Sales, Abipiel Regina I.

IE 003 – IE41S1 – Operations Research 1

Module 5 Assignment – Midterms

HONOR PLEDGE
“I affirm that I have not given or received any unauthorized help on this assignment and that
this work is my own.”

_________________
Abipiel Regina I. Sales
NAME AND SIGNATURE OF STUDENT

Cite a company that uses or applies the inventory model to manage their business. Your

discussion must include but is not limited to the following:

1. The nature of business of the company, business problem related to inventory model.

2. Application of the inventory model.

3. Benefit of applying the model.

H&M

Hennes & Mauritz (H&M) was founded in 1947 by Erling Persson. It laid its foundation

stone by selling clothes for women in Sweden in 1947. It further entered into new markets in

Stockholm and started its new line of production of men’s clothing by 1968. H&M soon

ventured out into new product lines such as clothing for Kids, Accessories, etc. It’s one of the

leading firms in the clothing industry and is recognized as the brand for fast fashion. Currently,

H&M is the second largest clothing retailer. It is currently spread across 61 countries with
Sales, Abipiel Regina I.
IE 003 – IE41S1 – Operations Research 1
Module 5 Assignment – Midterms

around 4900+ stores across the globe, thus establishing its strong presence in the marketplace.

The target market of H&M falls between the age group of 18-30 years[ CITATION Rat19 \l 13321 ].

The company’s usage of efficient and integrated systems for retail inventory management

in the major components of its supply chain, has played a huge part in enabling success in its

stock control management[CITATION LuC \l 13321 ]. H&M follows the ABC classification system

by manufacturing 80% of its retail inventory in advance and introducing the remaining 20%

based on the most current market trends [ CITATION LuC14 \l 13321 ]. Some of the activities carried

out while managing inventory are centralized such as Quality Inspections & excess stock

keeping. This helps them from preventing excessive damages as professional inventory managers

are hired for these tasks. Whereas, in some cases H&M carries decentralized form of inventory

management system. This is mostly done only in the regional market in order to cater to the

needs of the local customers and also helps them manage inventories effectively. Following the

decentralized system helps H&M to develop a good customer relationship. Moreover, H&M

stores do not keep back up stocks. However, once the stock is sold out, a request for

replenishment of goods is placed and products are delivered from the regional replenishment

centers [ CITATION Rat19 \l 13321 ]. According to the Annual Report of H&M 2018, it had an

excess inventory of around $4.3 Billion and H&M believes that digitalization up to a great extent

can help them remove the inventory. H&M has now initiated RFID (Radio Frequency

Identification) in almost 1800 of the stores of H&M and plan to initiate it in many other stores

[ CITATION Gri18 \l 13321 ].

Sales, Abipiel Regina I.
IE 003 – IE41S1 – Operations Research 1
Module 5 Assignment – Midterms

The application of this model has resulted in the company’s success that their regional

markets are able to cater to the needs of the local customers and also helps them manage

inventories effectively [ CITATION Rat19 \l 13321 ]. The ABC classification system has benefitted

the company that now it is one of the most successful clothing stores in the world.

References
1. Fast Moving H&M: An Analysis of Supply Chain Management. Rathore, Manvinder Singh,
Maheshwari, Kriti and Jain, Shreyans. 4, Karnataka : School of Business Studies and Social Sciences,
Christ University, 2019, Vol. 5. 2395-4396.

2. Lu, Clara. H&M Supply Chain Strategy - Successful Retail Inventory Control. intuit quickbooks. [Online]
August 11, 2020. [Cited: April 23, 2021.] https://www.tradegecko.com/blog/inventory-
management/hm-retail-inventory-control.

3. Lu, Clara. 10 Retail Giants and How They Manage Their Inventory. wiser. [Online] December 15, 2014.
[Cited: April 23, 2021.] https://blog.wiser.com/10-retail-giants-manage-inventory/.

4. Grill-Goodman, Jamie. How H&M trying right its 43 billion inventory problem. News: Retail Info
System. [Online] April 4, 2018. [Cited: April 24, 2021.] https://risnews.com/how-hm-trying-right-its-43-
billion-inventory-problem.