Professional Documents
Culture Documents
HM Company
HM Company
H&M OPERATION
MANAGEMENT
Prepared by:
Lưu Trang Linh - 18071135
Trần Nguyễn Phương Linh - 18071143
Vũ Huyền Trang - 18071253
Lê Khánh Linh - 18071134
Instructors:
PhD. Trần Công Thành
INTRODUCTION
This report was to fulfill the requirement of the subject
INS2023.
This study focuses on a multinational retail company, Hennes
and Mauritz (H&M), which examines H&M's in-store retailing
service to determine if it is performing well. However, certain
problems are discovered during the process, which the
organization may address using the operation management
system. We analyze how the organization works to achieve
success in the market, related to operation strategy, quality
control, facility layout, inventory management, and
forecasting, by conducting research and applying the
knowledge of operation management given in this topic. A
short background of the company, what they do and their
market position, their products and services to give us a
better understanding of the following analysis. On the other
hand, some analysis-based recommendations to maintain and
strengthen their market position are made when conducting
research.
TABLE OF
CONTENT
01
COMPANY
About H&M
Vission
OVERVIEW Mission
02
OPERATION:
IN-STORE
RETAILING
OPERATION
03
OBJECTIVE OF
3.1.Objective of service quality
3.2.Objective of cost
OPERATION
MANAGEMENT
04
MANAGEMENT
4.1.Supply Chain Management
4.2.Total Quality Management
4.3.Inventory
FUNCTION 4.4. Forecasting
05
CONCLUSION
H&M, which stands for Hennes & Mauritz, is a Swedish public limited company
known for fashion and quality at the best price in a sustainable way of clothing for
men, women, teenagers, and children. H&M and its associated companies operate in
73 countries with 4,414 stores around the world. It is the second-largest global
clothing retailer, just behind Spain-based Inditex (parent company of Zara). The
company has a significant online presence, with online shopping available in 51
countries.
Mision
H&M Foundation reaches beyond the H&M group's value chain and
complements. They offer the latest styles and inspiration for all
seasons, all styles from fashion pieces and unique designer
collaboration.
Vision
H&M’s vision is to lead the change towards a circular and renewable
fashion future industry while being a fair and equal company. Using
size and scale, they are working to catalyze systemic changes across
their operations and entire value chain. In this way, they can
continue to engage customers and provide more than fashion day
today.
02. Operation: In-store retailing operation
Input : Customer with demand and information.
Output : Customer with suitable products and feedback.
Transformation process
Support service
Stage 2: The dressing rooms are of good quality: a fan is provided
Support for each fitting room. In front of the dressing room‘s
service door has a signboard about the size, color, and material
to help customers pick the correct clothes quickly. They
should also have a friendly staff on hand to assist
customers with color, size, and material selections,...
In some circumstances, customers will ask for additional
services such as some advice related to products (form,
material, size, etc.) while some others want to try the
products on their own. However, preparation is needed
when the situation is needed.
Staff will be responsible for:
Introducing their products in detail so that
customers can choose the right product.
Advice about store promotions that can be beneficial
to customers.
Emphasize the features and benefits for customers
when buying and using the product.
Charging room
Stage 3:
The room is equipped with a lot of lights and a large
Changing
space for your comfort, a good reflector.
room
There will be a staff dedicated to the changing area to
assist customers in the process of trying on products
The staff will assist customers in removing chips from
the shirt to ensure that they will feel most comfortable
before entering the test room.
If customers are not satisfied after trying, they will pay it
back at the fitting room instead of taking it out
For customers who agree to buy trial products, we will
support getting new products
Payment
Stage 4: Perform product payment process, save customer
Payment information.
Customers can choose to pay directly or pay via bank
card, credit card,...
H&M's main goal is to have "fashion and quality at the best price in a sustainable
way." A broad variety of products are designed to meet the needs of consumers, as
well as the societal fashion trend, with good quality at a fair price. To achieve the
organizational target of versatility, the company's in-store retailing operation is
structured to be as efficient as possible, with a focus on competitive goals in quality
of service, quality of product, and especially, expense.
Several problems were discovered during the retailing operation and needed to be
resolved. As a result, developing an organizational plan to address these issues is
critical to its long-term development. Price, service quality, the bull-whip effect, and
social change are all problems that can be tackled.
If H&M does not deliver on its commitments, it may fail to succeed in the long run.
H&M 's primary objective is satisfying customers by maximizing the quality service
and making more money by reducing costs, getting more profits. It is fair to assume
that a businessman understands the importance of customer loyalty when he
realizes that it is directly linked to his profit margins. Customer satisfaction is critical
for any business's survival and development, as has been learned the hard way. As a
result, to achieve the highest standards of customer satisfaction, we have conducted
extensive research on the nature of Quality Management Systems, as well as their
different tools and methodologies
3.1. Objective of service quality:
The second objective of this operation is about the cost. H&M always wants to
offer customers high-quality clothes at a premium price. Due to the business
strategy of the retailing focus on cost leadership to compete with the
competition such as GAP and Zara. As compared to both of these brands, H&M
products are priced relatively lower as a part of its marketing mix pricing
strategy. At the time this study is conducted, compared to Zara, H&M offers more
variety of products. On average H&M products are priced at $25 whereas those of
Zara are $45. High quality and considerably lower prices attract the youth and
hence lead to an increase in sales for the company.
This is due to lower manufacturing and transportation costs by H&M (The main
focus is given on cost minimization). This can make H&M more competitive than
the other competitors. Thus the task of Operation Management to reduce the
cost so that customers will have more value. There are several management
approaches to get the price down. Strategies could be considered in Inventory
management, Supply chain management,... Specifically, the cost of facility and
Supply chain, because the cost will influence the decision on prices, reducing the
cost, makes the profits of business increase.
Therefore, H&M should focus on expansion to improve profitability: H&M has
been focusing constantly on expanding its store base across the globe. The
company added 400 new stores in FY 2016. Such expansion plans can help H&M
improve its bottom-line as well as the top-line. Located in low labor cost places
will be a huge opportunity for H&M to save retail space cost. H&M’s use of budget
controllers and centralized product distribution through terminals.
H&M should make a concerted attempt to save costs by removing unnecessary
expenses. They concentrate on outsourcing non-core operations and
outsourcing production processes to eliminate intermediaries. This practice
takes advantage of their expertise in apparel design and retail experience to
satisfy the needs and expectations of the target market. Furthermore, H&M
workers are taught to multi-task to increase their productivity and reduce the
amount of money the company would spend on salaries for a large number of
staff. Low cost, on the other hand, does not necessarily mean low quality.
04.
Management
functions
4.1. Supply chain management
H&M buys the raw materials primarily from its supply chain. H&M buys the range
planning department, then handles all the practical aspects with H&M's
manufacturing agency.
At the Production Facility, H&M employees are largely sourced from the local people,
giving access to raw materials as they regularly communicate with suppliers. Thus,
the agency ensures the quality of raw materials as well as on-time delivery
Vietnamese textile and apparel businesses have also been manufacturing for H&M
since 2011. This brand is working with about 30 suppliers with more than 40
Vietnamese factories.
Producer
H&M's differentiation and also a strong point is the management and maintenance of
relationships with suppliers. Does not own any factories, outsourcing more than 700
companies in 20 countries.
Procurement of raw materials from more than 750 different suppliers, with 60% of
production capacity located in Asia and the rest in Europe. H&M pre-produces more
than 80% of the stock and leaves the remaining 20% of capacity in response to
market demand and trends. H&M competes on price with other competitors by
having a good relationship with its supplier network.
To maintain the effectiveness of its outsourcing network, H&M has dozens of
supervisors and coordinators around the world - acting as a bridge between H&M
and the manufacturing plant, ensuring goods are returned with the highest quality
and the most reasonable price.
Market research and product design
H&M's core activity lies in designing to keep up with the latest fashion trends, with
the rest, from manufacturing to distribution, H&M employs a network of outsourced
companies, including even predicting fashion trends through Worth Global Styles
Network (WGSN).
The fact that H&M effectively combined its designers with the trend prediction
system has made an important highlight in the fashion company's overarching
strategy and grasping world market trends.
H&M's store’s network covers the world with more than 4,351 retail outlets across 64
countries. Because there are many different manufacturing plants, H&M does not
ship goods directly to each store but instead uses a network of distribution centers
around the world. Each distribution center will process the order and ship it to the
stores in one or more of the countries where it is responsible. distribution. Every
time a product is paid for, the distribution center immediately receives the data and
schedules real-time shipping.
Applying a sophisticated data management network can reduce production time by
15-20%.
Recommendations for the Supply chain:
Product: Since H&M is a fast-fashion company, their products are usually in volume
production. This helps them protect the brand and loyal customers. This is also a
disadvantage because they cannot provide products for the needs of their
customers. Therefore, in some cases, customers feel dissatisfied because they cannot
buy their favorite products and they do not come in sufficient sizes and colors.
Environment: Because H&M's store in Vietnam is not too large, just small stalls in the
shopping center, so the shopping space is limited. The gap between ranks is small,
making it difficult for customers to choose products. Besides, the product
arrangement is unclear, so it is easy to confuse customers with buying at the store.
The clothing and accessories section of the arrangement is still lacking in logic and
the sale stalls are messy.
Changing room: The fitting room at the store is quite small and the number of rooms
is not enough. The arrangement for the customer to try on clothes is not suitable, so
customers feel dissatisfied with trying the product on. Furthermore, on discount
days like Black Friday, the fitting room is very crowded.
Employees: Service attitude complaints are a frequent occurrence in the service
industry and so is H&M. Many people have complained about the service attitude of
the staff at H&M but the number of complaints is not too significant. This is easy to
see because many websites have rated the service attitude of employees at H&M
better than other brands.
Good quality
H&M's message and philosophy are “Fashion and quality at the best price” through
similar commercials in all markets. To make this conceivable H&M has a plan and
buying office, which makes all the dress assortments. New garments and frills show
up in H&M's stores consistently. H&M can move a piece of clothing from the plan to
the holder in only 20 days.
H&M focuses on exploring the overall market, for instance, H&M picks the provider
that best fits the creation cycle at a specific time.
H&M buys items ongoing during the year to best fit the items to the market and
H&M must find the right lead-time. H&M's buying relies upon what sells well and
what the market circumstance resembles. H&M's style year is separated into
spring/summer and fall/winter. Design that sells in high volumes is requested
around a half year ahead of time; nonetheless, the trendiest garments should arrive
at the stores inside only a couple of weeks
Service quality H&M does not possess any factories, it
reevaluates all creation. Nonetheless, H&M
retains rather high control of all the re-
appropriated creation stages. H&M has 22
production offices in Europe, Asia, Focal
America, and Africa. H&M arranges roughly 700
independent providers generally in Asia and
Europe. Each creation office has the duty to
ensure that the things bought have the correct
cost and great quality and that they are delivered
under the correct conditions and standards.
Competitive advantages
To be able to offer the consumers high fashion and quality at the best price, H&M
works with few middlemen. According to H&M, the firm buys the right items in large
volumes from the right markets. The firm has a deep knowledge of design, fashion,
and textiles and always tries to work with an economical mind. H&M has established
an efficient distribution channel. Lastly, the firm depends heavily on its IT system to
work as efficiently as possible. Also, one of H&M’s most valuable assets is the
corporate culture that promotes flexibility and adaptation.
Common in the EU clothing industry is to outsource lower value-added activities to
low-wage countries. Lower value-added activities are often labor- and capital-
intensive and material-consuming, for example, knitting and finishing. Due to the
Swedish home society and the demands from the firm’s founder, H&M turned to
work with independent foreign suppliers. These suppliers could answer and produce
more regular orders and lower price demands. To be worth working with these
suppliers it is not enough for them to offer a low price, the supplier must also be able
to meet the need for fashion, quality, quickness, and punctuality.
For H&M the core activities are to create fashion and quality at the best price. During
the interview, the IR responsible for the creation of fashion and quality at the best
price was stated as one of H&M’s main competitive advantages. First H&M achieves
that by working with more than 100 designers that are constantly working on
creating the latest fashion. Second H&M has more than 100 buyers that are
structuring the range planning. Finally, H&M has local production offices that are
handling the practical things such as being in contact with the local suppliers, buying
at the right price, and assuring that the item is produced and delivered at the right
time. According to the IR responsible at H&M, the pressure on short lead- times can
trigger increased prices and reduced quality. By using independent foreign suppliers
H&M can concentrate on the above activities that produce the most value for it and
outsource the rest.
H&M is active in 28 countries with 1,345 stores and a turnover of SEK 80,081 million.
The size of H&M is partly due to its establishment around the world and its high
profitability. The size of H&M is bringing strength to its bargain power and a huge
advantage when working with suppliers. Often H&M does not have to search for
potential suppliers instead the suppliers contact H&M. Therefore, the characteristic
size and the characteristic bargain power are Complementarities to H&M’s business
model. An increase in size will be followed by an increase in bargain power, in other
words doing more of one characteristic increases the desire to do more of the other
characteristic.
By using independent foreign suppliers and producing internationally firms can
lower their costs and prices. Having production in low-wage labor countries reduces
labor costs immensely. Most of the jobs in the clothing industry are rather low-
skilled therefore it is easy to teach new workers in developing countries how to
perform the work.
The whole world is looking at fast fashion as companies in this market are continuing
to grow. For competitor Zara, design and reacting to consumer trends and design
trends are most important. For Uniqlo, technology and getting customer preferences
right is most important due to longer lead times. H&M is thought to be in the middle,
focused on researching and predicting customer trends with a partly flexible
operating system. But, even if each company has its focus, they all focus on customer
preferences as a core competitive advantage.
4.3 Inventory
Fashion giants, diverse models, and poses challenges for brands are building a
product supply chain effectively and constantly bringing new products to market.
Ensure there are sufficient goods in the store for customers to test and do not
overproduce, leading to inventory backlog.
Inventories of H&M stores in Vietnam increased sharply due to the impact of the 19
covid pandemic which limited the contact, exchange, and purchase between people.
Moreover, on the H&M Vietnam fan page, a series of Vietnamese users called for a
boycott of the Swedish fashion company because of "changing the online map" at the
request of China, recognizing Hoang Sa and Truong Sa as belonging to China. This
has caused H&M stores in Vietnam to reduce the number of large customers, and the
number of inventories has skyrocketed.
Not so surprisingly, the store has solved the inventory problems by using a
discount strategy. It’s hard to resist a good deal. The easiest thing to handle your
inventory due to overproduction or out of fashion is to sell them at a lower price
than before. Most of the mid-range fashion brands will tend to reduce prices to
consume products
Buying small batches at the beginning of the season and relying on the
customer's preference to determine the production quantity of an item will help
the firm reduce inventory that is difficult to sell.
During the epidemic of covid19, H&M should develop an online sales system to
reduce the risk of epidemic diseases and still sell goods. To succeed in business
online, the store needs a team of professional staff in customer care, consulting
the design, size, and appropriate exchange and payment policies. Closing,
packing, and delivering the goods to the customer needs to be completed
accurately and ensure the quality of the goods.
They should recycle or resell un-consumable items that are left in stock. In some
cases, they may also use outside companies that specialize in selling unsold
goods to solve the problem. Many brands also use apparel donation initiatives to
NGOs and social enterprises. This contributes to helping H&M regain the
confidence of Vietnamese consumers.
4.4 Forcasting
Forecasting predictive action of something in the future, based on past
experience and data to make decisions. Forecasting methods can be
classified into two groups: qualitative and quantitative. Qualitative
methods are based on human judgment, opinions, and non -
mathematical. On the other hand, quantitative methods based on
mathematics make use of historical data. H&M is a fashion clothing
company, where there are constant changes in trends and changing
customer needs. To maintain business operations and governance, H&M
has applied forecasting methods. In this case, H&M should use
quantitative forecasting methods based on their historical datasets.
There are a bunch of techniques in quantitative forecasting methods
which are the trend series model, Seasonality time series model,
classification, and clustering model. In this case, we will discuss all the
techniques that we mentioned and give recommendations for H&M. The
first forecasting methodology is the trend time series model. H&M can
see the trend line of pattern increasing or decreasing for a period of
time. The pattern, in this case, can be the sale, product categories,
product items, or the number of customers. H&M store managers can
gain data from their invoices as the input of the forecasting model. For
example, H&M wants to see the trend line of new dress items, they have
to store the number of items sold each day (each hour). Then the trend
line tends to increase or decrease based on the new items sold increase
or decrease. It is actually beneficial for managers to make decisions
about whether to produce more items or reduce plan production.
Another example is the trend line of customers. Managers want to know
the number of customers increases or decreases from Monday to
Sunday.
Demand forecasting is one of the biggest challenges for retailers, wholesalers and
manufacturers in any industry, and this topic has received a great deal of attention
from both researchers and practitioners. The question is whether the forecasting
approaches are applicable and useful within the fashion industry. Traditional
forecasting methods, such as exponential smoothing, are designed for smooth, high‐
volume demand and don’t work well with intermittent, erratic or lumpy demand.
There are many papers that propose the use of statistical methods in order to
forecast demand. This first group includes the extension of standard methods and
variants of the Poisson model, a model based on binomial distribution, as well as
Croston’s model and its variants and bootstrap methods. Many authors have
compared models and the general consensus is that performance should vary
significantly according to the level of attributes. Particularly, if the demand pattern
has a high level of lumpiness or erractiness, which is likely in fashion demand and
often causes poor performance with statistical methods.
Conclusion
H&M operations performance has been successful in terms of offering good quality
products at low cost and up to new fashion trends. . This detailed case study will
provide complete knowledge of Operation management and its criteria. This case
study about organizations of H&M. It provides the basic information of these
organizations and how the operation strategy and supply chain is performing
through CRM techniques. Achieving the quality, by carrying out the forecasting
analysis and Innovation and improvement. Any organization has to be aware of these
criteria to improve and maintain consistency and increase revenues and decrease the
cost
References
H&M
Available at: https://www.hm.com/entrance.ahtml?oguri=%2F
HM Group
Available at: https://hmgroup.com/about-us
Wikipedia H&M
Available at: https://en.wikipedia.org/wiki/H%26M
H&M: How Fast Fashion Translates into Low Prices and Success
Available at: https://digital.hbs.edu/platform-rctom/submission/hm-how-fast-
fashion-translates-into-low-prices-and-success/
H&M
Available at: https://www.coursehero.com/tutors-problems/Business-
Other/28023169-Part-1-Resources-and-Capabilities-Identify-HMs-most-significant-
res/
Amada Phuong. (2018) Industry Analysts Are Concerned About H&M’s Future Available
at: https://www.styledemocracy.com/hm-inventory-problems/
DEC Design Education.( 2020) Bí mật cách xử lý hàng tồn kho trong ngành thời trang
Available at: http://dec.edu.vn/252/Bi-mat-cach-xu-ly-hang-ton-kho-trong-
nganh-thoi-trang
H&M: How Fast Fashion Translates into Low Prices and Success
Available at: https://digital.hbs.edu/platform-rctom/submission/hm-how-fast-
fashion-translates-into-low-prices-and-success/
Christopher, M. (1998). Logistics and supply chain management. 4th ed. prentice hall.
Lysons, K. and Farrington, B. (2006). Purchasing and supply chain management (6a.
ed.). Harlow: Pearson Education.
Mangan, J., Lalwani, C., Butcher, T. and Javadpour, R. (2014). Global logistics and
supply chain management. 2nd ed. Chichester: Wiley, p.10.
MBA Skool Team (2020) Chiến lược Tiếp thị Hỗn hợp (4P) của H&M.
Available at: https://www.mbaskool.com/marketing-mix/services/16924-h-and-
m.html [Accessed: 19 April 2020].
Appendix
WORK ASSIGNMENT