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Innovative Supply Chain Practices at H&M

Hennes & Mauritz (H&M) AB, a pioneering apparel retailer based in Sweden is known for its cheap but chic fashion. While other retailers are struggling, H&M sees the economic slowdown as an opportunity to expand, enter new markets and to add new brands. In September 2008, H&M is all set to enter into Japan, known as one of the world's most competitive fashion markets. It will open a second store in Japan in November and a third one expected to be launched soon. In Japan, H&M is also entering into a design collaboration with designer Rei Kawakubo. The Japanese designer is the founder of well-established fashion brand Comme des Garçons. Last year, H&M entered in China. It now has presence in 30 countries and more than 1,600 stores.

Download Management Case Study on H&M in Japan (PDF File)

H&M's Business Model Advantage

H&M's core business strategy - to provide the fashion concept and quality at the best price - is paying off largely due to its innovative supply chain practices. H&M's average sale prices are lower than those of its competitors. This it achieves with its in-house designers (around 100) who work with buyers and centrally design the garments at Stockholm, Sweden. The production is outsourced mainly to independent suppliers (around 700 who in turn use subcontractors) in Asia and Europe. For high-demand products, manufacturing is carried out in Europe and in Asia in case of garments with longer lead time. In all, there are around 20 production units and more than 700,000 people involved in product manufacturing.

Central Warehouse and Distribution with constant replenishment

A central warehouse in Hamburg in Germany collects all apparel from various locations and distributes locally to various distribution centres across various countries wherever H&M has a presence. Based on the demand, the apparel are replenished constantly. The constant replenishment helps maintain novelty and attract repeat customers. To be continued...

Case Study Quotes

"Pretty much, Apple and Dell are the only ones in this industry making money. They make it by being Wal-Mart. We make it by innovation". - Steve Jobs, Apple