, wholesalers, and retailers worldwide are shifting their focus to lower-cost countries, leading to constant movement of global shoemaking bases (Kong Cheong Shoes Group 2014). For instance, European countries such as Italy, Spain, and Portugal began to move their shoemaking bases to countries or regions with lower costs, such as Japan, Taiwan, South Korea, and Hong Kong in the 1960s, and thereafter to China in the late 1980s. Since 1996, China’s footwear industry has been growing at a rate of 10–20% annually, and the country has become the world’s leading footwear producer and exporter (Leo 2020). According to Wu (2018a) and the World Footwear * Che‑Wei Chang 1 Department of Recreational and Graduate Institute of Recreational Sport Management, National Taiwan University of Sport, No. 16, Sec. 1, Shuang‑Shih Road, Taichung, 404, Taiwan, Republic of China 13 Vol.:(0123456789) C.-W. Chang Yearbook (2017) there were 30,000–40,000 shoemaking enterprises worldwide in 2016, employing nearly 10 million individuals and producing 23 billion pairs of shoes. Taiwan’s footwear industry has gone through five phases: (1) Early phase (1949–1960): Under the business strategy adopted during this period, the store and factory were located in the same place, with the main service being shoe customization. Each shoemaker could therefore make only one or two pairs of shoes per day (Zhou and Li 2004). (2) Burgeoning phase (1961–1969): Taiwanese footwear factories introduced Japanese shoemaking techniques. They began to apply the mass production model as well as the business strategy of separating production and sales. At the time, there were more than 30 export-oriented footwear factories in Taiwan, the annual average exporting 20 million pairs of shoes and constituting a major export industry in the country. (3) Maturity phase (1970–1988): Earlier in the maturity period, favorable factors such as low wages, abundant labor, and high quality attracted a large number of orders from footwear manufacturers outside Taiwan. The number of footwear manufacturers in the country surged to more than 1400, with the volume of footwear production growing annually by 50%. In 1987, exports reached a peak of 1.8 billion pairs, making Taiwan the world’s second largest footwear exporter. However, since 1987, the New Taiwanese dollar appreciated sharply by 45%, wages rose, and the profitability ratio began to shrink. Manufacturers began to consider moving their production bases (Li 2017). (4) The industrial structure adjustment phase (1988–1989): This period witnessed high wages, rising labor consciousness, and labor shortages. Moreover, there was significant appreciation of the New Taiwanese dollar against the U.S. dollar, with US$1 being equivalent to NT$39.85 in 1985 and NT$26.42 in 1989. With this sharp appreciation of nearly 50%, profits and total output plummeted. During this period, manufacturers gradually moved their shoemaking bases to countries or regions with land and labor cost advantages such as Thailand, Vietnam, Hong Kong, and China (Xie 2017). (5) The International Division of Labor Phase (1990–present): From a globalization context, the number of shoemaking bases located in Taiwan has reduced drastically, whereas overseas investments have surged, forming a new pattern of international division of labor, whereby orders are received in Taiwan and shoes are produced outside Taiwan. Nevertheless, operational activities and research and development (R&D) centers have been retained to develop and design new shoe materials and models, and produce high valueadded and differentiated products. Taiwan still holds the leading position in the global footwear industry (Chen 2015). In each period, even though the footwear industry faced significant uncertainties such as environmental changes, local governments, and competition from international brands, Taiwanese enterprises gradually developed large-scale manufacturing capacity and manufacturing management capability, to balance quality and efficiency. To facilitate sustainable enterprise operation and development, it is desirable for production and supply chains to move to a cheaper country approximately every two decades. Recently, due to the COVID19 pandemic and the Sino–US trade war, the exchange rate between the NT$ and US$ has changed dramatically, and many Taiwanese companies have begun to evaluate the feasibility of transferring production lines to countries with lower production costs. Therefore, this study proposes a grey sharing decision-making evaluation model (GSDEM) to analyze the movement of the production bases of original equipment manufacturers (OEMs), for the sustainable operation and development of footwear enterprises. For this purpose, first, the focus group method was used; personnel from the footwear industry, government, and academic community were invited to jointly identify the criteria for evaluating production base movement. Thereafter, the grey situation decision-making (GSDM) algorithm and 13 Supply chain movement risk in the sneaker industry: an empirical… entropy were used to construct the model. The results of this study can serve as a useful reference for the sustainable operation of shoemaking OEMs. 2 Literature review The shoe supply chain includes the sourcing of raw materials, transforming them into semifinished goods (shoe materials, shoemaking, finished products), and branding (distributing goods to final users) (Marconi et al. 2017). Schwartz (2018) presented the sneaker supply chain, which starts with design and ends with the manufactured shoe, over an 18-mon (...truncated)