Supply Chain Management

Final Report Submission

Fast Moving H&M

An Analysis of Supply Chain Management

Submitted By:

Group 8 - Section A

Name Roll No.

Raja P P40035
Rashi Shah P40036
Vijay S P40052
Rajat Roshan P40142
Vipin Yadav P40161
Parth Makwana P40190

TABLE OF CONTENTS
Contents
1. Introduction.........................................................................................................................................3
2. History and Evolution of H&M supply chain........................................................................................4
3. Agents in H&M supply chain................................................................................................................5
4. Seven Principles of Supply Chain Management...................................................................................6
5. Process View........................................................................................................................................8
6. Supply chain Macro process................................................................................................................9
7. Supply chain Surplus............................................................................................................................9
8. Supply Chain Efficiency – Logistic Drivers..........................................................................................10
9. Planning for Uncertainties.................................................................................................................11
10. Business 4.0 at H&M..........................................................................................................................11
11. Supply chain Framework - SCOR Model.............................................................................................13
12. AAA supply chain...............................................................................................................................14
13. H&M Strategy....................................................................................................................................15
14. Supply chain coordination & its effect on performance....................................................................16
15. Analysis of H&M supply chain management.....................................................................................17
16. Omni Channel retailing......................................................................................................................19
17. Benchmarking the Supply chain operations with the Leading player................................................20
18. Recommendations.............................................................................................................................22
19. Conclusion.........................................................................................................................................22
20. References.........................................................................................................................................23

1. Introduction
H&M is world’s second largest clothing retailer. It has large worldwide market coverage with
more than 4900 stores in 96 countries. Its massive annual revenues make one wonder about how
one clothing retailer can perform so efficiently and consistently well. This wouldn’t be possible
their efficient Supply chain. The organization’s reliance on efficient and integrated systems for
retail inventory management in the major components of its supply chain. H&M strongly
believes that “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’s core operation relies on its designers, creative directors, and pattern makers to stay on
top of the latest trends, it also uses the services of fashion trend forecast companies such
as Worth Global Styles Network (WGSN).

Different Stakeholders in H&M are:

 Customers
 Suppliers
 Industry Peers
 In House Designers
 Non-Governmental Organizations (NGOs)
 Inter-Governmental Organizations (IGOs)
 Policymakers
 Investors

2. History and Evolution of H&M supply chain

First Hennes store was opened in the year 1947 in the Swedish city of Vasteras. Since then H&M
has come a long way as far as making its products available to customer is concerned. Initially, it
depended on meeting the local requirements through locally procuring the raw material needed.
It relied on retail outlets to offer its products. Fast forward to 2000s, H&M expanded in
American market by coming up with flagship store in New York.

It also expanded through online sales in European market and reached far east in Shanghai and
Hongkong in 2007. In 2011, it also expanded in southern hemisphere, and had its stores Europe,
North America, Asia, the Middle East, Africa, South America, and Australia.

Talking about the backward integration of the sourcing the raw material needed, H&M has
invested significant amount of time in modifying its supply chain to make the product available
to its customers when the customer wants the products. It sources its raw materials from Asian
and European markets, and apply them to meet different production needs. Initially the supply
chain of the firm was vertically integrated, but has then been modified to dual supply chain
model to implement its lean and agile combination production system. Pre-expansion phase it
was able to meet its requirements by producing in European countries, specially Sweden. But
looking at the cost advantage and regular availability of raw materials, it has been producing
nearly 60% of its production in Asia. It relies on cheap sources of transportation to keep the cost
down, but has invested heavily on technologies making its forecast, inventory management and
designing of garments to perform best while meeting the customers’ needs. It has incorporated
AI to make products which fit the customers’ needs physically and collaborates to make best
designs available.

Thus, H&M has been successful in integrating its supply network through various locations and
been able to deliver the most desirable products to its customers at most desirable prices.

3. Agents in H&M supply chain

The below picture shows the different agents involved in the supply chain of H&M. Each agent
has different role to be played in their supply chain. These agents play a major role in the success
of the company by forming and efficient supply chain. Each agent role is explained below:

Suppliers

From Design to production, H&M has outsourced everything to its suppliers. Based on
forecasted demand, orders are given to these suppliers all around the globe mainly based in Asia
and Europe.

Warehouse and IT department

These products are then shipped and assembled at its two major warehouses based at hamburg,
Germany. These are the automated warehouses based on successful implementation of Big data
and Artificial intelligence.

Distribution Centre

It has centralized distribution system. It follows both centralized and decentralized inventory
management. It has incorporated tecnological integration in various processes and majorly to
ensure efficient usage of transportation facilities.

Stores/Retail Outlets

Around 2200 stores in 96 countries, receive the standard mass manufactured products from the
central warehouse through H&Ms efficient transportation.
 4. Seven Principles of Supply Chain Management

Principle 1: Segment customers based on the service needs of distinct groups and adapt the
supply chain to serve these segments profitably

H&M segmented the customers into two groups which includes Fashion sensitive and non-
fashion sensitive. The supply chain for both the products are designed uniquely. The fashion
sensitive clothes are produced through agile method of manufacturing in Europe whereas for the
other group, the products are manufactured through lean method in Asia.

Principle 2: Customize the logistics network to the service requirements and profitability of
customer segments.

H&K utilises its own logistics services and doesn’t rely upon outsider for its coordination. The
products are moved straightaway to the specific area of the country to make certain that it is
made accessible just in time.

Principle 3: Listen to market signals and align demand planning accordingly across the
supply chain, ensuring consistent forecasts and optimal resource allocation.

To forecast the current fashion trend and patterns, H&M utilizing the services of Worth Global
Styles Network (WGSN). H&M utilizes the fundamental focal point of QR which help them to
deal with their inventory easily and productively. A proper balance between the supply and
demand of a product can be maintained. Instead of focusing on orders received, H&M uses end
user demand data for forecasting demand.

Principle 4: Differentiate Products closer to the customer and speed conversion across the
supply chain Lean Production and Agile Production Process of Manufacturing

In order to get more benefits, H&M coordinates both lean and agile production process of
manufacturing. For the customers with huge volume and low variability, the company uses lean
way of production as it takes lower lead time. This lean production focuses on efficiency, cost
improvement and disposal of wastages and accounts for 60% of the total production. This
process expects to give higher consumer loyalty with higher adaptability and viability. Style
delicate clothes are produced through agile production process as it takes higher lead time. These
products are made accessible at short notification utilizing market information and virtual
enterprise also ensuring high quality and minimum cost of production.

Principle 5: Manage Sources of Supply Chain Strategically to Reduce the Total Cost of
owning materials and services.

H&K follows ‘Dual Integrated Supply Chain’ model where the same products has been produced
by the two company. Through this model, the company can accelerate the on-time delivery and
can able to increase the visibility. The company can also respond to fluctuations in the demand
by predicting the events and have competitive edge over other companies.

H&K classified the suppliers strategically into three different categories based on their
performance and the relationship with the company.

i. Platinum & Gold – nearly 60% of the company’s products are produced by suppliers
of this category. Suppliers who have high focus on sustainability factor and giving
best performance will be categorised under this category.
ii. Silver – the suppliers who worked for a long time for the company and have close
relationship with them will come under this category. The company also giving
assistance in terms of training for these suppliers to push them into Platinum and gold
category.
iii. Others – The new suppliers, the suppliers for whom the company gave test order and
those who are in the initial stages of production will come under this category.

Principle 6: Developing a supply chain-wide technology strategy that supports multiple

levels of decision making and gives a clear view of the flow of products, services, and
information

The major aspects of customer’s demand such as affordability, latest trend pattern, personalised
products and quick delivery are satisfied effectively through technological integration and
digitalisation in H&M.
 5. Process View

H&M manufactures 80% of its retail inventory in advance and introduces the remaining 20%
based on the most current market trends. The retail giant's ability to offer affordably priced
apparel is largely due to its strong supplier relationships and its manufacturing strategies to
reduce lead times.

The most admirable characteristic of H&M is its ability to collaborate efficiently with its
partners. Not having any factories of its own, it utilizes over 700 partner companies in more than
20 countries, relying on a network of external suppliers to manage its buying and production.
H&M purchases garments from around 750 suppliers, with 60% of production taking place in
Asia and the remainder mainly in Europe.

H&M fosters close and effective engagement with its partners by strategically locating 30
production oversight offices as a mediating function and to enable easier contact with the partner
companies on the latest fashion trends and the internal matters of the company. This helps to
ensure the goods are produced at the accurate quality and price and that the suppliers abide to the
company's code of conduct. These production offices play a significant role in checking and
testing sample garments.
 6. Supply chain Macro process

The company relies on IT integration between the central national office and the production
offices. Communication between the various departments takes place electronically, especially in
regards to design and product development. This is crucial especially because the fashion giant
does not own factories and does not secure fabrics in advance. Instead, its partners secure fabrics
on behalf of H&M. With an efficient IT communication infrastructure in place, the company
simply has to place an order with one of its partner companies in the region that already have the
necessary fabrics.

With these manufacturing operations in their supply chain, H&M has managed to reduce the
average lead time by 15-20% through their continuous developments in the buying process.
Flexibility and short lead times have reduced the risk of buying the wrong items and allowed
H&M stores to restock quickly with the best-selling products at affordable prices.

7. Supply chain Surplus

The main objective for any supply chain is to maximize the supply chain surplus. The supply
chain surplus is the net value generated of the value that the final product serves to the customer
and total costs incurred by supply chain to fulfil the customer’s request. The difference between
the value for the customer and the price the customer has to pay determines the consumer
surplus. So, it becomes the motive of the agents of the supply chain to maximize supply chain
surplus while consumer tries to maximize consumer surplus.

Supply Chain Surplus = Customer Value - Supply Chain Cost

To maximize the supply chain surplus all the agents must try to work in synchronization and
maximize overall customer value while minimizing supply chain cost. If any agent tries to
maximize personal profits while compromising the supply chain surplus, the supply chain
becomes highly unstable and is very likely to collapse.

Looking at the agents in the supply chain of H&M, we can easily identify following prominent
ones:

 More than 800 suppliers: Asian suppliers responsible for lean production and European
suppliers responsible for agile production. It is quite clear that H&M follows dual supply
chain to meet the quality demands and achieve flexibility to cater to volatile requirements
of fast-fashion industry.
 Transportation: H&M relies mainly on railways, waterways and roadways to transport
its products from manufacturing centres to main warehouse located in Hamburg,
Germany. From Hamburg the products are sent to Pozan, Poland and Boras, Sweden
distribution centre for quality checking. And then it is made available in the stores
depending upon demands forecasts.
 Inventory Management: H&M follows both centralized and decentralized inventory
management. In 2018, it reported to have an excess inventory of $4.3 billion. However, it
asserted that with technological advancement, it can manage its inventory in much
efficient manner. Thus, H&M has introduced automated warehousing in most of its
warehouses.
 8. Supply Chain Efficiency – Logistic Drivers

To determine the efficiency of H&M supply chain, let us have a look at certain parameters
showcasing that.

Accounts receivable turnover for H&M for past five years:

Year 2015 2016 2017 2018 2019

ART 30.8 25.93 20.95 22.42 25.38
2

While we can also look at the ART trend for its rival Zara, which is

Year 2015 2016 2017 2018 2019

AR 8.56 7.49 14.0 13.42 14.11
T 2
Source: https://www.wsj.com

We can clearly see that ART for H&M has been always higher than that of ZARA. However, the
ART for H&M is much higher than industry average of 10 for the year 2019.It show that firm is
efficient enough in recollecting its money owned by clients. And its importance further
magnifies by the fact that it operates in nearly 61 countries through 4600 plus outlets.

Inventory turnover ratio of H&M stand at 2.52 against the industry average of 3.55 and asset
turnover ratio stands at 1.32 against the industry average 2.15. Higher inventory turnover ratio
shows that firm has been successful in replenishing its inventory at a healthy rate given the
volume and scale it operates in. However, asset turnover ratio needs to improve and it can be
seen with huge assets firm has acquired over the year.

9. Planning for Uncertainties

H&M handles various uncertainties by thoroughly studying the end user demand data instead of
forecasting demand based on orders received. They always have buffer inventory ready
considering some uncertain events in mind. Buffer is determined by the unforeseen events in
market demand and services. H&M believes that if they share a company’s forecasting data
through all levels in Supply Chains from POS (Point of Sales), it will lead to a longer way in
reduction of uncertainty extensively

H&M uses QR as integrated focus to manage their inventory efficiently. They use data from their
Point of Sales for better forecasting results fulfilling the customer need and demand.

10. Business 4.0 at H&M

In 2018, H&M created its own Artificial Intelligence department with the goal of helping the
company with more sustainable business decision. They have more 270 people working to apply
AI in different segments of the company. H&M has integrated AI technologies and advanced
data analytics that helps them in Demand forecasting, less lead time, better inventory
management, improving connection with customers, adjusting themselves with the latest trends
in fashion industries to be at top of the game.

Some of the Technologies used in their supply chain are

 Blockchain

They are planning to test some product with block chain so that they can trace data from history
and also can make sure it will not go out. They are trying to integrate block chain with their
supply chain in order eliminate forgery and errors which can reduce lead time by making it as
advanced inventory management system.

 Big data and Artificial intelligence

AI technologies and Advanced data analytics helps H&M to Forecast the demand, reducing the
lead time, improve the connection with the customers, manage inventory in a better way and can
be updated to the market latest trend easily. Through AI and Big data, H&M also presented
Loyalty card data and analysed returns.

 Automated warehouses
Electronic item code as RFID has been used to identify the information and location of any
product which is placed in the warehouse. It also helps to find the previous 2-year stocks weekly
or even daily stock as well.

 Data Matrix

Supply chain data using data matrix helps to track the products.

 Coded couture app

Customer can use this app to find out the suitable dress that one needs to wear for any event.

 Home stylist

Customers are given the option of getting in touch with the stylist through Home stylist which is
the voice application app introduced first in the fashion industry by H&M.

Through these technologies, the cost of production, lead time has been reduced and able to know
the customer preferences clearly.

11. Supply chain Framework - SCOR Model

The supply chain operations reference model (SCOR) is a management tool used to address,
improve, and communicate supply chain management decisions within a company and with
suppliers and customers of a company. The model describes the business processes required to
satisfy a customer’s demands. It also helps to explain the processes along the entire supply chain
and provides a basis for how to improve those processes:

 Plan
Demand and supply planning and management are included in this first step. Elements include
balancing resources with requirements and determining communication along the entire chain.
The plan also includes determining business rules to improve and measure supply chain
efficiency. These business rules span inventory, transportation, assets, and regulatory
compliance, among others.

They prepare Code of conduct for their suppliers including following points:

Legal requirements, Systems Approach, Monitoring & Enforcement

 Source

H&M have prepared code of conduct for their suppliers and all the suppliers must agree to the
COC. H&M doesn’t own any factories. Products are commissioned from around 800 first tier
suppliers.

 Make

As we know H&M doesn’t manufacture any products, it has central buying office in Stockholm,
Sweden. This office communicates with all production offices. It leaves its production to first tier
suppliers.

 Deliver

Purchase departments are responsible for communicating and buying merchandise on behalf of
H&M. Each market having its own distribution centre.

 Return

This includes the CSR initiatives taken by H&M. It includes Better cotton initiative by H&M
reducing waste such as water and hazardous chemicals in its supply chain. Also, it ensures fair
wage network with its suppliers.

12. AAA supply chain

In the H&M supply chain process, the lean manufacturing is done by the Asian suppliers which
accounts 60% of the production and agile manufacturing is done by the European suppliers
which are responsible for the rest of the production.

Fostering Agility

H&M being a customer centric company and targets higher customer satisfaction, aims at being
both quick to respond as well as cost efficient. As apparel industry is fast moving, both supply
and demand fluctuate more rapidly which makes a company’s agility critical as followed by
H&M majorly in European markets.

As soon as the designers spot possible trends, they sketch them and order fabrics. This provides
H&M with a head start as compared to the competitors as fabrics have the largest lead time. This
agility comes after the reliable data is received from the stores for required trends in the markets.
Agility comes with every part of their supply chain and their super-efficient distribution centres.
H&M having one in Hamburg, Germany.

In addition to being agile, H&M also uses lean methodology of production by its Asian suppliers
resulting in quantity products by achieving lower costs and higher efficiency. This way special
factor of Lean + Agile gives H&M both price and quantity advantage.
 13.H&M Strategy

In the H&M supply chain, Asian suppliers account for 60% of the total production whereas the
rest of the production is done by the European suppliers. But Asian suppliers practice Lean
methodology whereas European Suppliers practice Agile methodology. Lean aims to provide
higher customer satisfaction with higher flexibility and effectiveness. Whereas in Agile
production fashion-sensitive apparels are made available in a very short duration of time
controlling the costs associated with its production.

So, we can therefore infer that the Asian Suppliers of H&M use the Level Strategy as the
production mostly depends on PUSH with lower levels of inventory and cost optimization.
Whereas European Suppliers use Chase Strategy so as to fulfill the demands of the customers, as
the production mostly depends upon the PULL with lower inventory levels. This is tough so as to
maintain quality products while controlling the overall cost of the production to satisfy customer
demand.

14. Supply chain coordination & its effect on performance

There are three main processes in the highly integrated supply chain of H&M and they are:

 Design
 Production
 Distribution

The company has a central purchasing department. Stock control management of H&M has been
very successful owing to the reason for its dependence on highly efficient and integrated systems
for retail management. The H&M design centre is composed of 100+ skilful, polished and
artistic designers designing their craft from H&M design centre in Stockholm, Sweden widely
known as “White room”. These designers together with merchandisers are responsible for
creating, planning and purchasing the collections from the buying office based in Stockholm,
Sweden. Two collections are launched by H&M every year, one in spring and other in fall every
year. Designers are thus responsible for accomplishing its two-fold design process using long
term planning (nearly 12 months) and real time design feedback details collected from customer
driven product strategy.

For production purposes, H&M doesn’t own any factory, rather outsources all its production to
Asia and Europe. Irrespective of that H&M has been successful in controlling the quality and
also rates its suppliers based on the quality of products. Merchandise with shorter lead time is
outsourced from Asia, which accounts for 60 percent of the products and fashion sensitive
products are outsourced from Europe. This accounts for 40 percent of the products and generally
has more lead time. This helps H&M in implementing its dual supply chain with agile and lean
production strategy. This also helps in economies of scale and flexible purchasing strategy.
For distribution purposes, H&M relies heavily on cost-efficient methods of distribution. It uses
waterways and railways for transportation and central and local distribution centres. They use a
daily restocking method, with huge offline and online retail outlets. Inventory is held in regional
replenishment centres while not having back up stocks. Inventory from regional replenishment
centres distributes directly to the stores.

Technology integration: Centralized IT systems have been employed by H&M to monitor

customer trends and respond to the market changes. Consequently, they get competitive
advantage by having 20 percent of their manufacturing in shorter lead time in addition to this
replenishment centres further contribute to this flexibility by monitoring every individual store’s
inventory level and then responding in real time.

Cost reduction: In the absence of factories, the company enjoys labour arbitrage and cheap raw
materials from Asia, and saves the cost for setting up the plants and running them. A well-oiled
quick response and inventory management process enables retailers to continuously get new
stock into the stores in small batches which prevents products stagnation and redundancy as
wells as liquidation promotion and markdowns leading to better profit margins and lesser
unnecessary overstock.

15. Analysis of H&M supply chain management

i. Products design ： First, H&M is a fashion follower, not a creator. On the one hand,
more than 100 designers travel to and from the major fashion kingdoms on a regular basis
to capture fashion trends and features, and on the other hand, according to the feedback
of store terminal customer demand to obtain customer demand fashion features, thus
forms the "push-pull" type design production model. This ensures lead time and provides
the product the customer wants to "hold" the customer.
Secondly, H&M began to promote product design innovation, and gradually turned to a
custom-made production model. H&M combined with a top-level design master to
integrate quality, fashion and low prices perfectly, and to launch low-price, high-quality
products that would drain the trend. Shape brand characteristics and competitiveness.
 ii. Procurement and production：H&M strive to balance efficiency and cost. In order to
achieve low cost, H&M places production and purchasing in low cost areas. First of all,
outsourcing production, outsourcing all production activities to 700 suppliers in 22
countries in Eurasia, 60 percent of them in Asia and 40 percent in Europe, have innovated
the dual-supply chain management model of two-speed parallel procurement--purchasing
basic products from Asia, in order to reduce costs as much as possible, purchase products
that require rapid response from close to sales, ensuring speed. And H&M regulates
suppliers and works only with suppliers on its list. Thresholds are set to ensure quality
and coordination adjust and cooperate with each other.
Second, procurement flexibility, 12 times a year procurement, rather than quarterly
procurement. In order to ensure the accuracy of the purchase, H&M set up an ICT
information exchange platform within the company to make the information of sales,
inventory, purchase plan and production plan completely transparent, and set up a
circular information feedback mechanism. Ensure accuracy, quick response and low cost
from fashion prediction-design-production-product feedback-sales phase to ensure
procurement readiness.

iii. Logistics and transportation ： First of all, logistics outsourcing, H&M outsourced all
logistics to DHL and Green Cargo, freight transport subcontract to professional transport
companies, using the ICT platform to track the logistics process management and
planning the best route to ensure the timely supply and deployment of products. At the
same time, control efficiency, cost and professionalism, to ensure the H&M low-price
and high-quality core competitiveness.
Secondly, different from the speed pursued by ZARA, H&M pays attention to cost
control in logistics and transportation, so the main modes of transportation are railway
and sea transportation.

iv. Production marketing：H&M pays attention to the customer experience, first of all, the
store is high-end built, the store display is close to the big brand, in order to satisfy the
customer's ultimate experience, and the store area can satisfy the display of thousands of
 products. Create a "one-stop" shopping environment. And different from other fast
fashion joining mode, all H&M stores are self-owned, leased and used to avoid the
drawback of the shortage of enterprise funds.
Secondly, H&M pays attention to celebrity effect in sales, and strictly controls the cost
inside, but the cost of publicity is higher, accounting for 3-4% of the sales volume, H&M
uses the star to shape the image of "low price high-end brand", and promotes the appeal
of brand.

16. Omni Channel retailing

In 2017 H&M started witnessing the downfall of some their competitors over stored apparel
retailers like American Apparel, Wet seal, etc., which triggered a change. So, they decided to
replace it annual target of increasing 10 to 15% of stores count with a strategy to increase sales
through omnichannel retailing i.e., Physical stores and online channels together. The aim is to
make an easy and convenient shopping experience for customers by integrating physical stores
with digital platforms. It aims to accelerate the combination of on-line channels, and
is exploitation RFID following technology in twenty markets.

Some of their key planks of their strategy are:

 Physical stores– continued development of recent ideas and improvement of the

shop portfolio
 Online stores – enhancements like quicker and additional versatile delivery choices and
payments.
 Continued integration of our physical stores and on-line stores to
boost the client expertise.
 Fast, efficient and flexible product flow
 Make the availability chain even quicker, additional versatile and additional economical.
 Initiatives at intervals advanced information analytics and AI.
 Continued investments in our school foundation as well as sturdy climbable platforms
that change quicker development of assorted client apps and new technologies.
  Digital enlargement into new markets.

17. Benchmarking the Supply chain operations with the Leading player

H&M's supply chain operations is assessed with ZARA, one of the major king players in the
Apparel industry.

  Basis ZARA H&M

1 Supply Chain
2 Production Facility
3 Mode of Transport
Inventory
4 Management System
5 Lead time
6 Logistics
7 Focus
8 Market
Vertically Integrated
Dual Supply Chain
Supply Chain
Own Production facility Outsources to its suppliers
Fastest (Planes, trucks) Cheapest (Railways,
Own railway trucks waterways, Roadways)
Centralised and
Centralised decentralised
Lesser than 2 weeks 3 weeks or more
Third Party Logistics In house Logistics Provider-
Provider (3PL)- Inditex H&M International
Limited Transportation, Inc.
Creating value to the
customer Price of the Product
At crucial areas
worldwide 80% at the shopping malls

i. Supply chain
ZARA follows a vertically integrated supply chain. It deals its own supply chain by
completely running its entire supply chain. H&M follows a dual integrated supply
chain by having two sources of suppliers delivering the similar products for the
company.
ii. Production facility
Since ZARA has its own production facilities and has control over the supply chain, it
is exclusively answerable for its outcomes whereas in H&M it doesn't have any
 production facilities and outsources to its suppliers. There are high odds of deferral in
the production process for H&M.
iii. Mode of Transport
ZARA utilizes the quickest method of transportation like planes and trucks to get the
main mover advantage. ZARA even has own railway tracks. H&M utilizes the least
expensive method of transportation like Roadways, Waterways and Railways, in
order to reduce the cost on transport.
iv. Inventory Management System
ZARA utilizes Centralized Inventory Management System so as to guarantee the best
for the clients at any expense. The centralized system also helps in reducing the
operating cost and able to handle the issues related to product and the process
followed. H&M utilizes both Centralized and Decentralized Management System
which gives equivalent capacity to both the clients and the representatives.
v. Lead time
ZARA's lead time is less than 14 days which makes the product available by
manufacturing and delivering within 2 weeks. The supply chain of H&M is longer
than ZARA. H&M takes 3 weeks to get displayed on the store. This high lead time is
mainly due to the fact that suppliers need to ship the products to H&M's main
warehouse centre which is at Germany before reaching to distribution centres.
Because of the high lead time, H&M can lose its customers and not able to capture
the market share.
vi. Logistics
Third party logistics named "Inditex Limited" plays a vital role in making the
products available in the market in lesser than 48 hours. H&M utilises in house
logistics provider "H&M International Transportation, Inc." which is cost effective
yet requires more time to reach its customers.
vii. Focus
ZARA focuses on creating value to the customer whereas H&M mainly focus on the
price of the product. ZARA tries to give an experience to the customers while buying
by incorporating more current trend designs. But H&M focuses only on the product.
viii. Market
 ZARA has 2200 stores around the world which are majorly situated in the crucial
areas which pulls more customers, in particular the loyal customers whereas 80% of
the H&M stores are situated in the shopping malls which makes it hard to pull the
customers when compared to ZARA.

18.Recommendations

i. For reducing the lead time

The high lead time (3 weeks) is mainly due to the fact that the suppliers have to send their
products to central warehouse which is at Germany before reaching the distribution centres.
Instead, they should create local warehouses near the stores where high sales is happening and
make the suppliers to deliver their products directly to the local warehouses. This will help in
reducing the lead time and will create a Decentralized warehouse system.

ii. Store location

Instead of focusing only on the malls which restrict the competition to fashion retail outlets,
H&M needs to have more stores at prime locations in big cities to attract more customers
worldwide.

19.Conclusion

Thus, we have tried to link various topics from the chapters one to four with the supply of H&M
case. We could relate to many concepts in a real time case which helped us to understand the
class concepts more clearly and effectively. The recommendations have been given after
analysing the supply chain through various models and concepts.

20. References
http://ijariie.com/AdminUploadPdf/Fast_Moving_H_M__An_Analysis_Of_Supply_Chain_Manag
ement_ijariie10784.pdf

https://www.tradegecko.com/blog/inventory-management/hm-retail-inventory-control

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