How does the vertically disintegrated/fragmented distribution system in Japan co-ordinate along the value chain?
Japanese apparel industry is an industry where enormous number and variety of firms contract across markets to produce and sell the merchandise collectively. The spinning firms procure raw materials from importers and act like the principal fabric maker, coordinating production among the many participants. Thread brokers buy the thread from the spinning firms and send it to firms that finish or sometimes dye the thread. Once finished, the thread is sent to either a weaving or a knitting firm, which in turn sends it a fabric wholesaler after producing the fabric. The wholesaler might send the fabric to the print shop as required. After this the apparel maker coordinates the final half of the production process. It either designs the garments itself or approaches a designer for a garment. Some apparel makers also manufacture the garments in house. The apparel maker ships the completed garments to a wholesaler or to a retailer directly. The presence of wholesaler/broker at different steps reflects the disintegrated structure of the Japanese apparel industry. However, they play an important role in providing information about the market, economizing search costs, bearing risks etc. for small firms. Sometimes, if one of the parties involved in a production step is large it by passes the wholesaler completely. It should be noted that bypassing the wholesaler and vertically integrating only makes economic sense in a few cases.
High End Apparel: In this segment, the apparel maker plays a very important role in retailing. Because they generally know the market better than the department stores, apparel maker gives the retailer the right to return the unsold stock to avoid stock outs. In return, due to the risk that it bears, the
