h&m.pdf

H&M SUPPLY CHAIN ANALYSIS

SUBMITTED BYUPASNA HANDA NAVNEET KAUR BRAR NEHA SINGLA

Contents FROM IDEA TO STORE: THE DESIGN PROCESS ................................................................................. 4 FROM IDEA TO STORE: PLANNING AND BUYING ............................................................................. 5 FROM IDEA TO STORE: PRODUCTION PROCESS .............................................................................. 6 FROM IDEA TO STORE: LOGISTICS LOGISTICS AND DISTRIBUTION DISTRIBUTION ................ ........ ................ ................ ................ ................ ................ ................ ............ .... 7 Efficien Efficientt flows ............................................ ..................................................................... ............................................... ................................................ ............................ .. 7 Green Green transpor transports ts ............................................ ...................................................................... ................................................ ............................................. ....................... 7 SUPPLY SUPPLY CHAIN ANA ANALYS LYSIS IS ............................................. ...................................................................... ............................................... ......................................... ................... 8 Buyers Buyers ............................................... ........................................................................ ............................................... ............................................... .................................... ........... 8 Merchand Merchandise isers rs ............................................... ......................................................................... ................................................ ............................................. ....................... 8 Audit Auditors................ ors......................................... ............................................... ................................................ ................................................... ....................................... .............. 8 Suppli Suppliers............ ers..................................... ............................................... ................................................ .................................................. .......................................... .................. 9 Second Second-tier -tier supplier supplierss ............................................... ........................................................................ ............................................... ..................................... ............... 9 Factor Factory y employ employees ees ............................................. ....................................................................... ................................................ ......................................... ................... 9 CONSCIOUS MATERIA MATERIALS LS FOR A MORE MORE SUSTAINABLE FASHION FASHION FUTURE..... ................ ........ ................. ................ ............ ..... 10 FASHION FASHION FOR FOR ALL .............................................. ....................................................................... ............................................... ................................................ .......................... 11 1)

Women Women .............................................. ....................................................................... ............................................... ................................................ .......................... 11

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Men Men ............................................... ........................................................................ ................................................ ................................................ ............................. .... 11

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Kids Kids ............................................ ...................................................................... ................................................ .............................................. ................................. ......... 12

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Divide Divided d ............................................... ........................................................................ ............................................... ................................................ .......................... 12

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Denim Denim ................................................ ......................................................................... ............................................... ................................................ .......................... 13

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Access Accessori ories es ............................................. ....................................................................... ................................................ ........................................... ..................... 13

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Cosmeti Cosmetics cs ............................................... ......................................................................... ................................................ ........................................... ..................... 13

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H&M Home ............................................ ...................................................................... ................................................ ........................................... ..................... 14

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Sport Sportswear swear ............................................. ....................................................................... ................................................ ........................................... ..................... 14

H&M SUPPLY SUPPLY CHAIN STRATEGY - SUCCESSFUL SUCCESSFUL RETAIL INVENTORY CONTROL ................ ........ ................. ................ ......... 15 Design Design & Producti Production.......................... on................................................... .................................................. ................................................... ................................ ...... 15 Manufact Manufactur uring ing ............................................... ......................................................................... ................................................ ........................................... ..................... 17 Technological Integration .................................................................................................... 17 H&M'S SECRET TO CHEAP, AFFORADABLE AFFORADABLE AND FASHIONABLE FASHIONABLE CLOTHING: OUTSOURCING ............ .. 18 Buying Buying and Producti Production: on: .............................................. ........................................................................ ................................................ ............................... ......... 18 Green Green supply supply chain:............................... chain:........................................................ .................................................. .................................................. ............................ ... 19 Distr Distributi ibution:.................. on:........................................... .................................................. ................................................ ................................................ ............................. .... 19

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Cost reduction: ............................................................................................................ 20

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Flexibility: .................................................................................................................... 20

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Specialization:.............................................................................................................. 20

INTRODUCTION H & M Hennes & Mauritz AB (H&M) is a Swedish multinational  clothing-retail company, known for its fast-fashion clothing for men, women, teenagers and children. The clothing retailer H&M was founded in 1947, but during the last decade the company has made it to the top with $20.3 billion yearly sales. Forbes now lists H&M 31 in its brand value Top 100, along with Apple and Coca-Cola. H&M was established in Västerås, Sweden in 1947 by Erling Persson.

FROM IDEA TO STORE: THE DESIGN PROCESS Fashion, quality and sustainability  –  are the core values of H&M’s  design process.

H&M’s design department employs 160 in-house designers   and 100 pattern makers , as well as several design assistants and print designers. Working from our Head Office in Stockholm, they create H&M’s wide -ranging and varied collections.

The team is large and diverse, representing different age groups and nationalities that draw inspiration from every corner of the globe and a wide variety of sources. From art, cinema, magazines and music to street fashion, trade shows and trend seminars. All these influences are then filtered into constantly updated collections full of inspiring fashion at unbeatable value for money. Men, women, teenagers and children should always find something just for them at H&M –  whatever their taste or style. The design process is about striking the right balance between fashion, quality and the best  price and it always involves sustainability awareness that means a strong consideration for  both people and the environment, all the way from the sketch boo k to the customer.

FROM IDEA TO STORE: PLANNING AND BUYING The right mix of modern basics, current fashion and the very latest trends.

H&M always has the best customer offering in every market, which means that each store has to stock the right pieces –  a varied range that inspires customers to both browse and shop. Each of their concept teams consists of designers, buyers, assistants, pattern makers, a section manager and a controller, who are together responsible for producing just the right mix of garments, accessories and other products. Team members are all knowledgeable when it comes to fashion and trends, and keep up to date with H&M customers and their interests. Flexible assortment planning ensures that each store’s selection feels updated, on trend and relevant to its customers every day of the year. Different factors determine the final composition of merchandise. Figures for past seasons are combined with analysis of upcoming trends, colours and fits.

Demographics and geography also influence the distribution of products: high-fashion garments produced in limited quantities are sold mainly in big cities while basics are ordered in larger volumes and more widely distributed.

FROM IDEA TO STORE: PRODUCTION PROCESS H&M doesn’t own any factories, instead we work with around 820 independent suppliers  –  who are close, long-term partners.

They work with long-term partners and invest significant resources in our sustainability work in the supply chain. H&M does not own any factories; their products are sourced from independent suppliers, mainly in Europe and Asia. These suppliers manufacture our products and generally source fabrics and other components needed. Customers must feel confident that everything they buy at H&M is designed, produced and distributed with the greatest consideration for people and the environment. They work closely with our long-term partners and invest significant resources in our sustainability work in the supply chain. They contribute to over a million jobs in the sourcing countries –  where we also work actively to promote lasting improvement of working conditions and environmental impacts. The H&M production offices located in our sourcing markets are the main point of contact for the local suppliers, handling timing and practical aspects of all orders. H&M has a team of around 80 people who audit working conditions at supplier factories against our Sustainability Commitment. The production offices also perform extensive safety and quality testing as well as ensuring chemical requirements are met.

Ordering each product at the optimal moment is an important part of finding the right balance  between price, time and quality. Lead times vary from a few weeks to six months , with high-volume products such as basics and children’s wear ordered far in advance while more trend -led garments in small quantities can be produced at considerably shorter notice.

FROM IDEA TO STORE: LOGISTICS AND DISTRIBUTION Efficient logistics   and greener transport  make sure the latest trends and the right basics are always available in stores –   at the best price and with minimum impact on the environment.

Efficient flows H&M is both importer and retailer, and they make careful choices regarding every transport link in the supply chain from factory to store. Efficient flows and cost-consciousness at every stage are crucial to our success. These factors ensure that the right goods end up in the right quantity for each store  –   and at the best price for customers. The greater part of shipments from the suppliers’ factories goes di rectly to logistic centres in their markets, which support stores in their geographic vicinity independently of national  borders. Further, stores do not have back up stocks, but are replenished as required from the distribution centres.

Around 90 percent of all transports are by rail or sea.

Green transports One of the challenges is to fulfil their requirements and keep up with the rapid pace of H&M’s growth while making sure our transports have the least possi ble impact on the environment. They therefore strive to:   

avoid air and road transports whenever possible work with environmentally friendly transport companies have more efficient logistics with as little impact as possible on the environment

In 2015, more than 90 percent of our goods were transported from suppliers to distribution centres via sea or rail.

SUPPLY CHAIN ANALYSIS The approach is to use their influence wherever possible to promote good practice and raise awareness, not only among our suppliers and their employees as well as others along our value chain. They believe that working together in partnership is the best way we can make a  positive difference.

Buyers Their buying office is based in Stockholm, Sweden. Here, the designers, pattern makers and  buyers, together with merchandisers in the production offices, create, plan and purchase the collections.

Merchandisers Based in one of the 21 production offices in Asia and Europe, merchandisers are the link  between H&M’s buying office and our suppliers. They identify which suppliers to place orders with.

Auditors Also based in the production offices, the sustainability teams –   consisting of more than 130  people  –  monitors suppliers’ compliance with our Sustainability Commi tment (previously Code of Conduct) through our Full Audit Program (FAP) and support progress with actions that go beyond monitoring. Since February 2016, all suppliers are required to sign our Sustainability Commitment, an updated version of our Code of Conduct, adapted to H & M’s way of working with sustainability today.

Suppliers All their first-tier suppliers sign their Sustainability Commitment before producing for H&M and then monitor their compliance with it. The aim for the suppliers is to increasingly take ownership for ensuring good working conditions and environmental performance. Since the launch of our Sustainability Commitment they work even more with promoting ownership amongst the suppliers, encouraging them to take responsibility of their own sustainability work. H & M supports them in a number of ways, including the provision of training and capacity  building. They also help them to develop and improve management systems that will avoid non-compliance on an ongoing basis. The primary focus is on our strategic suppliers, which are their best suppliers in terms of sustainability. A supplier may own different factories. In some cases, suppliers may also subcontract other factories for certain tasks. All factories in which production for H&M takes place, no matter if directly contracted or subcontracted must comply with our Sustainability Commitment  before entering a business relationship with H&M.

Second-tier suppliers These are the suppliers of H & M’s suppliers. They might include fabric or yarn manufacturers for example. In general, H&M has no direct relations with these companies. Accordingly, they have less direct influence. However, since 2015, they've integrated secondtier supplier factories involved in making at least 50% of our products into our sustainability assessment. They aim for 60% by 2016. They also work in various ways to contribute to improvements at this and other stages upstream in our value chain.

Factory employees Their supplier factories employ about 1.6 million people. They think that factory employees should know their rights and be able to claim them. As a buyer, they have a responsibility and an opportunity to contribute to better workplace conditions and to work to raise awareness of rights at work among both factory employees and managers.

CONSCIOUS MATERIALS FOR A MORE SUSTAINABLE FASHION FUTURE H & M wants to make conscious choices in fashion desirable and easily accessible for as many people as possible. The right choice should be an easy and attractive one. Piece by  piece this will reduce the impacts that fashion has on the planet. Cotton is the raw material we use the most. H & M’s   aim is for all cotton in our range to come from more sustainable sources by 2020. A better fashion future is closer than you think. One reason for that is our ongoing support of new materials and clothes-making techniques. They have made it easy for us to find the conscious fashion in H & M stores  –   all their Conscious garments have the green hang tag.            

Cotton Recycled wool Organic leather Organic linen Organic hemp Organic silk FSC Natural rubber Recycled polyester & polyamide Recycled plastic Lyocell Denimite Recycled glass

FASHION FOR ALL H&M caters for the hottest trends to the very best in basics. H&M’s design team creates sustainable fashion for all, always at the best price.

1) Women H&M’s fashion for women is the largest of the collections. It comprises everything from the latest must-haves to updated fashion classics. From casual daywear to amazing party dresses, via relaxed leisure separates, high performance sportswear and contemporary maternity apparel – it’s all here.

2) Men Men looking to create contemporary, flexible wardrobes should always find what they need at H&M. The collection offers smart suits and shirts for work and festive occasions, easy everyday favourites, sports clothing, shoes and accessories. The collection includes the latest trends, tailored classics and comfortable leisurewear.

3) Kids H&M Kids offers children everything from supercool jeans to pretty dresses, in sizes from  baby to 14 years. H&M children’s clothing should be fashionable and comfortable and is always carefully tested to ensure it meets strict requirements for quality, function, safety and sustainability. Kids’ fashions must be soft on the skin, yet designed to withstand lively play and rigorous washing.

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4) Divided Fashion-conscious young men and women flock to H&M for up-to-the minute, functional clothing and accessories at Divided, covering the spectrum from relaxed basics with sporty influences to eye-catching party outfits that will please fashionistas of every age.

5) Denim Denim is everywhere on the fashion scene and is always part of the H&M fashion picture. Both denim trends and ever-popular classics are available in a variety of colours, designs and washes, along with updated shirts, jackets, dresses, skirts and shorts –  all in denim.

6) Accessories H&M offers diverse fashion to express individual and personal style. Customers can complete their fashion look with perfectly matched accessories –  from scarves, belts, hats and  jewellery to fashion footwear and bags for women, men, teenagers and children.

7) Cosmetics Make-up and skincare are often essential in expressing one’s personal style, and H&M  provides everything required for the season’s new looks. H&M’s cosmetics are never tested on animals, and all of H&M’s products fulfil at least the minimum requirements stipulated by the laws and regulations in H&M’s sales markets.

8) H&M Home H&M Home provides fashion for every room in the house. The collection offers towels, bed linen, curtains and other home textiles in trendy colours and prints, as well as home decor items in glass, metal and wood.

9) Sportswear At the beginning of 2014, H&M launched a new, updated and extended sports concept available for women, men and children. It will be a broad range of sportswear and accessories in specially developed functional materials. H&M is also proud to be dressing the Swedish teams for the Winter Olympics and Paralympics in Sochi 2014, and the Summer Olympics and Paralympics in Rio de Janeiro 2016. The athletes will also be giving their input into the new expanded sports collection, which means customers get the possibility to buy clothes and accessories tried and tested by world-class athletes, at affordable prices.

H&M SUPPLY CHAIN STRATEGY - SUCCESSFUL RETAIL INVENTORY CONTROL Fashion isn't just all about dressing up and H&M's supply chain procedures are a testament to that. Globally recognised for being a successful and expansive retail giant   in terms of market and financial prosperity , H&M's supply chain strategy is a continuous search for promising markets, cost-efficiency   in production of goods, and reduction in lead times for their retail inventory. H&M, which ranks number three on Gartner's Supply Chain Top 15 , is the world's second-largest clothing retailer . This is certainly no easy feat for a company that has 950 stores in 19 countries, and raked in a whopping turnover of 14.6 billion Euros in 2013. With such staggering figures, one can only wonder how the retail giant manages to successfully stay afloat and ensure adequate stock control for its fleet of stores. The organisation's reliance on 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 and a well -earned placing in the Gartner list.

Design & Production H&M is famous for offering chic, trendy styles with rapid turnarounds - an epitome of the widely acknowledged and appropriately named phenomenon that is 'fast fashion' . However, Van den Bosch, H&M's fashion oracle and head designer for the last 20 years, believes that the frivolous term does not do justice to the complex design process that is heralded by her team of 100 designers who meticulously curate and coordinate each collection more than a year in advance! This mammoth feat of designing and producing collections season after season is achieved via H&M's two-fold design process . It involves not only long-term planning of collections,  but also a real-time design response that stems from a customer-driven production strategy .

"The design team is very important to us and all our designers are very well-educated ," says Bosch. What comprises of this fashionable A-team you ask? Well, its designers come from all over the globe; From Holland, South Africa to Japan. The entire team works from H&M's design center in Stockholm, popularly known as the "white room". It does not stop there however. The team works closely with a mind-boggling number of services to produce its range of apparel - 60 pattern makers, 700 suppliers and 20 worldwide production centers to be exact.

Indeed, the production rate of H&M's retail inventory is elevated by its heavy dependence on outsourcing from design to production. Although 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). As a fast-moving retailer, it takes on an innovative direction in determining consumer interests through both traditional analysis and experimental augmented-reality technologies. With customer-driven reports of future trends in hand, H&M creates collections that strike a good balance between latest trends and the basics. Street fashion, haute couture, trends from the '50s and clean lines from the '60s are examples of a few recent avenues of inspiration for the H&M team as well. " We get inspiration from everywhere, but the most important thing is to make it your own way ," says Van den Bosch. However, while the brand is international in its persona, it certainly holds the Scandinavian trait of being democratic and  practical. And democratic it is in terms of price tags. With H&M's range of baby-doll dresses, printed silk blouses with fashionable leggings, and drainpipe jeans available at uniform, egalitarian  prices. What's behind the brand's economical prices? That's where its manufacturing game  plan comes in.

Manufacturing 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 utilises 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.

Technological Integration 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 bestselling products at affordable prices.

H&M'S SECRET TO CHEAP, AFFORADABLE AND FASHIONABLE CLOTHING: OUTSOURCING H&M opened its first store in Vasteras, Sweden  in the year 1947. Today H&M has expanded to over 3300 stores in 54 countries   and has a pool of over 116,000 employees. H&M offers clothes, accessories to women, men, teenagers and children. This is made  possible by a design and purchasing department which manufactures all the clothes. New clothes and accessories arrive to the stores every day and H&M is capable of moving apparels from design to hanger in mere 20 days.

Map showing H&M's global presence

Buying and Production: H&M does not own any of their factories ; it outsources all its production. Despite this, H&M maintains good control over their outsourced production phases. H&M has 22  production offices in Asia, Europe Africa and Central America. H&M purchases garments from over 800 suppliers and 60% of production takes place in Asia   and the remainder in Europe. H&M has 22 productio n offices in Asia, Europe Africa and Central America.

The role of these production offices: 

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Ensure that the products have the right price, good quality and they are manufactured under the right conditions. Conduct checking and testing which plays a role in reducing Lead Times. Minimize risk by buying raw -materials on an ongoing basis throughout the year. Apart from this, auditors regularly inspect work conditions and monitor environmental effects of manufacturing activities.

To offer the consumers high fashion and quality at the best price, H&M works with few middlemen. The company buys right items in large volume from the right markets. The firm

has a well-established and efficient distribution channel and relies heavily on its IT system to work efficiently.

Clothing Industry Supply chain

Green supply chain: Logistics is challenging for every fashion industry and H&M places a big emphasis on the green transportation. Goods sent from producers in Asia are transported almost exclusively  by ocean. Within Europe, H&M strives to increase the share of movements by rail over road. More than 90 percent of all transports are done via ocean, rail or road. Air is used only in exceptional cases when faster deliveries are required.

Distribution: Apparels arrive at one of the several distributions channels located in different sales markets. After unpacking and allocating, the garments are sent to the stores. These centres are in some cases supporting the stores in a geographic region consisting of several sales countries. The individual stores do not have backup stocks and they are replenished as required from central stockrooms as and when need arises. As soon as a product is sold a request is sent for replenishment.

Drivers for Outsourcing: 

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Cost reduction: The Company is saving money on initial start-up costs of plant, equipment and building. H&M enjoys advantage of labor arbitrage and cheap rawmaterials. Flexibility:   Since the fashion industry is ever changing, the company can modify  production patterns which will result in higher profit margins. Clothes that are have higher demand can be re-ordered whereas those that have lesser demand can have lower re-orders. Specialization: Through outsourcing activities H&M can focus more time and effort on designing as this is their core competency.