Identifying Future Variants of Fashion Demand: A Trent Forecasting Model for Minimizing Supply-Chain Costs

Fashion is primarily based on adoption of trends by consumers in textiles, clothing, footwear, jewelry and art, inter alia. As fashion is based on human preferences, it is characterized by dynamic changes throughout seasons and years, short life cycles, low predictability and high volatility of demand and impulse purchases. In the dynamic environment of apparel markets, fashion firms aim at successfully forecasting both the desirability of new collections and the volumes of each item produced and released to the market under terms of substantial levels of uncertainty. When demand for an item exceeds its supply, the firm is likely to lose additional profits that could have been collected had a sufficient volume of this item been present in the market. Alternatively, if the supply of an item surpassed its demand, it would remain unsold, thereby generating loss equal to its marginal production and distribution costs. The paper proposes a forecasting model that enhances the accuracy of fashion trend forecasting in the context of multiple variants of colour clothing. The model aims at maximizing profits of the firms, while minimizing the forecasting error and reducing the costs that result from excess capacity of production or, alternatively, from loss of potential revenues due to low demand.