H&M's Supply Chain Management Practices

H&M has a formula; it's based on the recognition that retailing is essentially theater. There's a stage and
it must change continuously to hold the interest of the consumer."
- Kurt Barnard, President of Barnard's Retail Consulting Group, in 2007.
"A short lead time is not an end in itself, since it is always a matter of getting the right balance between
price, time and quality."
- H&M Annual Report, 2006.

Introduction
In late 2002, one of the buyers from Sweden-based apparel retailer Hennes & Mauritz AB (H&M) on a
trip to South Asia, chanced upon a college student wearing a peasant blouse and gypsy skirt. The dress
caught the buyer's fancy and she immediately took photographs of it and sent them to the company's
design team at Stockholm, which was working on new concepts and styles for the coming season.
The designers approved the new concept, decided on the fabric and colors, and orders were placed with
a supplier in India to make the garments available in time for the spring-summer collection.
The dresses were on the shelves of some of H&M stores across the world by February 2003 and were
lapped up by customers in quick time.
The company was able to meet the growing demand for the dresses on time by replenishing the stocks
within three weeks.
Heeding customers' demands, H&M went on to embellish the peasant blouse with sequins and lace, and
brought out skirts in new colors. Seeing that the dresses were really popular, H&M also introduced them
in several other markets.
H&M was among the pioneers in fast fashion, and apart from introducing its own styles, it also scouted
around the world for styles and fashion that could click among customers.
The clothes from H&M were reasonably priced, stocks were replenished every day, and no item
remained on the shelves for more than a month. Customers therefore made it a point to repeatedly shop
at H&M.
The secret of H&M's success was a well-integrated supply chain - the clothes designed by the
headquarters at Stockholm were made by more than 600 suppliers located in 22 countries in Europe and
Asia. After the garments were manufactured, they were shipped to stores across the world. H&M
decided on the suppliers depending on the lead time.
The products with higher lead times were made in Asia, and those that were in high demand were made
in Europe. All the products were distributed across the world to its 1,345 stores, located in prominent
shopping districts in 25 countries across the world.
According to Florence Müller, Professor, French Fashion Institute,
 "H&M has gone from being a distributor to being a fashion label. H&M stores and those of its
competitors have a much larger role than you might think, they've become places for fashion followers
where one goes to see confirmation of the trends for the season."3
H&M was founded by Erling Persson (Persson), a salesman from Västerås , Sweden. In 1947, on a visit to
the US, Persson was attracted by the concept of clothes stores selling stylish garments at low prices.
Following a similar concept, he opened a store selling clothes for women in Västerås in 1947, and named
the store 'Hennes' (hers in Swedish). The low prices immediately attracted customers. The stores were
expanded during the 1950s and the 1960s. Persson was confident that the concept would work as well in
other countries, and in 1964, the company ventured overseas by opening a store in Norway. This was
followed by a store in Denmark in 1967...

Idea Generation and Design

Initially, H&M sourced the products mostly from its agents in Asian countries and sold them through its
stores. In the late 1980s, after Bosch joined the company, H&M began building a design team to take to
the stores the products that customers were demanding...

Production

Initially, all the production activities of H&M took place in Sweden. In the 1960s, production was carried
out in other Scandinavian countries and in the UK. In the late 1960s, some of the production activities
were shifted to southern European countries like Italy and Portugal. By the early 1970s, H&M was also
producing in Hungary, Poland, and erstwhile Yugoslavia. In 1978, H&M ventured into the Far Eastern
countries with a production office in Hong Kong. As of 2000, H&M had 21 production offices, of which 10
were in Europe, 10 in the Far East, and one in Africa...

Distribution
A large part of the finished products that were manufactured were shipped using external contract
companies to the central warehouse in Hamburg, Germany, which served as the transit terminal.
Logistics was managed centrally from the company's headquarters in Stockholm.
Most of the goods from the production centers across the world passed through this transit terminal on
their way to the destination country.
The transit terminal received the goods from all the suppliers across the world...
Store Management
Before opening new stores or before entering a new market, H&M conducted extensive research on the
demographics of the consumers, spending power, competition, and other factors that could contribute to
the success of the international venture...