Outsourcing Strategy Selection of Original Brand Manufacturers in the Fashion Industry Under the Influence of Brand Spillover

Abstract

Outsourcing strategy plays an essential role in manufacturing production. Compared to traditional manufacturing industries, brand spillover behavior from contract manufacturers is more prominent in the fashion industry's outsourcing practices. Therefore, we have developed a model for original brand manufacturers (OBM) to choose an outsourcing strategy under the influence of various factors: OBM can outsource production to a competing manufacturer (CM), a non-competing manufacturer (NCM), or produce internally. If CM is the only contractor for OBM, it will enhance its brand power through brand spillover. If NCM is the only contractor for OBM, there are quality control issues. In summary, we consider three outsourcing strategies for the OBM: outsourcing production to CM, outsourcing to NCM, or establishing internal production, which correspond to strategies C, N, and F, respectively. We find that the brand spillover has a greater impact on OBM than expected. It affects OBM's production planning by influencing market demand, resulting in the profit of strategy C always being lower than strategy N. This forces OBM to face quality control issues. On this basis, we discuss blockchain technology that enables OBM to address quality control issues while dealing with brand spillovers. Interestingly, blockchain technology does not always bring benefits and can only solve problems under specific conditions. In addition, we also prove that the dual-source strategy, that is, OBM outsources production to CM and NCM simultaneously, is better than the C and N strategies, but whether it is better than the F strategies depends on the investment cost.