ABSTRACT
Unauthorized subcontracting—when suppliers outsource part of their production to a third party without the retailer's consent—has been common practice in the apparel industry and is often tied to unsafe working conditions. Because retailers are unaware of the third party, the production process becomes obscure and cannot be tracked. In this paper we present an empirical study of the factors that can lead suppliers to engage in unauthorized subcontracting. We use data provided by a global supply chain manager with over 30,000 orders, of which 36% were subcontracted without authorization. We find that the frequency of unauthorized subcontracting across factories has a pronounced bimodal distribution. Moreover, the degree of unauthorized subcontracting in the past is highly related to the probability of engaging in unauthorized subcontracting in the future, which suggests that factories behave as if they choose a strategic level of unauthorized subcontracting. At the order level, we find that state dependence (i.e., the status of an order carrying over to the next one) and price pressure are the key drivers of unauthorized subcontracting. Buyer reputation and lead time also play a role. Finally, we show that unauthorized subcontracting can be predicted correctly for more than 80% of the orders in out-of-sample tests, and for about 70% of suppliers. This indicates that retailers can use business analytics to predict unauthorized subcontracting and help prevent it.
BIO
Anna Sáez de Tejada Cuenca is an Assistant Professor of Production, Technology and Operations Management at IESE Business School, University of Navarra. She received her PhD in 2019 from the UCLA Anderson School of Management, and spent a year working as a Postdoctoral Research Fellow at Georgetown University's McDonough School of Business. Before starting her doctoral studies, Anna was a research assistant at IESE and a junior R&D engineer at Sabirmedical. During her PhD, she interned at Amazon in the Supply Chain Optimization Technologies team. Anna holds a BSc in Mathematics and a MSc in Mathematical Engineering from the School of Mathematics and Statistics at UPC-BarcelonaTech.
Anna's research interests include social responsibility, sustainability, supply chain management, behavioral operations management, and empirical and experimental operations management. Recently she has been working on visibility and transparency in apparel supply chains, on behavioral biases of managers, on sustainable business models in fashion, on diffusion of diversity initiatives along supply chains, and on consumer attitudes and behavior with regards to environmental issues like recycling, renewable energies, or ecolabeled products. Her papers have been accepted in leading journals such as Management Science. Anna won the POMS College of Sustainable Operations Best Student Paper Award in 2018 and the POMS College of Behavior in Operations Management Junior Scholar Paper Competition in 2019.