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National Institute of Fashion Technology


HYDERABAD
Master of Fashion Management (2013-15)

SUPPLY CHAIN MANAGEMENT & E-BUSINESS
ASSIGNMENT 1
REPORT ON
SUPPLY CHAIN PRACTICES
OF



"#$%&''() *+, "#$%&''() -.,
AKANSHA GUPTA (03) PROF. A SRINIVASA RAO
2

S

CONTENTS




1. COMPANY HISTORY H&M 4
PRODUCTS
CORPORATE RESPONSIBILITY
CORPORATE BENCHMARKS
2. SUPPLY CHAIN H&M 13
PROCESS
INFORMATION FLOW
FINANCE FLOW
PRODUCT FLOW
PUSH-PULL VIEW
3. REFERENCES




























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COMPANY HISTORY

History and Business

Erling Persson, a salesman from Vasteras, Sweden, established H&M. He visited to the US in 1947 and
was attracted by the concept of selling stylish garments products at low prices. Then following the same
concept he founded a store in Vasteras in 1947 for selling the clothes for women and named it Hennes!
(hers in Swedish). The low prices attracted the customers within a short time. Persson was confident
that, this concept would also work in other countries and based on this confidence company started to
venture outside of the country by opening a new store in Norway in 1964. Today this company is
operating its business in 37 countries with around 2000 stores and 74000 employees. A preview of this
successful journey can be stated as follows-

1947- The first store opens in Vasteras, Sweden, selling womens clothing. The store is called Hennes.

1952- Hennes opens in Stockholm.

1964- The first store outside Sweden opens in Norway.

1968- Founder Erling Persson buys the hunting and fishing equipment store, Mauritz Widforss. Sales of
men and childrens clothing begin. The name is changed to Hennes & Mauritz.

1974- H&M is listed on the Stockholm Stock Exchange.

1976- The first store outside Scandinavia opens in London, the UK.

1977- Impulse stores are launched. Sales of cosmetics begin.

1980s- Stores open in Germany and the Netherlands. H&M acquires the mail order company, Rowells.

1990s- Progress continues in Europe. Billboards using famous models complement adverts in
newspapers and magazines. In 1998 Internet sales begin.

2000- The first store to open in the US is on Fifth Avenue in New York. In the same year stores open in
Spain. In subsequent years, H&M opens in many new European markets.
S

2004- H&M initiates designer collaborations starting with Karl Lagerfeld. Further collaborations
include Stella McCartney, Viktor & Rolf, Madonna, Roberto Cavalli, Comme des Garons, Matthew
Williamson, Jimmy Choo and Sonia Rykiel.

2006- A major expansion of internet and catalogue sales begins with the Netherlands as the first market
outside Scandinavia. The first franchise stores are opened.

2007- The first Asian stores open in Hong Kong and Shanghai. In the same year, the new store concept,
COS Collection of Style, is launched. Internet and catalogue sales expand with the addition of
Germany and Austria.

2008- H&M opens in Tokyo, Japan. H&M acquires the fashion firm Fabric Scandinavian AB with
Weekday, Monki and Cheap Monday.

2009- The first store opens in Russia. H&M opens in Beijing and Lebanon gets its first franchise stores.
H&M Home is launched. Weekday and Monki open their first stores in Germany. Karl-Johan Persson
takes over as CEO.

2010- The first store opens in South Korea. Israel becomes a new franchise country. Internet and
catalogue sales expand further with the launch of internet sales in the UK.

2012- The first store opens in Mexico














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Business Concept of H&M

H&Ms business concept is Fashion and quality at the best price. Design and buying department of
H&M gathers the collections and makes sure to offer the latest fashion in the market. H&M can ensure
the best price in the market by- having few middlemen, buying large volumes, having a broad and in-
depth knowledge within every aspect of textile production, buying the right goods from the right
market, being cost-conscious at every stage and having efficient distribution. H&M is driven by some
strong values like- salesmanship, simplicity, constant improvements, cost-consciousness and
entrepreneurship. H&M considers the quality as the central issue all the way from the idea stage to the
ultimate consumer. The quality concept includes sufficient testing and ensuring that the goods are
manufactured in a good working condition and without the use of environmentally hazardous chemicals
or harmful substances. H&M is also controlling the quality standard of their suppliers by imposing the
code of conduct theory. H&Ms business growth concept is to increase the number of stores by 10-15
percent per year along with increasing the sales in the existing stores.

H&Ms business concept is to give the customer unbeatable value by offering fashion and quality at the
best price. To be sure they can offer the latest fashions they have a design and buying department that
creates their clothing collections.

To ensure the best price by:
having few middlemen
buying large volumes
having a broad, in-depth knowledge of design, fashion and textiles
buying the right products from the right market
being cost-conscious at every stage
having efficient distribution

H&M is driven by strong values such as simplicity, team spirit ,continuous improvement , cost-
consciousness and entrepreneurship. H&Ms own designers interpret fashion trends and create fashions
that are accessible to all. The stores are revitalised daily with new items.
The central issue is Quality, from the idea stage all the way to the end customer. The quality work
includes extensive testing, as well as ensuring that the goods are produced with the least possible
environmental impact and under good working conditions.
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H&M does not own any production factories. Production of goods is outsourced to independent
suppliers, primarily in Asia and Europe, through H&Ms local production offices. Nor does H&M own
any of its stores. Instead H&M rents store space from international and local landlords.

Product range:

H&M offers a broad and varied range that allows customers to find their own personal style. The
collections are created with H&Ms broad clientele in mind and the aim is to satisfy many different
tastes and requirements.
H&M is aimed at everyone with an interest in fashion. Customers should always be able to find clothes
and accessories at H&M for every occasion. The collections are extensive and new items come into the
stores every day.

WOMEN
The womens collections are intended for fashion-minded women of all ages. The extensive range
includes everything from modern basics to tailored classics, sportswear, maternity clothes and cutting-
edge fashion. Matching accessories, underwear and shoes complements the collections


MEN
The mens collections include everything from timeless tailored pieces to modern basics, leisurewear
and seasonal fashions that reflect the latest trends. Matching accessories, underwear and shoes are also
included in the mens collection.


CHILDREN
The childrens range is divided into various concepts:
0 18 months ,1.5 8 years and 9 14 years. The collections are intended to be as fashionable as they
are practical, durable, safe and comfortable.

DENIM
The jeans concept &denim includes everything from traditional five-pocket jeans to trendy fashion
jeans. Since 2007, a selection of denim models in organic cotton has been available.

COSMETICS
H&Ms cosmetics department provides a wide range of makeup, skin care and body care products. The
range is often updated with new colours, scents and products that reflect modern fashions. H&M does
not permit animal testing of its cosmetic products either during the production process or in finished
form. All suppliers must guarantee that their contents, packaging and labelling meet EU quality and
safety requirements.




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Corporate responsibility:

H&Ms business concept is to offer customers fashion and quality at the best price. At H&M, quality is
about more than making sure that products meet or exceed customers' expectations. It also means that
they have to be manufactured under good conditions and that customers must be satisfied with the
company. Taking responsibility for how operations affect people and the environment is also an
essential prerequisite for H&M's continued profitability and growth.

Some examples of how H&M act in a corporately responsible manner:

Supply chain working conditions

The choice of countries of manufacture places particularly high demands on H&M. They are aware of
the risk of human rights violations and non-compliance with local labour law and internationally agreed
labour standards. At the same time, they are convinced that there is an opportunity to contribute to
better working conditions for all the hundreds of thousands of people who make their products.

Code of Conduct

Since H&M do not have direct control over this production, they have drawn up guidelines for
suppliers, which together form a Code of Conduct.
This Code of Conduct is based on the UN Convention on the Rights of the Child and ILOs conventions
on working conditions and rights at work. It is there so that they can be sure that products are produced
under good working conditions.

The Code includes requirements concerning:
working environment
a ban on child labour
fire safety
working hours
wages
freedom of association




1u
Corporate Responsibility Benchmarks:


Better Cotton
Cotton continues to be a main focus for H&M. Because of the challenges theyve seen in connection to
cotton production H&M took a decision to initiate an active and long-term work on improvements.
They address the issue in several ways, but the two main areas are how they can seriously contribute to
a more sustainable cotton cultivation, and also to find a method that can operate at a large scale when it
comes to track cotton's origin, so that they can choose which markets they want to purchase from with
and which they want to avoid.

The first harvest of Better Cotton

H&Ms aim for all cotton used in our product range to come from sustainable sources by 2020 at latest,
and Better Cotton Initiative (BCI) is our main effort to achieve this goal. The very first cotton to meet
the Better Cotton criteria has just been harvested and will be available in our stores spring 2011.
Furthermore, Better Cotton is traceable. They have been involved with the BCI since its inception in
2004, and are an elected member of the organisations council. The BCI is a long-term initiative that
develops and promotes good farm practices allowing more cotton to be grown while reducing water and
chemical use. The system has established minimum environmental and social requirements for cotton
growing. H&M is one of the first companies to support BCI, for example by investing in training
farmers in Pakistan, India, Brazil and West Africa.

Traceability project

This fall they have just initiated a traceability project with an external service provider in Bangladesh
and China. The aim for this project is to find methods which can realistically be used routinely and on a
large scale to trace the origin of cotton. Their goal is to make it a natural part of our work.

It important to understand that when it comes to cotton from Uzbekistan this issue must also be
addressed on a political level. H&M has written several letters between 2007-2010, most recently on 22
June 2010, to the Swedish Minister of Trade, Ewa Bjrling, to urge the Swedish government to act upon
the issue of Uzbekistan. The Swedish Minister of Trade has confirmed that they have raised the issue
bilaterally within the EU.


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Cotton from Uzbekistan

H&M takes a clear stand against child labour, and does not accept that underage workers are used
anywhere in their supply chain including cotton cultivation. One of their concerns is the discovery of
forced child labour in cotton cultivation in Uzbekistan.
Although they do not have direct business relations with cotton producers, and the routes of global
cotton trade are often complex, they seek to avoid the use of Uzbek cotton where they can. In the same
instance, Uzbekistan is one of the largest cotton producers in the world and avoiding the use of cotton
from there is a serious challenge.
So far, they have taken the following steps to avoid Uzbek cotton in their products:


In the spring of 2008, they received confirmation from the around ten suppliers in Bangladesh
who have their own spinning mills and source their own raw cotton that they do not buy cotton
from Uzbekistan.
The majority of the cotton used in products made in Bangladesh originates from Uzbekistan.
Therefore, their current efforts focus on Bangladesh. They have begun requesting that all their
garment suppliers in Bangladesh declare the country of origin of the cotton, yarn and fabric used
for each H&M order.
They are investigating methods which can realistically be used routinely and on a large scale to
trace the origin of cotton, to be able to promote or avoid certain markets. This year, they will
initiate a pilot project with an external service provider.
They aim for all cotton in H&M's range to come from sustainable sources by 2020 at the latest.
They will never accept child or forced labour, and therefore, as long as the government of
Uzbekistan continues to compel children as workers in its cotton fields, Uzbek cotton will not be
an option for H&M or those involved in our supply chain.











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SUPPLY CHAIN






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Designing
0ntil the 198u's the company mostly bought piouucts fiom its agents in Asian countiies anu then
ie-solu them in its stoies. In 1987, the company stiiving to impiove its positioning employeu new
uesign uiiectoi !"#$"#%&" (") *%) +,-./ anu staiteu to builu a uesigneis team. The new iuea was
to uesign anu piouuce items that customeis weie uemanuing in the stoies.

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PR0B0CTI0N
L0uISTICS &
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NANAuENENT
INF0RNATI0N
TECBN0L0uY
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Touay, the heauquaiteis in Sweuen employ aiounu 1uu inteinal uesigneis anu coopeiate with
aiounu Su pattein uesigneis anu 1uu buyeis. Togethei, they cieate the company's collections,
consiueiing the thiee basic factois: fashion, quality anu piice. The basis foi each collection is
customei uemanus. Accoiuing to Naigaieta van uen Bosch
"01 0&2- &,, .,3450."&%* ,) " /")$%# ")* 01 0&2- &,, "(")&6$"#*%7 3"89% 0&2- ),& :-; <,: .") /"(%
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B&N uesigneis, aveiage ageu Su, come mostly fiom uiffeient Euiopean Countiies, but theie aie
also Ameiicans anu Afiicans. They aie iequiieu to "constantly obseive the tienus in the fashion
inuustiy, stieet fashion, college fashion, anu events, encountei uiffeient cultuies, tiavel, visit
exhibitions, flea maikets, anu films anu keep eye on television anu Inteinet.
Although theie aie two main collections eveiy yeai - the spiing anu the autumn one, B&N ielease
many sub-collections in eveiy season, so that each week customeis can finu something new in the
B&N stoies. Eveiy concept, like Women, Nen, Kius, Biviueu anu Benim has its own team of
uesigneis, buyeis, pattein makeis, assistants anu contiolleis. Theii common goal is to piouuce
gaiments accoiuing to consumei uemanus.
B&N builus up its iange by putting togethei a balanceu mix of mouein basics, cuiient fashions
anu high fashion within each concept. A numbei of uiffeient factois affect the final composition of
the iange. What solu well last season is combineu with the coming season's big tienus, colouis
anu mouels. The aim is that the iange shoulu ieflect what customeis want at all times.
Customei uemanu in uiffeient maikets anu in uiffeient stoies ueteimines the mix of the piouuct
iange. The size of the stoies, theii location anu whethei it is a city stoie oi a iegional stoie also
have a beaiing on how the piouuct iange is uistiibuteu.
Bigh fashion gaiments that aie piouuceu in limiteu quantities, foi example, will be solu only in
stoies in the big cities. Nouein basics - such as jackets, tops anu tiouseis in a iange of colouis anu
in the cuiient season's cut - aie oiueieu in laigei volumes anu uistiibuteu to moie stoies.
Concept teams finu the iight meichanuise mix, which have theii own team of uesigneis, buyeis,
assistants, pattein makeis, a section managei anu a contiollei. The numbei of people woiking on
the teams vaiies uepenuing on the concept. They aie all uniteu by theii common inteiest in
fashion anu tienus anu by theii unueistanuing of what customeis want. The teams piouuce the
iight mix of meichanuise foi each concept.
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Buying & production

H&M does not own any factories. Instead, clothes and other products are bought in from around 700
independent suppliers, primarily in Asia and Europe.
The buying department plans the range, but H&Ms production offices then deal with the practical
aspects. The production offices, where most of the employees are drawn from the local population, keep
in constant contact with the suppliers.
The production offices are responsible for placing the order with the right supplier and for the items
being produced at the right price, being of good quality and being delivered at the right time. They also
carry out checks to ensure that production takes place under good working conditions. Ensuring the
safety and quality of the items also takes place at the production offices and is the result of extensive
testing, including checking for shrinkage, twisting and colourfastness, as well as checking that the
chemical requirements have been met. A team of 500 people works together and built the range, putting
together the fabrics, garment types, colors and theme and glimpse at new seasons fashion.



The LEAD TIME can vary from a couple of weeks up to six months. It is important to know the right
time to order each item. A short lead time is not necessarily best, since the right lead time is always a
matter of getting the right balance between price, time and quality. For high-volume fashion basics and
childrens wear it is advantageous to place orders far in advance. Trendier garments in smaller volumes
1S
require considerably shorter lead times. H&M produce most of the garments outside Europe to achieve
the benefits of leanness. They buy fabric in advance as per the forecast in order to minimize the cost.

H&M purchases garments from around 750 suppliers: 60% of production takes place in Asia and the
remainder mainly in Europe. The production offices have a mediating function between the internal
buying department and external suppliers, ensuring that:

Buyers orders are placed with the right supplier,
The goods are produced at the right price and quality
The suppliers conform to the companys code of conduct as for working conditions.

Production offices also deal with sample garments and other checking and testing, which is a major
factor in reducing lead times. The decision of which supplier is the right one, is not only a matter of
cost-efficiency but also depends on other factors such as transport times, import quotas and quality
aspects. To minimise risk, buying is carried out on an on-going basis throughout the year.

In recent years, H&M has reduced the average lead time by 15-20% through developments in the
buying process. Flexibility and short lead times diminish the risk of buying the wrong items and allow
stores to restock quickly with the best selling products.
In technical terms, H&M operates with two main collections per year, one in spring and one in autumn.
Within each season, however, there are a number of sub-collections so that customers can always find
new goods in stores. The aim of the company is to find the optimal time (and supplier) to order each
item. In this context, quick is not always the best while trendier garments require very short lead
times, many fashion basics or childrens wear may be ordered well in advance. For goods which are
selling well, the company is able, on average, to get supplementary orders in a few weeks.

Focused on trade-off between price, time and quality

All manufacturing is outsourced to 700 suppliers

Local production offices look after suppliers and place orders as well as looking after quality
assurance

Lead times vary from 2-3 weeks for high fashion items to 6 months for more basic product


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Logistics & distribution

The right product has to arrive in the right place, at the right time and at the right cost. H&M ups the
stakes even further by always demanding the greenest possible transports. The final leg of a products
journey is the delivery to stores. H&M controls every part of the distribution process and currently
operates two major regional DCs in Poland (serving Poland, non-Nordic online and catalogue) and
Germany (serving Germany and Netherlands) as well as a further 15 DCs around the world, servicing
all its major markets. However, when entering new markets, H&M will either rely on existing facilities
in neighboring markets or an outsourcing partner. However, as soon as the sales justify it, H&M brings
distribution back in-house. Goods sent from producers in Asia are transported almost exclusively by
ocean. Within Europe, H&Ms ambition is 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.
The merchandise arrives at one of the distribution centers located in the different sales markets. After
unpacking and allocation the garments are distributed to the stores. These centers are in some cases
supporting the stores in a geographic region consisting of several sales countries. The individual stores
do not have backup stocks; they are replenished as required from central stockrooms. As soon as a
product is sold a request is sent for replenishment. Every day, the H&M stores receive new goods.
The keywords for H&M logistics are simplicity, reliability and transparency. Simplicity logistics must
not become too complicated. Reliability the fastest is not always the best. Instead H&M prioritizes the
most reliable and greenest method. Transparency information exchange between all links in the
logistical chain.


INF0RNATI0N FL0W & FINANCE FL0W
H&M is a large organization, where the flow of information has to be clear and accurate. In fact one of
the keywords that the company swears by is Transparency-information exchange between all links in
the logistical chain. In the company the flow of information is important for forecasting demand and
other improvises. Information, along with materials and money, must readily flow across the supply
chain to enable the planning, execution, and evaluation of key functions. H&M makes sure of that. The
accurate information flow of H&M makes its supply chain more successful. It is a crucial tool along the
C0ST0NER RETAILER WAREB00SE BEAB0FFICE S0PPLIERS
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entire supply chain. Individual stores are connected with the logistics and procurement departments and
the central warehouse. From central departments, it is possible to follow sales of individual items, thus
feeding an intelligent procuring system. The company relies on IT integration between the central office
and the production offices. Communication between departments takes place electronically, including
design and product development.







PRODUCT FLOW
S0PPLIERS BEAB0FFICE WAREB00SE RETAILER C0ST0NER
18

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The streams of material in H&Ms supply chain consists of both push and pull principles, demonstrated
In Figure 22. The material flow where products are produced to stock and not yet consolidated
flow where products are produced to stock and not yet consolidated to a certain customer. When the
customer receives his order the pull flow completes its destination. However as the customer has the
possibility to return products, the total material flow might not be over yet. If the customers sends his
or her items back they will start the reverse logistic process, creating a push flow back to the
distribution center
Though essentially H&M supply chain is based on the pull strategy from its customers. Point-of-
sale information is used by store managers while regarding issues such as ordering stock levels and
identifying individual trends within each store. The company designs each collection on the basis of
customer demand. They constantly observe the trends in the fashion industry, street fashion, college
fashion, and events, encounter different cultures, travel, visit exhibitions, flea markets, and films and
keep eye on television and Internet and then the highly in demand products are planned and executed.







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REFERENCES

www.hm.com/ie/customer-service/faq/about-hm-com
www.ecoconsultancy.com/ie/blog/11051-21-ways-online-retailers-can-improve-
customer-retention-rates
Foundations of Marketing- John Fahy and David Jobber
www.ebusiness-watch.org
www.forbes.com
Logistics and transport management- Leif Enarsson
www.hm.com/gb/corporateresponsibility_responsibility.html
www.webmagazine.com