Implementation of Supply Chain Strategy

Officially, H&M employs more than 160 in-house designers who work together with printer
designers and pattern designers, and thereby the wide array of H&M products are made
available in the international market. H&M has always been known to strike the right balance
among the quality, wide range of products, international fashion, the best pricing, along with
sustainability. The collections of H&M are planned centrally and there are no factories that
the brand owns, rather there are more than 800 suppliers from where outsourcing is
implemented, with 60% in Asia, and 40% in Europe (Petro, 2012). Since H&M gives high
priority to geographic and lead tomes, European nations are chosen more for production
rather than Asian nations.

To assure the top-notch quality of the products, H&M makes sure that it works closely with
its suppliers and also maintains a long-term collaboration. The suppliers working with the
company are assessed twice every year so that their performance and efficiency can be
determined and also maintain the communication so that in case of demand changes the
implementation can be catered right away (Siegle, 2018). There is a Code of Conduct that the
suppliers, contractors, and business partners have to sign. The commitment towards the Code
of Conduct has to be catered via the supply chain of the company.

H&M doesn’t work with middlemen and applies strategic management with the production
offices that are close to the suppliers, which also works as a vital source of information flow.
Starting from the selection of the suppliers, managing the process of production, evaluating
the samples to check the quality of the products, there is optimal efficiency implemented by
H&M so that the demands of customers can be responded to well. Usually, H&M releases
two seasonal collections every year in the market, and sub-collections are also launched so
that the inventory remains updated. The primary collections are long-time lead products,
while the sub-collections are the short-time lead ones (Petro, 2012).

The production plan of H&M are made at least six to twelve months in advance, and there are
continuous coordination and communication with the production process. Such an advanced
planning program helps the company to cater to the demands and expectations of the
customers and also contribute towards sustainability in the supply chain operation. H&M has
its own in-house IT system that connects with every store in the world with corporate
logistics, central warehouse, and the system of procurement. The involvement of advanced
technology helps the visibility of the whole supply chain operations of every department
involved in the process and more effective and secured management can also be applied
across the channels of supply chain strategy implementation.

The Dual Integrated Supply Chain strategy has always been the prime success behind H&M
as an international brand. The Dual Integrated Supply Chain indicates that H&M involves
two supplier sources that produce the same products or items (Munoz & Dunbar, A, 2015).
H&M is heavily dependent on outsourcing starting from its design to the production. H&M’s
one of the most highlighting features is its seamless and efficient partnership with suppliers
and partners from all across the world. Since H&M doesn’t have factories of its own, it
efficiently collaborates with more than 800 partner companies in more than 40 nations.
Bangladesh, India, Vietnam, Cambodia, and China are the major Asian nations that
manufacture products and items for the company, along with other European nations.

H&M inter-connects with three types of suppliers, who are segregated under the following
names.

Platinum & Gold

They are the preferred suppliers, producing almost 60% of H&M’s products. The suppliers
who implement top-notch performance and also practice sustainability are considered to be
the Platinum & Gold suppliers.

Silver

The Silver suppliers are the ones with whom H&M experiences a long-term and close
relationship. The company even offers training to such suppliers so that they can have room
for development and progress in the long run.

Others

The suppliers under this category are in the first phase or stage of production with H&M and
they are under trial for operation. H&M doesn’t trust the suppliers under this category
initially and hence they are tested. If the suppliers perform well and are given a green signal
for their performance, they are moved up the order.

The fashion industry is considered to be a fast sector since it demands quick adaptability,
flexibility, and response to customer demands and thereby making decisions. Thus, H&M
ensures to incorporate both agile and lean supply chain strategies in the manufacturing
process so that the maximum advantages and benefits can be drawn. Under the lean
production process, the lower lead time is practiced and only the specific merchandise is
produced in large volumes for the customers. Furthermore, lean production is product-
centered and aims at efficiency, waste elimination, and cost optimisation. Under agile
production, the merchandise takes a higher lead time since it involves fashion-sensitive items
that are made available in a short time with virtual collaboration and market knowledge,
without failing to meet the high quality and the cost control production.

H&M has control over every phase of its supply chain operation as a wholesaler, retailer, and
importer. The advanced IT is one of the prime reasons that the supply chain and the logistics
of the company have such good support and control. The stock management of H&M is
handled manually, while the transportation is looked after by the third parties. The majority
of its production goods flow is sent and conveyed via the terminal in Hamburg, Germany,
which is thereby dispersed to the different distribution centers in the countries around the
world. After the products or merchandise arrive at the specific locations, they undergo strict
scrutiny and inspection and then finally are allocated in the stores or in the “call off
warehouse”, which is a centralised storage room that H&M utilise.

References:

Munoz, A. & Dunbar, M. (2015). On the Quantification of Operational Supply Chain

Resilience. International Journal of Production Research.

Petro, G. (2012). The Future of Fashion Retailing-The H&M Approach. Forbes Lifestyle,
2012.

Siegle, L. (2018). The Problems of Fast Fashion.