H&M Supply Chain Essay

Hennes and Mauritz AB is a Swedish retail-clothing company, which has expanded enormously in the past years. H&M has grown from one single store in a small town in Sweden to a multinational ranked as the second largest global fashion retailer with its 3,600 stores in over 58 countries and $22 billion in annual sales (The World’s). This incredible story of success makes us wonder about their strategies and how they managed to get where they are today.

Retail super-giant Wal-Mart has fought its way to becoming the world's largest company. Wal-Mart’s legendary supply chain technology has allowed them to break the three-day barrier that some economists in the eighties felt that it was unbreakable. In other words, Wal-Mart is often able to replenish items on the Wal-Mart shelf in less than three days – not from the central warehouse to the shelf, but from the manufacturer to the shelf. With quick and reliable 2-day turn around, Wal-Mart is able to maintain lower levels of inventory and still meet customer demand. These lower inventory levels result in either a reduced floor plan with lower carrying costs and lower interest expense – or a greater diversity of products on the store shelves.

Westminster Company is a giant Global manufacturer of health products whose brand has been recognized by the world. As the company they have three different operations which produce and distribute different product lines. Their main strategy on which they are working and which is a major success for them is decentralized management. Now they are re-evaluating their traditional supply chain strategy because the company is getting too much pressure from their large domestic’s customers and global customers. Now the company has to study on

Global sourcing is a technique of strategic sourcing in the global strategy, which is an effective approach as a part of organization’s procurement section. The objective of global sourcing is to develop global efficiencies in the delivery of a product or service for the firms achieving a sustainable competitive advantage and this is an important weapon have been focused in the 21st Century. The well-known organization, Hennes and Mauritz (H&M) is one of the largest international fashion retail and production house with the great deal of businesses all over the world. In the today’s competitive market and

* Procurement: As it is the second Europe’s cloth retailer company, for the production H&M uses a lot of material and workers so its mains recourses are material, labour and energy. That is why small changes in prices can affect the company’s profit a lot, and the fact that it does not own any manufactories causes some problems in controlling the production’s prices. However, not owning the factories can be an advantage in some cases. Indeed, if a problem appears, H&M can easily change its suppliers. Moreover, due to its huge size, H&M can easily manipulate with its suppliers to have the best quality at the lowest production’s price.

Supply chain management is a practice that involves the planning, supervision, and implementation of strategies and controls to direct the movement of goods and services provided to customers. The intent of this essay is to incorporate a synopsis of existing literature and to provide the reader with a general understanding of how supply chain management correlates with the organizational design and structure of modern firms. The essay comprehensively reviews the components of supply chain management and their integration with functional areas within an organization. The information presented in this essay

The value delivery option is another component that supports the supply chain. Providing attention to the changes within consumer demands that will aid in rapid production of consumer products. In order to gain a larger view of the said component it is vital that the value-based method must be clearly understood. Based on the findings of (Feller, A., Shunk 2006).the ability to realign the structure of the supply chain, this process will allows the supply chain to sustain its effectiveness by adopting to changes in consumer necessities with merchandises of larger value. A diversified supply chain is constructed to match the overall components of the chain with customers need in mind. But if this construction of the supply chain doesn’t match the needs it will make nearly impossible for the organization to provide said products and services to the consumer.

One the main features of H&M is the rapidity of shifts in demand and respond to customers’ needs. In fact when necessities of customers change, in only three weeks H&M can create new items. A normal clothes company needs six months to create new collections or articles. That’s why H&M does many researches all the time to find out new tendencies or variations of styles, giving shoppers last tendencies clothes.

Effective supply chain management can provide an important competitive advantage for a business marketer, resulting in improved communication and involvement among members of the chain, increased motivation, and decreased costs. Tracking the movement of and demand for components used to manufacture a product across a variety of potential and actual suppliers, provides insight and the ability to respond instantly to shortages, surpluses, and changes in market conditions. It seeks to optimize production, decrease manufacturing time, minimize inventory, streamline order fulfillment, and reduce cost.

The H&M guarantees value for their low pricing. This strategy of low prices has made the company very successful in emerging markets, according to Jepeson (2014). From the research conducted H&M seems to be practicing a cost based pricing model. The two major constituents of the brand pricing is the high fashion and the lower cost. The company collaborates with renowned designers in order to offer innovative product design but manages to keep prices low through the manufacturing

‘Fashion industry is characterised by short product life cycles, volatile and unpredictable demand, tremendous product variety, long and inflexible supply processes and a complex supply chain.’

The business world today is a competitive one. All the companies are trying their best to get ahead in the game. Because that is how they will improve and be the best at what they do. To achieve this the companies have to constantly strive hard and try to be ahead of their competitors or at least in step with them. This is where value chain comes in. Value chain deals with adding value to your product so that the company might gain a competitive edge over their rivals.

Over the years, the competition landscape for most companies has shifted from the highest-quality, lowest priced product or best performing product to the ability to respond to market needs quickly and get the right product at the right time to the right customer. This has in turn forced organizations to compete with their supply chain. Understanding supply chain management and putting this knowledge into practice has become a mandate to improve supply chain relationships in the entire world.

It allows H&M to source their suppliers easily at a lower cost. In return, save some operational costs and improve its revenue.

The supply chain in a high-end store should be able to reach the balance between responsiveness and efficiency by maintaining customers demand stable even when the prices vary, keeping low inventory levels and exploiting economies of scale.