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Key facts:
H&M was established in Vsters, Sweden in 1947 by Erling Persson and
sells clothes and cosmetics around the world.
Some brief facts about H&M:
Organisation:
Corporate management is based at H&Ms head office in Stockholm.
Stockholm is also where the main departments for design and buying,
finance, accounts, expansion, interior design and display, advertising,
communications, IR, HR, logistics, security, IT and CSR and environment are
located.
H&M has 16 country offices that are responsible for the various departments
in each sales country. H&M also has around 16 production offices which take
care of contacts with the approximately 700 independent suppliers that H&M
works with.
Divided
H&Ms Divided department
offers fashion with a younger
look. The range includes
denim and street fashions for
all occasions, from everyday
looks to partywear,
complemented by matching
accessories and underwear.
&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 constantly updated with new colours, scents
and products that reflect contemporary 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.
good guide. The size of the stores, their location and whether it is a city store
or a regional store also have a bearing on how the product range is
distributed.
High fashion garments that are produced in limited quantities, for example,
will be sold only in stores in the big cities. Modern basics such as jackets,
tops and trousers in a range of colours and in the current seasons cut are
ordered in larger volumes and distributed to more stores.
Concept teams find the right merchandise mix, which have their own team of
designers, buyers, assistants, pattern makers, a section manager and a
controller. The number of people working on the teams varies depending on
the concept. They are all united by their common interest in fashion and
trends and by their understanding of what customers want. The teams
produce the right mix of merchandise for each concept.
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 the practical aspects are then
dealt with by H&Ms production offices. 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.
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 require
considerably shorter lead times.
Buying and production
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 ongoing 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.
Green logistics:
The right product has to arrive at the right place, at the right time and at the
right cost. Logistics is a challenge for every fashion company. In addition H&M
demands the greenest possible transportation, which is in line with the
ongoing ambitious work towards sustainability. One example is that the
airfreight volumes have been halved in just a few years. H&M monitors the
environmental performance of logistic service providers such as shipping lines
and road hauliers.
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 centres located in the
different sales markets. After unpacking and allocation the garments are
distributed 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; they are replenished as required
working environment
a ban on child labour
fire safety
working hours
wages
freedom of association
This case study is based on information in the public domain (collated and
edited by Stephen Kelly) and used the following sources:
www.ebusiness-watch.org
www.hm.com