Can Brands Claim Ignorance? Unauthorized Subcontracting in Apparel Supply Chains

Unauthorized subcontracting—when suppliers outsource part of their production to a third party without the retailer’s consent—has been common practice in apparel industry and is often tied noncompliant working conditions. Because retailers are unaware party, process becomes obscure cannot be tracked. In this paper, we present an empirical study factors that can lead engage unauthorized subcontracting. We use data provided by global supply chain manager with more than 30,000 orders, which 36% were subcontracted authorization. find frequency subcontracting across factories has pronounced bimodal distribution. Moreover, degree past highly related probability engaging future, suggests behave as if they choose strategic level At order level, state dependence (i.e., status carrying over next one) price pressure key drivers Buyer reputation time also play role. Finally, show predicted correctly for 80% orders out-of-sample tests about 70% suppliers. This indicates business analytics predict help prevent it. paper was accepted Vishal Gaur, operations management.