PROJECT REPORT

TO ANALYSE THE SUPPLY CHAIN MANAGEMENT OF FASHION

GIANTS: H&M AND ZARA
&
TO DRAW A COMPARITIVE ANALYSIS OF THE SCM OF BOTH
COMPANIES

Submitted in partial fulfilment

of the requirements of B.A (VOCATIONAL STUDIES) MATERIAL MANAGEMENT

IN THE GUIDANCE OF SUBMITTED BY

MRS. NAMITA LAVANYA VASHIST
ROLL NO: 2K20/MM/31
EXAMINATION ROLL NO.: 000000

At

COLLEGE OF VOCATIONAL STUDIES

UNIVERSITY OF DELHI
 DECLARATION

I, LAVANYA VASHIST, the undersigned, hereby declare that the project report submitted by me
to the UNIVERSITY OF DELHI in partial fulfillment of requirement for the award of the Degree of B.A.
(VOCATIONAL STUDIES), under the guidance of Mrs. NAMITA COLLEGE OF VOCATIONAL STUDIES,
UNIVERSITY OF DELHI is original work and the conclusion drawn therein her based on the material
collected by myself. The information has been used purely for academic purpose.

Place: New Delhi

LAVANYA VASHIST
 ACKNOWLEDGEMENT

The present work is an effort to throw some light on THE SUPPLY CHAIN
MANAGEMENT AT H&M AND ZARA, WHILE ALSO DRAWING A COMPARITIVE
ANALYSIS BETWEEN THE SCM OF BOTH THE COMPANIES. The work would not have
been possible to come to the present shape without the able guidance, supervision
and help to me by number of people. I first would like to thank Mrs. Namita for their
kind support because of which I was able to complete my thesis project on time. I
convey my heartfelt affection to all those people who helped and supported me during
the course, for completion of my thesis.

LAVANYA VASHIST
 CERTIFICATE

This is to Certify that this project entitled “TO ANALYSE THE SUPPLY CHAIN
MANAGEMENT OF FASHION GIANTS: H&M AND ZARA & TO DRAW A COMPARITIVE
ANALYSIS OF THE SCM OF BOTH COMPANIES” submitted in partial Fulfillment for the
award of B.A. degree of college was carried out LAVANYA VASHIST under the guidance
of Mrs. Namita, this has not been submitted to any university or institution for the
award of any degree/ diploma certificate

NAME OF TEACHER NAME OF STUDENT

MRS. NAMITA LAVANYA VASHIST
SIGNATURE SIGNATURE OF STUDENT
 TABLE OF CONTENTS

SR.NO TOPICS

1 ABSTRACT

2 OBJECTIVE OF THE STUDY & KEYWORDS

3 INTRODUCTION

4 LITERATURE REVIEW

5 COMPANY PROFILE

6 RESEARCH METHODOLOGY

7 ZARA SUPPLY CHAIN ANALYSIS

8 H&M SUPPLY CHAIN ANALYSIS

9 COMPARISON BETWEEN ZARA AND H&M SUPPLY CHAIN ANAYLSIS

10 CONCLUSION

11 REFERENCES
ABSTRACT
Supply Chain Management aims to enable an efficient flow of products to their
deserved places at the right time so as to create value to the customers while
at the same time making sure to minimize costs for the company. Fast fashion
means reduced time between the design and the delivery process. New styles
reach the stores faster from the designer’s table. But, brands in fast fashion
retail network like Zara, H&M and Topshop often face challenges which include
short product life cycle, reduction in lead times for retail inventory, distribution
of products within fourteen to fifteen days after they first appear on the fashion
shows and also the issue centred with the incentives of the sales managers. This
research paper focuses on how these major fast fashion brands mainly Zara and
H&M overcome their major challenges by adopting innovation supply chain
management. Fashion is just not all about dressing up and supply chain
management of H&M and Zara is a proof to that which is globally recognized as
a successful and extensive retail giant. Apart from this, the research paper will
also provide a comparative analysis of the supply chain management
techniques of both companies.
OBJECTIVES OF THE STUDY &
KEYWORDS
 OBJECTIVE OF THE STUDY

The objective of this study is as follows:

1. To learn and evaluate H&M’s supply chain management, its practices, and
overall performance
2. To learn and evaluate Zara’s innovative supply chain management, its practices
and performance in the fast-moving fashion globe.
3. Drawing out a comparative analysis between H&M and ZARA on the basis of
their supply chain management, so as to furthermore deepen the horizon of
our understanding on how their operations make a distinctive impact on the
current market space.

KEYWORDS

 H&M, Zara, Supply chain management, dual integrated supply chain, Lead time,
just in time production, vertical integration, technical integration, inventory
management, fashion trend forecast, augmented reality technologies, fast
moving retailer, long product development cycle, liquidation promotion
INTRODUCTION
Supply chain management is the management of the flow of goods and services and
includes all processes that transform raw materials into final products. It involves the
active streamlining of a business's supply-side activities to maximize customer value
and gain a competitive advantage in the marketplace.

How Supply Chain Management (SCM) Works

Supply chain management (SCM) represents an effort by suppliers to develop and

implement supply chains that are as efficient and economical as possible. Supply
chains cover everything from production to product development to the information
systems needed to direct these undertakings.
Typically, SCM attempts to centrally control or link the production, shipment,
and distribution of a product. By managing the supply chain, companies can cut excess
costs and deliver products to the consumer faster. This is done by keeping tighter
control of internal
inventories, internal
production, distribution,
sales, and the inventories of
company vendors.
SCM is based on the idea
that nearly every product
that comes to market results
from the efforts of various
organizations that make up a
supply chain. Although
supply chains have existed
for ages, most companies
have only recently paid
attention to them as a value-
add to their operations.

5 Parts of SCM

The supply chain manager tries to minimize shortages and keep costs down. The job is
not only about logistics and purchasing inventory. According to Salary.com, supply
chain managers “oversee and manage overall supply chain and logistic operations to
maximize efficiency and minimize the cost of organization's supply chain."
Productivity and efficiency improvements can go straight to the bottom line of a
company. Good supply chain management keeps companies out of the headlines and
away from expensive recalls and lawsuits. In SCM, the supply chain
manager coordinates the logistics of all aspects of the supply chain which consists
of the following five parts.

Planning

To get the best results from SCM, the process usually begins with planning to match
supply with customer and manufacturing demands. Firms must predict what their
future needs will be and act accordingly. This relates to raw materials needed during
each stage of manufacturing, equipment capacity and limitations, and staffing needs
along the SCM process. Large entities often rely on ERP system modules to aggregate
information and compile plans.

Sourcing

Efficient SCM processes rely very heavily on strong relationships with suppliers.
Sourcing entails working with vendors to supply the raw materials needed
throughout the manufacturing process. A company may be able to plan and work with
a supplier to source goods in advance. However, different industries will have
different sourcing requirements. In general, SCM sourcing includes ensuring:

 the raw materials meet the manufacturing specification needed for the
production of goods.
 the prices paid for the goods are in line with market expectations.
 the vendor has the flexibility to deliver emergency materials due to unforeseen
events.
 the vendor has a proven record of delivering goods on time and in good quality.

Supply chain management is especially critical when manufacturers are working with
perishable goods. When sourcing goods, firms should be mindful of lead time and
how well a supplier can comply with those needs.

Manufacturing

At the heart of the supply chain management process, the company transforms raw
materials by using machinery, labor, or other external forces to make something new.
This final product is the ultimate goal of the manufacturing process, though it is not
the final stage of supply chain management.

The manufacturing process may be further divided into sub-tasks such as assembly,
testing, inspection, or packaging. During the manufacturing process, a firm must be
mindful of waste or other controllable factors that may cause deviations from original
plans. For example, if a company is using more raw materials than planned and
sourced for due to a lack of employee training, the firm must rectify the issue or revisit
the earlier stages in SCM.

Delivering

Once products are made and sales are finalized, a company must get the products
into the hands of its customers. The distribution process is often seen as a brand
image contributor, as up until this point, the customer has not yet interacted with the
product. In strong SCM processes, a company has robust logistic capabilities and
delivery channels to ensure timely, safe, and inexpensive delivery of products.

This includes having a backup or diversified distribution methods should one method
of transportation temporarily be unusable. For example, how might a company's
delivery process be impacted by record snowfall in distribution center areas?

Returning

The supply chain management process concludes with support for the product and
customer returns. It’s bad enough that a customer needs to return a product, and it’s
even worse if its due to an error on the company's part. This return process is often
called reverse logistics, and the company must ensure it has the capabilities to receive
returned products and correctly assign refunds for returns received. Whether a
company is performing a product recall or a customer is simply not satisfied with the
product, the transaction with the customer must be remedied.
Many consider customer returns as an interaction between the customer and the
company. However, a very important part of customer returns is the intercompany
communication to identify defective products, expired products, or non-conforming
goods. Without addressing the underlying cause of a customer return, the supply chain
management process will have failed, and future returns will likely persist.

SCM vs. Supply Chains

A supply chain is the network of individuals, companies, resources, activities, and

technologies used to make and sell a product or service. A supply chain starts with
the delivery of raw materials from a supplier to a manufacturer and ends with the
delivery of the finished product or service to the end consumer.

SCM oversees each touchpoint of a company's product or service, from initial creation
to the final sale. With so many places along the supply chain that can add value
through efficiencies or lose value through increased expenses, proper SCM can
increase revenues, decrease costs, and impact a company's bottom line.
Types of Supply Chain Models

Supply chain management does not look the same for all companies. Each business
has its own goals, constraints, and strengths that shape what its SCM process looks
like. In general, there are often six different primary models a company can adopt to
guide its supply chain management processes.

 Continuous Flow Model: One of the more traditional supply chain methods,
this model is often best for mature industries. The continuous flow model
relies on a manufacturer producing the same good over and over and
expecting customer demand will little variation.
 Agile Model: This model is best for companies with unpredictable demand or
customer-order products. This model prioritizes flexibility, as a company may
have a specific need at any given moment and must be prepared to pivot
accordingly.
 Fast Model: This model emphasizes the quick turnover of a product with a
short life cycle. Using a fast chain model, a company strives to capitalize on a
trend, quickly produce goods, and ensure the product is fully sold before the
trend ends.
 Flexible Model: The flexible model works best for companies impacted
by seasonality. Some companies may have much higher demand requirements
during peak season and low volume requirements in others. A flexible model
 of supply chain management makes sure production can easily be ramped up
or wound down.
 Efficient Model: For companies competing in industries with very tight profit
margins, a company may strive to get an advantage by making their supply
chain management process the most efficient. This includes utilizing
equipment and machinery in the most ideal ways in addition to managing
inventory and processing orders most efficiently.
 Custom Model: If any model above doesn't suit a company's needs, it can
always turn towards a custom model. This is often the case for highly
specialized industries with high technical requirements such as an automobile
manufacturer.

Example of SCM

Understanding the importance of SCM to its business, Walgreens Boots Alliance Inc.
decided to transform its supply chain by investing in technology to streamline the
entire process. For several years the company has been investing and revamping its
supply chain management process. Walgreens was able to use big data to help
improve its forecasting capabilities and better manage the sales and inventory
management processes.

This includes the 2019 addition of its first-ever Chief Supply Chain Officer, Colin
Nelson. His role is to boost customer satisfaction as the company increases its digital
presence. Beyond that, in 2021, it announced it would be offering free two-hour,
same-day delivery for 24,000 products in its stores.

Why Is Supply Chain Management Important?

Supply chain management is important because it can help achieve several business
objectives. For instance, controlling manufacturing processes can improve product
quality, reducing the risk of recalls and lawsuits while helping to build a strong
consumer brand. At the same time, controls over shipping procedures can improve
customer service by avoiding costly shortages or periods of inventory oversupply.
Overall, supply chain management provides several opportunities for companies to
improve their profit margins and is especially important for companies with large and
international operations.

How Are Ethics and Supply Chain Management Related?

Ethics has become an increasingly important aspect of supply chain management, so

much so that a set of principles called supply chain ethics was born. Consumers and
investors are invested in how companies produce their products, treat their
workforce, and protect the environment. As a result, companies respond by instituting
measures to reduce waste, improve working conditions, and lessen the impact on the
environment.

What Are the 5 Elements of Supply Chain Management?

Supply chain management has five key elements—planning, sourcing raw materials,
manufacturing, delivery, and returns. The planning phase refers to developing an
overall strategy for the supply chain, while the other four elements specialize in the
key requirements for executing that plan. Companies must develop expertise in all five
elements to have an efficient supply chain and avoid expensive bottlenecks.

What Element of the Marketing Mix Deals with Supply Chain

Management?

Place is the marketing mix element that deals with supply chain management as it
involves the processes that take goods and services from their raw beginnings to the
ultimate destination—the customer.
THE GLOBAL FASHION INDUSTRY: AN EVOLUTION FROM
HARDWARE TO QUICKWARE

The global apparel industry is perhaps the oldest and most important industry in the
economic history of the western world. In fact, unidentified bird bones have been
found to be used as sewing needles as early as 50,000 BC. Throughout history,
humanity has created textiles and garments by hand-weaving various animal and
vegetable fibers together to craft unique and long-lasting pieces.
This notion of slow, hand-made fashion continued until the Industrial Revolution,
which saw huge shifts in both the production and quantity of garments made with the
introduction of modern technology. It was the first industry to be mechanized, due to
the high amount of labour required to produce textiles and garments.
With the invention of sewing machines and cotton gins, clothing companies were able
to considerably accelerate the manufacturing process. This resulted in the mass
production of clothing, allowing fashion brands to simplify patterns, improve
affordability, and increase the frequency of changes in designs.
Fashion became a commodity of self-expression rather than simply serving a practical
purpose. As a result, “Fast Fashion” became the high-street norm in the late 1990s
when brands such as Zara and H&M started producing affordable versions of outfits
and styles seen on catwalks worldwide and selling them at a high volume within a two-
week turnaround. The industry boomed, and technology continued to evolve to allow
consumers to order from their favourite brands with one click and from the comfort
of their home. The emergence of online shopping resulted in altered buying
behaviours and consumption patterns, making fashion even more accessible to
everyone.
Nowadays, around 150 billion garments are produced each year, despite a world
population of 7.5 billion. The fashion brand Zara, a subsidiary of Spanish group Inditex,
produces around 65,000 designs per year. For context, an average clothing company
produces up to 5,000.
In such a competitive & fast-paced industry like apparel, supply chain management is
critical. It is the driving force behind a successful fashion season and a brand’s ability
to pivot to the latest styles quickly. A strong supply chain strategy in fashion requires
some special considerations because the industry has such short product lifecycles and
high consumer demands.
Here’s what we need to know about apparel supply chain management.
Why Supply Chain Management Is Crucial in the Apparel Industry

Advanced supply chain management (SCM) benefits practically every industry. In

apparel, where fast fashion, ever-shifting trends and micro-seasons numbering in the
double digits impact the entire industry, it’s critical. Fashion retailers must carry a wide
variety of products to fit many customers’ preferences. And the lightning-fast pace at
which items come in and out of vogue means the industry’s product lifecycle is
incredibly short. The fashion industry is constantly planning for the next season,
getting new styles into production and perfecting them before the current pieces fall
out of favor.
The industry also has a more complex supply chain. It includes the manufacturers
creating the fibers, textiles and finished garments, which adds three links to the chain
before involving wholesalers and retailers. The supply chain starts with new designs,
which are then produced, distributed and sold. This added complexity requires an
organized, knowledgeable logistics leader to drive new products through the supply
chain and manage inventory flow throughout.
Meanwhile, consumers now demand more transparency in the supply chain. Due to
labor abuses overseas, many customers look at where their clothes are produced and
under what conditions. Clothing brands may work with many manufacturers to create
so many unique styles in such a short time. The typical fashion brand reports between
1,000 and 2,000 suppliers, with numbers reaching 20,000 to 50,000 when including
sub-suppliers. With the increased demand for 100% supply chain visibility, these
companies must find a way to monitor and manage their complex supplier networks.
Demand forecasting is also challenging in the fashion industry. Since fashion trends
come and go so quickly, every product at the start of the season has no sales history.
Therefore, retailers can’t look at the past year’s sales numbers to determine how a
product will perform. The product lifecycle is short, which means your business needs
to be preparing for the next season and looking for the next big thing before their
current stock goes out of style.
Meanwhile, consumer preferences are constantly in flux. 2020’s hottest trend may
soon look stale and out of touch, or it could just as easily continue to rise in popularity.
Trends arise out of the media, individual influencers, the economy and even the
weather. For example, a rainy spring might boost outerwear sales while putting a
damper on other spring arrivals.
Apparel companies need to prevent shortages and overstocked goods, which is
especially important with shorter fashion seasons. Running out of an item at the wrong
time can severely impact the season’s sales. Having too much leftover as new styles
come into season reduces your profitability and wastes space in the retail storefront
or warehouse. Effective supply chain management ensures a steady supply of product,
arriving just in time to meet current demands.
Without an advanced, competent SCM structure, apparel brands and retailers struggle
to meet consumer needs. Their inventory costs increase while product quality and
suitability for the target customer decrease.

How Clothing Supply Chain Management Works

The apparel supply chain includes a broad network of clothing designers, fabric and
finished apparel producers, transportation providers, wholesalers and direct-to-
consumer retailers. It connects all the organizations involved in turning raw materials
into finished garments and distributing them to customers. In the fashion industry, the
supply chain breaks down into five main links:

1. Design: In the first step, fashion designers choose fabrics, trims, fits and finishes
for clothing items and carefully plan each silhouette. They often create their
own iteration of the latest trend or may create the runway looks that others
want to replicate. Designers are often the ones directing the rest of their supply
chain. For example, they approve the fabrics and materials manufacturers use,
alongside the sellers that carry their products.
2. Textile manufacturing: Each garment requires raw materials. Textile producers
spin, weave, blend and dye cloth and create other materials for the final
product.
3. Apparel manufacturing: Next, garment makers cut the cloth and sew it into
wearable pieces, following the patterns and designer specifications.
4. Distribution: Distribution in the fashion industry is complex since raw materials
and finished apparel are produced worldwide and imported into key markets.
Items may be shipped directly to retailers or to a distribution center that may
feed multiple retailers. A well-managed supply chain includes detailed tracking,
allowing brands to manage and optimize transportation and know exactly
where shipments are along their routes.
5. End-user purchase: At the end of the supply chain, a customer purchases the
item. They may buy it from a brick-and-mortar retailer, shop online or choose
a “buy online pick up in-store” (BOPUS) option. For online retailers, this portion
of the supply chain places greater importance on logistics and transportation
management. Brick-and-mortar retailers must emphasize good sales floor and
storeroom management to please in-person and BOPUS shoppers. All retailers
must focus on inventory management to ensure they can sell to consumers
however they prefer to shop.
Fashion brands often use one of three strategies to manage their supply chain:

 Push Supply Chain

A push supply chain strategy uses market forecasting and predictions to drive the
supply chain. Producers and designers create clothing pieces in anticipation of
upcoming demand. They then “push” these products to end-consumer retailers. In
fashion, warm weather wear appears on shelves at the end of the cold season in
preparation for the increased demand as the weather heats up.
 Pull Supply Chain
The pull strategy waits for demand to rise rather than forecasting it. Manufacturers
produce new items only when they know consumers will buy them. In other words,
end-users and consumer-facing retailers pull apparel through the supply chain. This
reduces the risk of inventory becoming overstocked while increasing the risk of not
meeting a sudden influx in demand.
 Hybrid Push/Pull Supply Chain
Fashion brands can combine both supply chain strategies using the push/pull method.
This helps brands save on inventory costs while reducing the risks of unpredictable
demand, which is so common in the fashion industry. Under this configuration, the
supply chain starts as a push system, where textile producers constantly create fabrics
in anticipation of new garment designs. The demand for new fashion pieces pulls these
materials into garment production plants and the rest of the supply chain to end
consumers.
Other brands may push finished garments to a warehouse, where they wait to be
pulled into the retail environment when the demand arises.
Benefits of Supply Chain Management in the Apparel Industry

Supply chain management increases productivity and improves organizational

cohesiveness. It offers benefits such as:
 Operational and Organizational Flexibility
Staying competitive in the fast-fashion market requires an incredible amount of
precision and flexibility. Clothing brands that want to remain trendy need to work
with designers and manufacturers to change their operations for a new product
line. Managing a diverse supplier network and staying in close contact with key
suppliers across that network helps companies do this more effectively. They can
quickly identify the right designers and manufacturing partners to take on
particular projects, and those team members can adapt just as quickly. This
flexibility leads to a more cohesive organization overall.
 Minimized Inventory Costs
Fashion retailers who work well with a diverse supplier network can minimize costs
in many ways. First, they can get samples and quotes from several suppliers before
committing to new orders. Next, by effectively forecasting needs, retailers can
order less safety stock. They can place new orders based on current demand, giving
them more confidence that they can sell the inventory they’re buying. This strategy
lets retailers keep enough stock to meet customer demands without overstock to
clear out at the end of the season.
 Better Resource Management
Transparency, sustainability and ethical supply chains are becoming more critical
to consumers. Better SCM leads to better resource management. Logistics chain
leaders can analyse the raw materials that go into their products and work directly
with suppliers to adopt more sustainable practices. This has tremendous business
impacts since less material goes to waste, and manufacturers can reduce their
energy and water consumption.
 Increased Productivity and Better Logistics Management
Better communication and collaboration with all tiers of suppliers help clothing
brands continue producing goods in all circumstances. They’re less likely to face
disruptions related to supplier delays and wider raw materials shortages. They can
quickly find out about potential concerns long before they affect the market. By
diversifying their supplier networks, they can more easily pivot to different
suppliers amid logistical hiccups.
What Organizations Should Consider Before Implementing Supply Chain
Management
There are a few things to know about fashion supply chain management before you
enact a new system for your company. Key considerations for implementing an
effective SCM system include:

 Involving Key Stakeholders

Involving key stakeholders early makes change management easier. For supply chains,
it’s imperative to include the workers whose workflows will change the most. That
might encompass your sourcing managers, suppliers and transportation and logistics
providers. Their involvement ensures a smoother transition and will help you find the
holes in proposed changes. With their aid, the new SCM functions and processes will
be more readily accepted and become more refined.

 Planning for Long-Term Success

Implementing effective SCM is a process. As a manager, you must carefully consider
the scope, schedule and necessary resources required for successful execution. While
apparel organizations face pressure to achieve a fast return on investment, trying to
implement too much too quickly can endanger your project. Creating a phased, long-
term plan to roll out a new logistics and supplier management system can help you
avoid risks and smooth out your processes along the way.

 Gaining Supplier Buy-In

A managed supply chain will place new demands on suppliers. You may require them
to hold specific certifications or follow new practices. Your new system will necessarily
impact suppliers, so make sure they can meet your new expectations. If you’re a big-
name clothing brand, you’ll likely have an easier time convincing suppliers to adopt
your system.
If you’re a smaller or mid-sized brand, you’ll need to ensure you minimize burdens for
your suppliers. It must be easy to use and add value for your partners. Besides focusing
on the system, itself, you’ll also need to finesse how you present your requests to
vendors.
Best Practices for Apparel Supply Chain Management
While implementing a new system can be challenging, once you know how to manage
supply chain operations in the apparel industry, you can achieve higher productivity,
better profits and a more cohesive, effective company overall. Here are a few best
practices to keep in mind:
  Align Priorities and Plans Across Teams and Suppliers
Many fashion brands manage several product lines and sales channels. With large
companies divided into many departments, it’s common for individual teams to plan
around their own priorities, leaving the supply network disjointed. A business should
have a global supply chain plan aligned across stakeholders and departments. All
teams should have the same logistical goals and work from one united program.
 Prioritize In-Season Sales
When items are in season, they sell for the highest price. Ensuring that all your in-
season inventory performs well is crucial. By letting yourself sell out of your styles
before the end of the season, you avoid placing items on clearance. This increases the
urgency for your products since shoppers can’t be sure that a product will be marked
down in a few weeks.
To optimize in-season sales, many fast-fashion retailers start by producing a limited
quantity of a new style. They then ramp up production for styles that sell quickly and
do not reorder the slower-moving products. This “test and repeat” strategy helps them
make the most out of a fashion season and sell off stock before it moves to
markdowns.
 Segment Customers for a More Efficient Supply Chain
If you’re an apparel retailer with a wide product selection, each product may appeal
best to a particular type of customer. It’s essential to segment your finished goods and
how you market them to your customers. Effective supply chain managers also use
these customer segments to enhance the supply chain. They may work with
specialized designers, manufacturers and logistics companies to manage products for
varying markets.
 Focus on Total Cost of Ownership (TCO) Over Price
The initial acquisition costs of inventory in the apparel supply chain can be deceptive.
In the apparel industry, moving manufacturing offshore sometimes offers reduced
labor costs and other benefits. However, fashion brands may pay for that cost in
shipping and more complex transportation logistics. This can reduce the cost of
manufacturing while increasing the TCO. Inventory also requires storage, which is
sometimes a hidden cost. Effective supply chain managers prioritize each product’s
TCO.
Keeping the TCO down may require paying more for a product initially. For example, if
you order more frequently in smaller quantities, you may not get the same volume
discounts. However, the savings that come with renting a smaller warehouse, with less
risk of inventory going out-of-season, often make up for it.
The Best Time to Implement Fashion Supply Chain Management
As fashion retailers grow, their supplier network becomes more complex and
interconnected. When you have many vendors, it’s useful to standardize your supplier
expectations and management practices. More complex supply chains that require
more time to get products from raw materials to end consumers need more
management. As you decide whether it’s the right time to implement a new SCM
system, consider your current level of vendor complexity and your plans for the future.
A SWOT ANALYSIS OF THE SUPPLY CHAIN OF WORLD’S
LEADING APPAREL COMPANIES

SWOT refers to strengths, weaknesses, opportunities and threats. The analysis below
consists of some of the top apparel companies including Nike, Adidas AG, etc.
conducted by the Global Data Apparel Intelligence Centre, the analysis will discuss the
supply chain strengths and weaknesses for leading global apparel companies.
Example 1- Nike, Inc
Headquarters: US

Business model: US sporting goods giant

Nike, Inc designs, markets, and distributes
sports footwear, apparel, equipment, and
accessories for men, women, and children.
The company markets its products under
various brands, including Nike, Jordan, and Converse. The brand sells its products
through its company-owned retail stores, e-commerce portals, independent
distributors, licensees, and sales representatives located worldwide. It also
merchandises its products through its e-commerce portal nike.com.
Strength: Strong operational network
The analysis revealed that Nike’s strong operational network enhances its supply chain
activities and its future growth and expansion plans. It helps the company to ensure a
steady supply of inputs and manage its supply risks, price variations and complexities.
Moreover, Nike footwear products are supplied by 191 footwear factories located in
14 countries and are manufactured outside the US by independent contract
manufacturers. For example, in FY2021 its contract factories in Indonesia, China, and
Vietnam produced about 24%, 21% and 51% respectively of Nike brand footwear
products. The company is said to have manufacturing contracts with independent
manufacturers in India and Argentina to manufacture and sell its footwear in those
countries.
During FY2021, the company’s contract factories in Cambodia, China, and Vietnam
manufactured 12%, 19% and 30% of its total apparel production, respectively. The
company’s top five contract manufacturers accounted for 51% of the Nike brand’s
apparel production.
Weaknesses: Competitors with higher operating, technical and distribution
resources and a heavy reliance on Asia
The analysis highlighted that Nike operates in a highly competitive retail market with
a long list of competitors. It suggests that some of its competitors have higher
operating histories, technical, marketing, distribution and support resources, as well
as greater brand recognition and higher financial capabilities. All of these factors could
potentially restrict Nike’s creation of innovative products and the ultimate expansion
of its business.
GlobalData apparel analyst Emily Salter noted Nike’s supply chain is also heavily reliant
on Asia. She mentioned that it impacted the brand’s stock availability and revenue at
the start of its FY2021/22 with factory closures in Vietnam, and port closures in China,
which contributed to significantly increased shipping times from Asia to North
America, which were its main markets.
Example 2- Adidas AG
Headquarters: Germany

Business model: Adidas AG designs, manufactures and

markets athletic and sports lifestyle products and
markets its products under the Adidas brand. The
company’s product portfolio includes footwear,
apparel and sports accessories and equipment.
They distribute and sell products through their
own-branded stores, retail stores, wholesale stores, sporting goods chains, buying
groups, department stores and more.
Strength: Strong operational network
Similar to Nike, the analysis revealed that Adidas’ global operations and strong
operational network enables it to manage its development, production, planning,
sourcing and distribution related activities efficiently. In December 2020, the company
operated over 2,500 own-retail stores; wholesale stores across the globe. It also
markets products under Adidas brands through e-commerce stores in 40 countries and
mobile shopping apps in 25 countries.
Adidas has two production facilities in Germany and the US, but it outsources most of
its production to independent manufacturing partners. As of December 2020, Adidas
had 132 independent manufacturing partners, operating 277 manufacturing facilities.
They operate across the Americas, Europe, Asia-Pacific, Africa, and the Middle-East,
however, more than 68% of its independent manufacturing partners are located in
Asia.
Weaknesses: Competitors with higher operating, technical and distribution
resources and higher costs and lead times during the supply chain crisis
Adidas is similar to Nike in that it also operates within a highly competitive sportswear
market. The factors listed as determining the level of competition within the
sportswear apparel and footwear industry include price, comfort, quality, product
functionality, brand loyalty and awareness, and marketing and advertising capabilities.
Some of Adidas’ competitors also have higher operating histories, technical,
marketing, distribution and support resources; greater brand recognition and a higher
financial capability which could restrict the creation of innovative products and
business expansion.
According to the analysis, in FY2020, the company’s third-party manufacturing
partners were mainly located in Asia with Adidas sourcing over 97% of footwear, 93%
of apparel, and 77% of accessories and gear volumes from the region.
This was viewed as a negative for the company, since its skew towards Asia meant that
the brand would suffer from supply chain crisis.
Example 3- Moet Hennessy Louis Vuitton SE (LVMH)

Headquarters: France

Business model: Moet Hennessy Louis

Vuitton SE (LVMH) is a manufacturer
and marketer of luxury goods. The
company’s product portfolio includes
apparel, leather goods, wines and spirits, perfumes and cosmetics, jewellery and
watches. It also offers cruise services and carries out selective retailing and various
other activities under DFS, La Grande Épicerie de Paris, Sephora, and Le Bon Marche
Rive Gauche banners. LVMH markets products under the Christian Dior, Guerlain,
Givenchy, Kenzo, Louis Vuitton, Celine, Edun, Emilo Pucci, Loewe, Nicolas Kirkwood,
Make Up For Ever, and Zenith brand names.
Strengths: Europe-centric production, global store network, operational capabilities
and high profit margins
LVMH has a diversified store network with a wide geographic presence and its strong
operational network is said to improve its efficiency in maintaining synergies between
demand and supply of its products in the market.
LVMH’s fashion and leather goods production is primarily Europe-centric in terms of
both raw materials and manufacturing. This means it avoids most supply chain issues
linked to production in Asia and long-distance shipping.
Weaknesses: Intense competition, counterfeiting and piracy
LVMH operates in a highly competitive industry and according to the analysis, some of
its competitors are said to have higher operating histories, technical, marketing,
distribution, and support resources. LVMH’s performance could also be affected by
the rising influx of counterfeited products in the market.
LITERATURE REVIEW
At an overview, supply chain management refers to the management of the flow of
goods and services. It includes all processes that transform the raw materials into final
products. Supply chain management involves the active streamlining of a business’
supply-side activities to maximise customer value and gain a competitive advantage in
the marketplace. It represents an effort by suppliers to develop and implement supply
chains that are as efficient and economical as possible. Supply chains cover everything
from production to product development to the information systems needed to direct
these undertakings.
SCM is based on the idea that nearly every product that comes to market results from
the efforts of various organizations that make up a supply chain.
The 5 Components of Supply Chain Management are as follows,
 Component 1: Planning
 Component 2: Sourcing
 Component 3: Inventory
 Component 4: Production and Transportation
 Component 5: Return of Goods

Advanced supply chain management (SCM) benefits practically every industry. In our
research we have shed light on the apparel industry, where fast fashion, ever-shifting
trends and micro-seasons numbering in the double digits is impacting the entire
industry. Fashion retailers need to
carry a wide variety of products to fit many customers’ preferences. And the lightning-
fast pace at which items come in and out of vogue means the industry’s product
lifecycle is incredibly short. The fashion industry is constantly planning for the next
season, getting new styles into production and perfecting them before the current
pieces fall out of favor.
The industry also has a more complex supply chain. It includes the manufacturers
creating the fibers, textiles and finished garments, which adds three links to the chain
before involving wholesalers and retailers. The supply chain starts with new designs,
which are then produced, distributed and sold. This added complexity requires an
organized, knowledgeable logistics leader to drive new products through the supply
chain and manage inventory flow throughout.
Meanwhile, consumers now demand more transparency in the supply chain. Due to
labor abuses overseas, many customers look at where their clothes are produced and
under what conditions. Clothing brands may work with many manufacturers to create
so many unique styles in such a short time. The typical fashion brand reports between
1,000 and 2,000 suppliers, with numbers reaching 20,000 to 50,000 when including
sub-suppliers. With the increased demand for 100% supply chain visibility, these
companies must find a way to monitor and manage their complex supplier networks.
Demand forecasting is also challenging in the fashion industry. Since fashion trends
come and go so quickly, every product at the start of the season has no sales history.
Therefore, retailers can’t look at the past year’s sales numbers to determine how a
product will perform. The product lifecycle is short, which means your business needs
to be preparing for the next season and looking for the next big thing before their
current stock goes out of style.
Meanwhile, consumer preferences are constantly in flux. 2020’s hottest trend may
soon look stale and out of touch, or it could just as easily continue to rise in popularity.
Trends arise out of the media, individual influencers, the economy and even the
weather. For example, a rainy spring might boost outerwear sales while putting a
damper on other spring arrivals.
Apparel companies need to prevent shortages and overstocked goods, which is
especially important with shorter fashion seasons. Running out of an item at the wrong
time can severely impact the season’s sales. Having too much leftover as new styles
come into season reduces your profitability and wastes space in the retail storefront
or warehouse. Effective supply chain management ensures a steady supply of product,
arriving just in time to meet current demands.
Without an advanced, competent SCM structure, apparel brands and retailers struggle
to meet consumer needs. Their inventory costs increase while product quality and
suitability for the target customer decrease.
The global fashion industry has many giant players, H&M, Zara, Louis Vuitton, Yves
Saint Laurent, Balenciaga, and the list goes on.
In our research we have recommended the following companies.

ZARA, one of the world’s most successful fashion retail brands – if not the most
successful one. With its dramatic introduction of the concept of “fast fashion” retail
since it was founded in 1975 in Spain, Zara aspires to create responsible passion for
fashion amongst a broad spectrum of consumers, spread across different cultures and
age groups. There are many factors that have contributed to the success of Zara but
one of its key strengths, which has played a strong role in it becoming a global fashion
powerhouse as it is today, is its ability to put customers first. Zara is obsessed with its
customers, and they have defined the company and the brand’s culture right from the
very beginning.
The Zara brand offers men and women’s clothing, children’s clothing (Zara Kids), shoes
and accessories. The sub-brand Zara TRF offers trendier and sometimes edgier items
to younger women and teenagers.

Hennes & Mauritz (H&M), founded in 1947 by Erling Persson. The company
laid its foundation stone by selling clothes for women in Sweden in 1947. It further
entered into new markets in Stockholm and started its new line of production of men’s
clothing by 1968. H&M soon ventured out into new product lines such as clothing for
Kids, Accessories, etc. It is one of the leading firms in the clothing industry and is
recognized as the brand for fast fashion. Currently, H&M is the second largest clothing
retailer and is spread over more than 60 countries with around 5000+ stores across
the globe, thus establishing its strong presence in the marketplace. The target market
of H&M falls between the age group of 18-30 years and also to those who are fashion
delicate. One of the key factors for H&M’s success has been its supply chain
management. An effective and efficient supply chain becomes an asset of a company
and henceforth, is able to add value to their customers when it provides right product
at right place at right time. H&M strongly believes that “A short lead time is not an end
in itself, since it is always a matter of getting the right balance between price, time and
quality” (H&M, 2006)
When it comes to SCM in fashion industry, companies can rely on various approaches,
but the most common ones which they can utilise are responsiveness and efficiency.
For example, Zara, a Spanish brand, prioritizes responsiveness, while H&M, a Swedish
retailer, pursues the efficiency strategy. Despite their different approaches, the
companies have similar types of customers and have achieved success in shaping their
supply chains.
 Zara is a multinational brand, which laid its foundation in 1975 and, has
established its presence in many countries around the world. As of 2018, the
company employed more than one hundred seventy thousand employees and
had a turnover of several billion dollars which made it one of the largest fashion
retailers. Currently, Zara provides an opportunity for customers to buy their
products online, which significantly contributes to its revenue, especially during
the COVID-19 pandemic.

 H&M is a company that specializes in fast fashion and offers its clients a huge
variety of clothes and accessories to choose from. It is committed to
implementing and promoting sustainable production practices, for example, to
minimize its impact on the environment, the company sources organic cotton.
The brand is recognized as one of the major fashion retailers and continues to
expand further, including online.
  Zara is a company that is not oriented toward one particular demographic and
instead focuses on offering affordable clothes which can fit people of all ages
and both sexes. The brand’s target audience is young people and those who
want to own trendy clothes but cannot afford more expensive analogs. Zara is
keen on providing its customers with apparel inspired by recent trends and
does it in an extremely fast way and in limited quantities, which ensures that its
products possess some level of exclusivity.

 On the other hand, H&M focuses on encompassing as many demographics as

possible, for example, offering special collections for plus-size persons. Yet,
similar to Zara, the brand’s primary audience is young people and individuals
who do not have many resources to spend on clothes. Moreover, since H&M is
committed to keeping its prices as low as possible, the brand attracts those who
view apparel, not as a fashion statement but simply as disposable products
which must be cheap. Thus, H&M, due to its cost-efficiency, provides an
opportunity for people with low incomes to buy affordable clothes which have
relatively good quality.

 Zara pursues a business model where it copies the latest designs from high
fashion brands and quickly supplies them to its stores; this is made possible due
to several factors. First of all, it efficiently uses data by tracking each item of
clothing the company sells, so when one product becomes out of stock, the
inventory management instantly orders a new batch. Secondly, Zara produces
fifty percent of its goods in its factories, which are located close to distribution
centers, which allows the brand to ship new clothes to customers faster than
its competitors. As a result of combining effective data utilization and
geographical proximity of its facilities, Zara has achieved a position where it has
one of the most responsive and fastest supply chains in the world.

 H&M’s stress on low prices enables it to use a different approach to supply

chain management to meet its ultimate goal of being a cost-efficient company.
The brand does not have its factories, which significantly reduces expenses for
maintaining and servicing buildings and paying salaries to workers; instead, it
relies on seven hundred partner manufacturers. Moreover, the company
utilizes a network of suppliers from Asia, where labor is much cheaper than in
Europe or the U.S. Additionally, the company relies on sea and railway
transportation to keep its logistics costs low (Rathore et al., 2019). Thus, H&M
has managed to achieve its cost efficiency by outsourcing its manufacturing
and production and using cheaper modes of transportation.

Zara and H&M pursue different approaches to supply chain management; while the
former focuses on responsiveness and quickly delivering products to its clients, the
latter seeks to decrease its prices. Both companies are multinational fashion retailers
which have a presence in many countries and sell large quantities of products. Despite
having mostly similar audiences, Zara’s customers are more concerned about the
fashion aspect of clothes, while H&M’s clientele value affordability and quality. Zara
has reached its status of a responsive brand by relying on its manufacturing power and
effective use of data, which allows it to replenish its stock in a fast manner. On the
other hand, H&M manages to keep its prices low by using the help of foreign
manufacturers, cheap labor, and inexpensive transportation.
COMPANY PROFILE
H & M Hennes & Mauritz AB or H&M Group (abbreviated H&M) is
a multinational clothing company based in Sweden. Its focus is fast-fashion clothing
for men, women, teenagers, and children. As of 2021, H&M Group operates in 75
geographical markets with 4,702 stores under the various company brands, with
107,375 full-time equivalent positions. H&M is the largest international clothing
retailer only behind Spain-based Inditex (parent company of Zara). H&M was founded
by Erling Persson and its current CEO is Helena Helmersson.
H&M- Hennes & Mauritz company stats

Industry- clothing, shoes, sports equipment

Founded- 1947

Headquarters- Stockholm

Country- Sweden

CEO- Gudrun Helena Lundberg Helmersson

Employees- 110,325
 H&M Group is a family of
brands and businesses, aiming to
make it possible for customers
around the world to express
themselves through fashion and
design, and to choose a more
sustainable lifestyle. They believe
in creating value for people and
society in general by delivering
their customer offering and by
developing with a focus on
sustainable and profitable growth.

Models
Kylie Minogue
In 2007, H&M and Kylie Minogue launched a
swimwear line in Shanghai to celebrate H&M's
presence in Asia.

Lana Del Rey

Lana Del Rey was the face of H&M's 2012 global
summer collection music video, in which she also
sang a cover of "Blue Velvet" as a tribute to
filmmaker David Lynch, who she has said
impacted her work.
 Beyoncé
In May 2013 Beyoncé was the face of H&M for
her campaign, "Mrs. Carter in H&M," which
drew heavily upon Knowles' personal style. The
singer also included the track "Standing on the
Sun" from her fifth studio album as the
campaign soundtrack.

DESIGNERS
Karl Lagerfeld
In November 2004, select stores offered an exclusive collection by fashion
designer Karl Lagerfeld. The press reported there were large crowds and that the initial
inventories in the larger cities were sold out within an hour. The clothes were still
available, though, in less fashion-sensitive areas until the company redistributed them
to meet demand.
Stella McCartney
In November 2006, the company launched a collection by Stella McCartney.
Viktor & Rolf
Also in November 2006, the company launched a collection by avant-garde Dutch
designers Viktor & Rolf.
Madonna
H&M launched a collaboration designed by pop star Madonna in March 2007.
Roberto Cavalli
In November 2007, several months after collaborating with Madonna, the company
launched a collection by Italian designer Roberto Cavalli.
Marimekko
Finnish company Marimekko was chosen as a guest designer in spring 2008.
Comme des Garçons
H&M partnered with Comme des Garçons, a Japanese fashion label, in the fall of 2008.
Products in the collection included accessories, a unisex fragrance, and clothing for
adults and children.
Matthew Williamson
For spring and summer of 2009, British designer Matthew Williamson created two
exclusive ranges for the company – the first being a collection of women's clothes that
were released in select stores. For the second collection, Williamson ventured into
creating menswear for the first time. It featured swimwear for men and women and
was available in all of H&M's stores worldwide.
Jimmy Choo
On 14 November 2009, the company released a limited-edition diffusion
collection by Jimmy Choo featuring handbags and shoes for men and women, with
prices ranging from £30 to £170. The collection also included clothing designed by
Choo, such as garments made of suede and leather, and was available in 200 stores
worldwide, including London's Oxford Circus store.
Sonia Rykiel
Sonia Rykiel collaborated with the company by designing a ladies knitwear and lingerie
range that was released in select company stores on 5 December 2009.
Lanvin
French fashion house Lanvin collaborated with H&M to create a new collection,
"Lanvin Hearts H&M," in fall 2010.[32] The collection, designed to make Lanvin clothing
more accessible to the average consumer, featured items that were around 100 euros.
Usually, Lanvin dresses would cost hundreds of euros more.
Elin Kling
For Spring and Summer 2011, the company worked with fashion blogger Elin Kling,
whose collection was only available at select stores.
Versace
H&M announced a collaboration with Versace in June 2011 that was later released on
November 19. Versace also planned a Spring collaboration with the company that
would only be available in countries with online sales. Similar to past collaborations,
Versace agreed to let H&M use its name for a previously agreed-upon sum, without
actually having a role in the design process.
Marni
H&M announced a collaboration with Marni in November 2011. The campaign
launched a few months later in March 2012 and was led by director Sofia Coppola

Anna Dello Russo

On 4 October 2012, Vogue Japan editor Anna Dello Russo launched an accessories
collection with H&M as Paris Fashion Week drew to an end. The collection was stocked
in 140 H&M stores worldwide and was also available to purchase online.
Maison Martin Margiela
On 12 June 2012, H&M confirmed that it would launch a collaboration with avant-
garde label Maison Martin Margiela for a fall rollout. The Maison Martin Margiela
collection for H&M hit stores a few months later on 15 November 2012.
Isabel Marant
Isabel Marant was a collaboration designer for fall 2013 and, for the first time in her
career, made a few men's pieces to accompany the women's collection. The collection
sold out very quickly in cities across the globe and was heavily anchored in sales online.
Alexander Wang
During the Coachella Valley Music and Arts Festival in California, H&M announced its
first collaboration with an American designer. Alexander Wang was the designer
chosen and the collection was released to a select 250 stores around the world on 6
November 2014.
Balmain
Balmain was announced as the next collaboration with H&M through Balmain
designer Olivier Rousteing's Instagram page. The collection was released on 5
November 2015. That year's H&M Christmas campaign was made in collaboration with
popstar Katy Perry, who also sang the commercial soundtrack "'Every Day Is A
Holiday".
Kenzo
In November 2016, H&M released a designer line in collaboration with Kenzo.[40] That
year the company released an annual holiday movie directed by Wes Anderson as part
of the company's Christmas advertising campaign. Titled "Come Together", the short
film starred Adrien Brody as a train conductor who saves Christmas after a blizzard
delays the train's arrival and causes the few passengers to miss part of the holiday.
Zara Larsson
Swedish singer Zara Larsson designed a "playful, young, empowering and little
glamorous" collection with H&M in February 2017.
Naomi Campbell
After 20 years, Naomi Campbell came back to collaborate with the company for a
global female empowerment commercial spot in fall 2017. She wore clothes that
blurred the line between masculine and feminine in the campaign's Tokyo spot-video
where she lip-synced "Wham Rap (Enjoy What You Do)" by Wham!.
Jeremy Scott and Moschino
Designers Jeremy Scott and Moschino collaborated with the brand in April 2018.
Richard Allan
With the idea of reviving the spirit of the swinging sixties, H&M collaborated with
designer Richard Allan in July 2019.
Sandra Mansour
The Fleur du Soleil collection, part of H&M's collaboration with Lebanese
designer Sandra Mansour, was released in August 2020 and marked the first time the
company had partnered with an Arab designer.
Simone Rocha
Irish designer Simone Rocha, daughter of designer John Rocha, was announced as a
collaborative partner in March 2021. Simone is a regular at London Fashion Week and
was named ‘Womenswear Designer of the Year’ at the British Fashion Awards in 2016.
Rocha's designs are famed for their femininity, which is shown in an H&M campaign
film shot by Tyler Mitchell.

MARKET EXPANSION PLANS

The H&M group’s expansion is taking place with a focus on increased omnichannel
sales. In 2022 H&M is launching in six new markets. Cambodia opened via franchise in
March, North Macedonia opened in August and also via franchise in Costa Rica. The
remaining new H&M markets in 2022 will be Ecuador, Kosovo and via franchise in
Guatemala. The company is accelerating its expansion in the North and South America
region, with a focus on Latin America.
Apart from this, H&M announced on 2 March 2022, an end to retail operations of its
more than 150 stores in Russia, as a result of the Russian invasion of Ukraine. H&M
cited that it stands "with all the people who are suffering" in Ukraine as well as for
"the safety of customers and colleagues" in Russia. Having recently expanded
including via its Weekday and & Other Stories formats, Russia was H&M's sixth-biggest
market at the time, representing 4% of group sales in the fourth quarter of 2021.

COUNTRIES H&M OPERATES

IN (2022)

So far in 2022, H&M online

has launched in Colombia, Peru and Uruguay. In September H&M online launched via
franchise in Israel and on Shopee in Thailand. In the spring COS, another individual
brand of H&M, launched online in Australia and via Zalora in the Philippines. At the
end of the year COS online will be launched via franchise in Thailand. Similarly, Monki
has launched on AboutYou, as well as on Zalora in Singapore and Malaysia, & Other
Stories on HURR in the UK, and Arket on YOOX. In September & Other Stories opened
in Singapore and also on Zalora in Singapore, Malaysia and the Philippines. In the
fourth quarter COS will be launching on YOOX, Nordstrom and Breuninger.
In the fourth quarter Arket will open its first stores in France and Finland. The H&M
group is continuing to renegotiate a large number of leases as part of the company’s
intensified store optimisation, which also involves rebuilds and adjustment of the
number of stores and of store space to ensure the best store portfolio in each market.
The H&M group’s contracts allow around a third of leases to be renegotiated or exited
each year. For 2022 the plan is to open around 89 new stores and close around 254
stores, making a net decrease of around 165 stores excluding Russia, Belarus and
Ukraine. Most of the openings will be in growth markets, while the closures will mainly
be in established markets.
VALUES
At H&M it is believed that, “Our values are part of who we are, what we stand for and how we act.”
The company’s working principles are bonded as follows,

We are one team

“Our workplace is inclusive, and respectful. We encourage and help each other to win
together. We see the big picture and collaborate across boundaries, sharing our skills
and knowledge in the best interests of our company to create unbeatable customer
value.”
We believe in people
“We are the best we can be and bring out the best in everyone and the business. We
empower and trust others to take ownership and embrace diverse perspectives. We
listen to and learn from our colleagues.”
We are entrepreneurs
“We have a strong business mindset. We are curious and creative and take every
opportunity to adapt to ever changing customer needs. Our innovative and flexible
approach delivers the best customer offer and experience.”
We make constant improvement
“We are always eager to find a better way forward. We constantly improve by seeking
feedback to act, learn and adapt with speed. Everyday improvements, big or small
steps, can make a huge difference.”
We are cost-conscious
“We make careful, sustainable choices by using resources responsibly and doing more
with less. We create value for money, making a sustainable lifestyle accessible for
everyone.”
We are straightforward and open-minded
“We are open, honest and humble. We reflect on our behaviour and listen to others.
We speak up, but once a decision has been made, we commit to it.
We are prepared to have our own ideas challenged and happy to let the best idea win.”
Zara, a Spanish multi-national retail clothing chain, specialises in fast-fashion, and sells
clothing, accessories, shoes, beauty products and perfumes. The company has its head
office in Arteixo, in Galicia. It is the largest constituent company of the Inditex group.

Industry- retail

Founded- 1974

Headquarters- Arteixo

Country- Spain

Chairman and CEO- Pablo Isla

Founders- Amancio Ortega &

Rosalia Mera

Parent- Inditex

The clothing retailer has more nearly 3,000 stores, including its kids and home stores.
It has stores in 96 countries and is the flagship brand of the Inditex Group. Zara is
renowned for its ability to develop a new product and get it to stores within two
weeks, while other retailers take six months. Spain is the biggest market with 547
stores (including Zara Kids and Zara Home), followed by China (229 stores), France
(145), Russia (144) and Italy (134). The U.S. has 98 stores as of January 2019.
Zara is a forward-thinking force in fashion, embodying what is possible, when is
possible when responsibility and aspiration are accessible to all. By bringing more
thoughtful style to the world, Zara aims to provide everyone, no matter where they
are, with the inspiringly beautiful, always on-trend, responsibly crafted fashion they
deserve.
MISSION STATEMENT
Zara mission statement is to “give customers what they want, and get it to them faster
than anyone else.” Such a simplistic, concise, and straightforward statement shows
why this company has been so fruitful.
It has the following parts:
1. Distinguished products
2. Improving lives
Zara is more concerned with the likes and interests of its clients rather than simply
pushing fashions in the market. That is why the company dedicates more time to learn
about these ‘wants,’ to inform the designs of its products. Unknown to many
competitors, this is what makes Zara brand unrivalled. The company has also learned
that by meeting the demands of the clients when needed, it improves their lives and
creates loyalty. Hence, they have come with a survey opportunity that will benefit
both you and the company. The unique supply chain adopted by Zara to increase the
speed of delivering new products faster has made it a darling in the Spanish and global
markets.
Zara vision statement is “to contribute to the sustainable development of society and
that of the environment with which we interact.” Its main parts include:
1. Developing society
2. Improving the environment
Through its corporate social responsibility, Zara keeps demonstrating its responsibility
to improvement of the lives of people. Moreover, the company also supports a wide
range of environmentally-conscious programs to support the stability and
preservation of natural resources.
CORE VALUES
Zara core values include “beauty, clarity, functionality, and sustainability.” The
company uses these as the guiding principles in its operations.
As a fashion company, Zara acknowledges the importance of fostering progressive
cultures to stay alert and updated with market demands.
MARKET EXPANSION
Zara’s first shop outside Spain was opened in 1985 in Porto, in Portugal. In 1989, the
company entered the United States, and then France in 1990. During the 1990s, Zara
expanded to Mexico (1992) and Greece, Belgium and Sweden (1993). In the early
2000s, Zara opened its first stores in Brazil (2000); Japan and Singapore (2002); Ireland,
Venezuela, Russia and Malaysia (2003), China, Morocco, Estonia, Hungary and
Romania (2004); the Philippines, Costa Rica and Indonesia (2005); South Korea
(2008); India (2010); Taiwan, South Africa and Australia (2011); and Peru (2012).
In September 2010, Zara launched its online boutique. The website began in Jordan. In
November of that same year, Zara Online extended its service to five more countries:
Austria, Ireland, the Netherlands, Belgium and Luxembourg. Online stores began
operating in the United States in 2011, Russia and Canada in 2013, Mexico in
2014, South Korea in 2014, Romania in 2016, India in 2017, Brazil in 2019 and Peru in
2020.
Zara introduced the use of RFID technology in its stores in 2014. The RFID chips are
located in the security tags which are removed from clothing when purchased and can
be reused. The chip allows the company to quickly take inventory by detecting radio
signals from the RFID tags. When an item is sold, the stockroom is immediately notified
so that the item can be replaced. An item that is not on the shelf can easily be found
with the RFID tag.
In 2015, Zara was ranked #30 on Interbrand's list of best global brands.
In 2019, Zara updated their logo. It was designed by the French agency Baron & Baron.
In 2019, the global fashion business Journal MDS stated that while the textile
commerce of the world had gone down by 2.38%, Zara's had risen 2.17%.
In 2019, Chief Executive Persson said the brand is waiting for more acceptable global
rent levels to continue its expansion. In Europe, the brand planned to cut the number
of retail locations beginning in 2020.

PRODUCTS
Zara stores have men's and women's clothing as well as children's clothing (Zara Kids).
Zara Home designs are located in European stores. The majority of Zara customers are
aged between 18 and about 35. All of the clothing is processed through the
distribution center in Spain.
Zara also includes accessories, shoes, swimwear, beauty and perfumes.
In May 2021, Zara launched its first beauty line, ZARA Beauty.
RESEARCH METHODOLOGY
Research is an art of scientific investigation. It comprises defining and redefining
problems, formulating hypothesis or suggested solutions, collecting, organizing and
evaluating data, making deduction and reaching conclusions and at last carefully
testing the conclusion to determine whether they formulating hypothesis.
Collection of the data is of primary importance in the research process. Data which is
collected for the purpose of research helps in proper analysis which is helpful to
conduct research effectively. For our study, we have taken secondary data into
consideration.
Secondary data means data that are already available i.e., they refer to the data which
have already been collected and analysed by someone else. When the researcher
utilises secondary data, then he has to look into various sources from where he can
obtain them. In this case he is certainly not confronted with the problems that are
usually associated with the collection of original data. Secondary data may either be
published data or unpublished data. Usually published data are available in:
 various publications of the central, state are local governments
 various publications of foreign governments or of international bodies and their
subsidiary organisations
 technical and trade journals
 books, magazines and newspapers
 reports and publications of various associations connected with business and
industry, banks, stock exchanges, etc.
 reports prepared by research scholars, universities, economists, etc. in different
fields
 public records and statistics, historical documents, and other sources of
published information
The sources of unpublished data are many; they may be found in diaries, letters,
unpublished biographies and autobiographies and also may be available with scholars
and research workers, trade associations, labour bureaus and other public/ private
individuals and organisations.
Secondary data collection in Research Methodology
Researcher must be very careful in using secondary data. He must make a minute
scrutiny because it is just possible that the secondary data may be unsuitable or may
be inadequate in the context of the problem which the researcher wants to study. By
way of caution, the researcher, before using secondary data, must see that they
possess following characteristics:
Reliability of data: The reliability can be tested by finding out such things about the
said data: (a) Who collected the data? (b) What were the sources of data? (c) Were
they collected by using proper methods (d) At what time were they collected? (e) Was
there any bias of the compiler? (t) What level of accuracy was desired? Was it
achieved?
Suitability of data: The data that are suitable for one enquiry may not necessarily be
found suitable in another enquiry. Hence, if the available data are found to be
unsuitable, they should not be used by the researcher. In this context, the researcher
must very carefully scrutinise the definition of various terms and units of collection
used at the time of collecting the data from the primary source originally. Similarly,
the object, scope and nature of the original enquiry must also be studied. If the
researcher finds differences in these, the data will remain unsuitable for the present
enquiry and should not be used.
Adequacy of data: If the level of accuracy achieved in data is found inadequate for the
purpose of the present enquiry, they will be considered as inadequate and should not
be used by the researcher. The data will also be considered inadequate, if they are
related to an area which may be either narrower or wider than the area of the present
enquiry.
From all this we can say that it is very risky to use the already available data. The
already available data should be used by the researcher only when he finds them
reliable, suitable and adequate. But he should not blindly discard the use of such data
if they are readily available from authentic sources and are also suitable and adequate
for in that case it will not be economical to spend time and energy in field surveys for
collecting information. At times, there may be wealth of usable information in the
already available data which must be used by an intelligent researcher but with due
precaution.
ZARA SUPPLY CHAIN ANALYSIS
 As a brand, Zara values their speed and
responsiveness to the latest fashion
trends. Owned by the distribution
group Inditex, we had a look at what is
the secret to Zara’s competitive
advantage. The secret is it is supply
chain management. In this section we
will be explaining about the techniques
that Zara uses for its supply chain
management.

Zara produces more than 450 million

items a year. The brand stays so
efficient even with the sheer volume
that passes through its supply chain
because of the regular, small batch deliveries that happen with clock-work precision twice a week to
the stores around the world. Ensuring all this runs smoothly is what Zara does best - controlling more
of its manufacturing and supply chain than most of its competitive counterparts.

SUPPLY CHAIN MANAGEMENT TECHNIQUES USED BY ZARA

Vertical Integration

Vertical integration is a strategy where a company expands its

business operations into different steps on the same production
path, such as when a manufacturer owns its suppliers and/or
distributor. It can help companies to cut down on costs and
improve efficiencies by decreasing transportation expenses and
reducing turnaround times. Zara uses vertical integration to
manufacture and distribute products in small batches. The
company manages all warehousing, design, logistics and
distribution by itself.

Inventory Management

Inventory management is the practice of overseeing and controlling the storage, ordering and use of
components that a company uses in the production of the items. Inventory optimization models are
put in place to help the company to determine the quantity that should be delivered to its retail stores
via shipments that go out twice every week. The stock delivered is strictly limited. This goes towards
the brand image of being exclusive while avoiding the build-up of unpopular stock. Quick in-season
turnaround, from production facilities located close to Zara’s distribution headquarters in Spain,
allows Zara to ship more often and in smaller batches. If the design Zara hastily creates in an attempt
to chase the latest trend does not in fact sell well, little harm is done.
Just In Time Production

Just in time is an inventory strategy companies employ to increase efficiency and decrease waste by
receiving goods only as they are needed in the production process and thereby reducing inventory
costs. This method requires producers to forecast demand accurately. The objective of this technique
is elimination of inconsistencies, and unreasonable requirements from the production process, which
results in improvisation of productivity. Just in time production model has helped Zara in reducing
inventory in its supply chain, provided it with agility that sets it apart from other competitors and to
achieve fast turnover by producing products in small quantities.

The retail giant Zara delivers fashionable and trendy apparels catered for different tastes through a
managed and collaborated process – just in time. Zara keeps a large amount of its production in-house
and makes sure that its own factories reserve 85 percent of their capacity for in-season adjustments.
It enables Zara to be flexible in the frequency, amount and variety of new products to be launched.
The company relies on sophisticated fabric cutting, sourcing and sewing facilities nearer to its design
headquarters in Spain.

Zara also has extra capacity on hand to respond to the changing demand. This later translates to
frequent shipments and more numbers of customer visits to the stores, creating an environment of
opportunity.

Centralized Logistics

Centralized logistics is a means of organising the receipt of product from suppliers and its onward
delivery to the individual branches of a multiple retailing operation. Deliveries from suppliers are
transported to a central location, usually in full load quantities, rather than to each branch.

The secret to the success of Zara is centralization. They make decisions in a very coordinated manner.
It sticks to a predictable, deep and fast rhythm, based around order fulfillment to stores.

Each of Zara’s outlet sends in two orders per week on specific days and timing. Trucks leave at specific
times and shipments arrive in stores at specific times. Garments are already labelled and priced upon
destination.

As a result of this clearly defined rhythm, every staff involved (from design to procurement,
production, distribution, and retail) knows the timeline and how their activities pan out with respect
to other functions. That certainly also extends to Zara customers, who know when to visit stores for
fresh new garments.
According to the techniques followed by ZARA’s supply chain, we can analyse the innovation of ZARA
supply chain management from the following aspects:

Products design

First of all, ZARA design mainly depends on the buyer operation, not original design. Mainly through
the "copy" high-grade products or the outsourced trend products to recombine, in order to save
design time and cost.

Secondly, the "trinity" design and order management model is innovated, which is composed of
designers, market personnel, purchasing and scheduling personnel, and fully communicates to ensure
that the design conforms to the trend of trend accurately and saves time.

Procurement and production

First of all, procurement and design are carried out simultaneously. According to the information
collected, ZARA is concurrent with the design and organizes the purchase in time to ensure that the
design can be put into production directly after the design is completed. About 40 per cent of the
fabric comes from within the group, with the remaining 60 per cent purchased from 260 suppliers
near headquarters, each with no more than a share of up to 4, avoiding ZARA's over-reliance on a
particular supplier.

Second, ZARA does not have a fixed cooperation between suppliers and manufacturers, generally have
preference to choose the lower price of manufacturers to cooperate

Lastly, in terms of production, most of ZARA's products are produced in Europe, and nearly 50 percent
of the products are produced by themselves, while the other half are outsourced to nearby affiliated
suppliers. In most cases, a factory produces only one product for ZARA for a certain period of time,
thus avoiding production errors. European production maximizes the speed of the ZARA supply chain.

Distribution and transportation

ZARA logistics is the main pursuit of extreme speed. First of all, in order to ensure the speed, ZARA
mainly through air transportation for product distribution.

Secondly, ZARA uses the self-developed commodity management intelligent system to strengthen the
information transmission with information technology, so that the whole distribution network is faster
and more efficient. More than 200 miles underground transmission network has been built, China
Unicom headquarters and various suppliers, transportation clothing materials and products, greatly
accelerated the intermediate transmission speed.

Finally, unlike other garment companies that set up logistics transit stations, ZARA uses direct
distribution from distribution centers to stores for sales, thus reducing large-scale warehousing and
loading. The necessity of unloading saves time and cost.

Sales and feedback

First, ZARA's retail stores are mostly fully controlled and are generally located in busy streets or
upscale business districts. The display and decoration of the store are managed by the company
headquarters to ensure the display of the brand image and improve the customer shopping
experience.

ZARA only produces a certain quantity of products every quarter, according to the restocking
application submitted by the store, it guarantees that the product will be updated twice a week, but
each product will not sell more than three weeks. Moreover, for some hot products, ZARA will only
replenish goods twice at most, effectively controlling the backlog of products caused by demand, idle
production capacity and excessive supply in this way, thus stimulating consumers to make quick
purchase decisions. To ensure that the ZARA inventory will not exceed 20, well below the clothing
industry 35% level.
H&M SUPPLY CHAIN ANALYSIS
H&M is a clothing brand founded by Erling Persson in Sweden in 1947. Today, H&M
sells clothing, accessories and cosmetics at more than 1500 stores around the world.
H&M has a three-in-one philosophy of fashion, quality and price, creating a dual supply
chain of efficiency and cost.
The organization’s dependence on efficient and integrated systems for retail inventory
management in the major parts of its supply chain, has led to enabling success in stock
control management and a well-earned position in the Gartner list.
Decisions on collections are taken by a group of approximately 100 pattern makers
and 160 in-house designers together with merchandisers in our production offices to
create, plan and purchase the collections from the buying office based in Stockholm,
Sweden. H&M launches one collection in spring and one in fall every year. The
company has two design procedures: long term collection planning and real-time
design based on latest trends to gain market share in a faster way while also being
flexible in the eyes of the customer.
Manufacturing: Independent Suppliers, But Strong Relationships
H&M outsources all its production and does not own any factory. Regardless, the
company maintains a good control over their outsourced production activities. It’s
production is handled by 850 independent suppliers, mainly in Asia and Europe.
Merchandise with shorter lead times are produced in Europe while ones with longer
lead times are produced in Asia. H&M maintains control over their outsourced
production through 30 production offices in strategic locations close to suppliers.
Production offices perform the following functions:
 Act as a liaison between designers and the suppliers working with information
from both to choose suppliers that are efficient and more convenient for a
specific product.
 Act as auditors by performing quality and safety testing while also monitoring
environmental effects of manufacturing activities to ensure that company’s
requirements are being met.
 Help suppliers improve working conditions and standards to create a closer
relationship with suppliers allowing the company to reduce lead times.
 Minimizing risk by purchasing raw-materials throughout the year on an ongoing
basis.
Strong supplier relationships with the help of effective manufacturing strategies
reduce lead times and help reach affordability.
It is very important to order the product at the right time to obtain the right price,
quality and lower lead times. H&M manufactures in advance 80% of it’s inventory
while introducing remaining 20% based on current market trends. Lead times vary
between a few weeks to six months, with advance orders for garments such as
children’s wear and basics while trendy clothes based on current trends that require
smaller quantities may be produced at a shorter notice.

Logistics: Inventory Management Out of the Stores

Most of the manufactured products out of the factory directly go to logistics centers
from where the products are distributed to the stores closer to the area. Inventory is
held in regional replenishment centers while not having back up stocks. Inventory from
regional replenishment centers distributes directly to the stores.
Technology: Integrating the System from Product Design to Sales
H&M having a very complex supply chain uses a very well-developed IT system
integrating the headquarters, administrative sources, production offices and stores
allowing for communication in real time especially in regards to design and product
development and this is important as the fashion giant does not own any of their
factories and does not buy fabrics in advance.
 Using IT, the company obtains information regarding the fabrics held by each
supplier so as to make informed decisions as to where to place a specific order.
 Using central inventory management software each store is connected to
corporate logistics and H&M warehouses which makes ordering process and
restocking stores more efficient.
 The head office monitors sales trend from each store and use this information
for design and production choices oriented to the customer.
H&M uses a centralised IT system to observe customer trends. This gives them a
competitive advantage by allowing 20% of manufacturing to be done in shorter lead
times. In addition to this replenishment centers further contribute to this flexibility by
monitoring every individual store’s inventory level and then responding in real time.
Distribution
Garments are transported to one of the many distribution channels located in
different sales market after which unpacking and allocation is done and then garments
are sent to the stores. These distribution channels act as a center for supporting the
retail stores of a region consisting of several sales countries.
 Green Supply Chain
H&M emphasises on green transportation as company’s core value despite the fact
that logistics can be challenging for every fashion industry. Goods are transported
mostly by ocean in Asia whereas goods from Europe are transported by rail rather than
road because H&M aims to increase share of distribution movements by rail over road
in Europe. Air is only used in exceptional cases when faster deliveries are required.
Drivers for Outsourcing
 Cost Reduction
Since the company does not own any factories of their own it saves money on costs of
setting up plant, building and equipment and it enjoys labour arbitrage and cheap raw
materials.
 Flexibility
The fashion industry is dynamic which the company can use in its favour by changing
production patterns which would result in high profits. Apparels that are high in
demand can be reordered while those low in demand can be ordered in less amounts.
 Specialization
Designing is one of H&M’s core capability and outsourcing activities gives the company
more time to focus and put effort in designing their collections.
H&M takes out two major collections every year - spring and fall. Between each
season, there exist many subcollections that help H&M to continuously change its
inventory. The major collections are conventional long lead items; the sub-collections
are contemporary items with short lead times.
The reason behind H&M’s capability to act quickly is its network of 20-30 production
offices which are strategically placed close to the suppliers. These offices work with
the buyers in Sweden and the production facilities, they review samples, check quality,
and choose the suppliers, which will handle each order. The items with short lead
times are made in Europe, and the items with longer-lead items are made in Asia. Like
Zara, this allows H&M to be more receptive to trends.

Moreover, if we measure by sales,

H&M is currently Europe's largest
clothing retailer, and earnings
have continued to rise even amid
the current downturn in retail
sales.
Below we will be analysing the
innovation of H&M supply chain
management from the following
aspects:

Products design
First, H&M is a fashion follower, not a creator. On the one hand, more than 100
designers travel to and from the major fashion kingdoms on a regular basis to capture
fashion trends and features, and on the other hand, according to the feedback of store
terminal customer demand to obtain customer demand fashion features, Thus, forms
the "push-pull" type design production mode. This ensures lead time and provides the
product the customer wants to "hold" the customer.
Secondly, H&M began to promote product design innovation, and gradually turned to
a custom-made production model. H&M combined with a top-level design master to
integrate quality, fashion and low prices perfectly, and to launch low-price, high-
quality products that would drain the trend. Shape brand characteristics and
competitiveness.
Procurement and production
H&M strives to balance efficiency and cost. In order to achieve low cost, H&M places
production and purchasing in low-cost areas. First of all, outsourcing production,
outsourcing all production activities to 700 suppliers in 22 countries in Eurasia, 60
percent of them in Asia and 40 percent in Europe, have innovated the dual-supply
chain management model of two-speed parallel procurement--purchasing basic
products from Asia, in order to reduce costs as much as possible, purchase products
that require rapid response from close to sales, ensuring speed. And H&M regulates
suppliers and works only with suppliers on its list. Thresholds are set to ensure quality
and coordination, adjust and Advances in Social Science, Education and Humanities
Research, volume 344 11 cooperate with each other. Second, procurement flexibility,
12 times a year procurement, rather than quarterly procurement. In order to ensure
the accuracy of the purchase, H&M set up a ICT information exchange platform within
the company to make the information of sales, inventory, purchase plan and
production plan completely transparent, and set up a circular information feedback
mechanism. Ensure accuracy, quick response and low cost from fashion prediction-
design-production-product feedback-sales phase to ensure procurement readiness.
Logistics and transportation
First of all, logistics outsourcing, H&M outsourced all logistics to DHL and Green Cargo,
freight transport subcontract to professional transport companies, using the ICT
platform to track the logistics process management and planning the best route to
ensure the timely supply and deployment of products. At the same time, control
efficiency, cost and professionalism, to ensure the H&M low-price and high quality
core competitiveness.
Secondly, different from the speed pursued by ZARA, H&M pays attention to cost
control in logistics and transportation, so the main modes of transportation are railway
and sea transportation.
Production marketing
H&M pays attention to the customer experience, first of all, the store is high-end built,
the store display is close to the big brand, in order to satisfy the customer's ultimate
experience, and the store area can satisfy the display of thousands of products. Create
a "one-stop" shopping environment. And different from other fast fashion joining
mode, all H&M stores are self-owned, leased and used to avoid the drawback of the
shortage of enterprise funds.
Secondly, H&M pays attention to celebrity effect in sales, and strictly controls the cost
inside, but the cost of publicity is higher, accounting for 3 ~ 4% of the sales volume,
H&M uses the star to shape the image of "low price high-end brand", and promotes
the appeal of brand.
H&M’s supply chain in numbers
Data below is validated as per December 2021.

 H&M performs business with over 602 commercial product suppliers who
manufacture products for its brands in over 1519 tier one factories in Europe,
Asia and Africa.
 China and Bangladesh are the largest production markets for clothing.
 The European Union is the largest production market for H&M’s beauty
assortment.
 Eight years is the global average length of our relationship with a supplier since
2006, but some have been doing business with the brand for over 25 years.
 Around one and a half million people are employed by the supplier factories
they work with. 63% of them are female and less than 1% are migrant workers.
 H&M operate 16 local production offices, employing over 2,000 colleagues who
work daily with the suppliers.
 37% of tier one factories have trade union representation.
 967 factories reported that worker representatives are freely chosen by the
workers.
 COMPARISON BETWEEN ZARA AND
H&M’s SUPPLY CHAIN MANAGEMENT
Zara is a multinational brand that was founded in 1975 and, over the following
decades, it has established its presence in many countries around the world. As of
2018, the company employed more than one hundred seventy thousand employees
and had a turnover of several billion dollars which made it one of the largest fashion
retailers. Currently, Zara provides an opportunity for customers to buy their products
online, which significantly contributes to its revenue, especially during the COVID-19
pandemic.

H&M is a company that specializes in fast fashion and offers its clients a huge variety
of clothes and accessories to choose from. It is committed to implementing and
promoting sustainable production practices, for example, to minimize its impact on
the environment, the company sources organic cotton. The brand is recognized as one
of the major fashion retailers and continues to expand further, including online.

Below we have made a comparative analysis of both companies on various aspects.

 An important shared belief of both companies is the deep understanding of
their customers’ needs and wants. Both have built structures for identifying
 their preferences. For Zara, reacting to customer’s wishes is a core constituent
of its competitive advantage, while H&M is known for its emphasis on
researching and forecasting upcoming trends.
 The noteworthy thing about these brands is their innovative approach to
fashion retail. Zara depends on its supply chain and cost leadership. It has an
unconventional supply chain which allows it to deliver products in real time and
react to the contemporary fashion trends. H&M’s fashion cycles are longer than
Zara but it still manages to respond to the altering trends.
 Not only H&M, Zara also focuses on consumer preferences to maintain their
competitive edge. In addition to that, Zara also maintains close relationships
with the suppliers that ensures lower prices of raw materials and control costs.
 H&M values maintaining long lasting relationships with the suppliers. Trust,
transparency and responsibility are vital in supplier relationships.
Concentration is also on development and sustainability of suppliers. As H&M
has expanded globally it has generated new opportunities for suppliers and
workers.
 Uniqlo, another fast fashion retailer focuses on technological differentiation. It
uses long product development cycles and offers basics that allure a large
consumer base. In comparison, Zara has built a supply chain that enables it to
follow fashion trends and deliver goods in near real-time. H&M has an approach
that is a combination of the Uniqlo and Zara models. It merges a commitment
to longevity and staying responsive to fashion trends at the same time.
 Compared with H&M, ZARA innovation supply chain pays more attention to
rate building, but neglects product cost, quality and innovation, which leads to
its low price and low quality and lack of competitiveness. This part mainly
explains the deficiency of ZARA innovation supply chain and its influence on the
development of ZARA.

Deficiencies in ZARA Innovation supply chain Management

 Does not pay attention to product quality
ZARA design lack of innovation, but still maintain the original brand positioning
and development model, simply rely on imitation and reorganization. The
quality is neglected in the pursuit of speed. ZARA pursues speed blindly, and
from the design stage, it does not strictly control the quality of fabric. ZARA
cannot guarantee the quality of raw materials and products by changing
suppliers and manufacturers frequently in order to pursue low cost.
  High product
cost
Whether ZARA choose
air transportation or
nearby production will
have a huge
expenditure, too high
cost eventually leads to
high product price,
price competition does not have an advantage. The lack of innovation in
marketing: there are many fast fashion brands available in the market, such as
H&M star effect marketing is the main marketing means of the clothing
industry, ZARA still takes hunger marketing as the main sales strategy has been
eliminated by the market.
 The model is easy to replicate
ZARA's supply chain management lacks other innovations besides speed, such
as product design innovation, supplier management model, etc., as other
enterprises improve their economic strength, this supply chain management
model is easy to replicate. The realistic influence of insufficient Innovation
supply chain Management The shortcomings of innovative supply chain
management have reduced customer loyalty to ZARA, further affected the
profitability of ZARA, and even weakened the advantage of ZARA, which is
gradually overtaken by other brands, as follows:
1. Customers are losing a lot: First of all, the PH index is often not up to
standard, the formaldehyde content exceeds the standard, and so on,
which leads to the sharp decline of customer trust. Secondly, the product
lacks innovation, customer loyalty drops obviously, the profit level of
shop is not as good as before. Moreover, because of the high cost, ZARA
products further price, higher prices than other fast fashion brands,
customers began to switch to other brands.
2. Lower profit level: ZARA sales performance in first-tier cities is relatively
impressive, but the secondary and third-tier city stores are basically in a
no-profit state, inventory increases and gross profit margin decline lead
to a vicious circle of marketing mode.
3. Gradually caught up: ZARA's competitiveness is declining, development
is not good, is gradually being overtaken by other fast fashion brands led
by H&M, 2018 global clothing and fashion brand value ranking, ZARA
behind H&M, ranked third in the world, brands such as UNIQLO have
also outsold ZARA. in recent years.
 Solutions
Fast fashion enterprises, represented by ZARA, should learn from H&M to
pursue speed and cost balance and focus on both price and quality. The specific
countermeasures are as follows.
1. Attach importance to product quality: The first stage of product design
should take the product quality into account. On the one hand, the
design team should carry out product innovation while ensuring the
basic needs of customers. On the other hand, the design team should be
sure of the process and material of the fabric, and avoid leaving quality
loopholes in the design stage of the product. Secondly, in the stage of
purchasing and production, we should establish a stable supplier system,
establish long-term strategic cooperation with suppliers, realize
information sharing, and monitor the quality of upstream products and
reduce communication costs. Finally, the establishment of a strict
monitoring system, all kinds of fabrics into the Strict inspection, for non-
qualified products to actively implement the treatment program.
2. Control cost, flexible pricing: First of all, we should control the cost, in
the stage of product procurement, basic fabric bulk purchase, switch to
railway, sea transportation and other general modes of transport.
Production phase, appropriate increase in Southeast Asian countries
production ratio, reduce manufacturing costs. Secondly, according to
the adjustment of pricing scheme, according to the changes of consumer
groups, we should make the choice of raising and lowering the price
according to their consumption level, and then make differential pricing
according to the difference of consumption psychology between men
and women. New marketing, orderly expansion: first of all, we should
make use of fan effect to innovate marketing, create star effect and
improve brand competitiveness. Second, ZARA needs to control all store
operation, close inefficient stores, and then forward-looking present
market saturation, according to the operational conditions of the
enterprise has rhythm, scale expansion.
3. Continuous innovation: Continuous innovation in supply chain
management to reduce the possibility of replication by other fast fashion
companies. First of all, we should change the plagiarism mode in the
product design, combine the cultural characteristics of the consumer
market, join the international fashion elements, Advances in Social
Science, Education and Humanities Research, volume 344 14 realize the
breakthrough in the design, and meet the individual needs of the
consumers. Secondly, it innovates the new experience of customers and
 seamlessly connects the physical stores and the online sales before and
after sale, thus improving customer satisfaction and loyalty.

Deficiencies in H&M Innovation supply chain management

 Major shift in the industry

Increasing digitisation has influenced this. H&M sees many opportunities arising from
this shift, as the group has the capacity and resources to seize them, but there are also
risks for those who during this transitional period are not fast and agile enough. As
more and more shopping take place online, mainly via mobile phones, the shift poses
challenges to physical retail stores across the industry.

 Fashion

In the fashion industry operation is a risk in itself. Mode has a limited shelf life and
there is always a risk that some of the collections are not commercial enough, i.e.,
Customers will not be well received. Purchases of fashion are often emotional and can
be adversely affected by unforeseen geopolitical and macroeconomic events.

 Weather

Products of the H&M Group are sold based on normal weather patterns. Divergences
from normal weather affect sales. This is especially true in the transition from two
seasons, such as from summer to autumn or from autumn to winter. If autumn is
warmer than usual, it can have a negative impact on the sales of weather – related
clothes, such as outerwear and chunky knitwear sales, which already account for a
significant proportion of total sales in several markets.

 Dependence on third party vendors and delays within the supply chain

H&M Group is completely dependent on third party vendors for the supply of its
merchandise. This means the group does not own any factories and outsources to
commercial product suppliers in manufacturing factories. The group maintains huge
vendor relationships; however, it has no assurance of continued supply, pricing, or
access to new products. For this reason, disruption in vendor relations could lead to
insufficient in-stock positions. In addition, this lack of direct control over the
manufacturing process could make the company vulnerable to quality issues in its
sourced merchandise.

Apparel analyst Salter says this is supported by the group reporting in its Q3 FY2020/21
results that demand was not able to be fully met because of disruption and delays in
product flow.
 ZARA VS H&M, WHO DOES IT BETTER?

BASIS H&M ZARA

Markets Around 2200 stores in 96 Around 4968 stores in 61
countries countries
Supply chain Vertically integrated Dual supply chain
supply chain
Outsourcing or own Owns production Outsources its production
production house activities activities to its suppliers
Major production Production is mainly done Production is mainly done
in Spain and Portugal in Europe and Asia
continents
Modes of transport Uses fastest modes of Uses cheapest modes of
transportation (planes, transport (waterways,
trucks), also owns railway railways and roadways)
tracks
Distribution channel Centralised distribution Centralised plus local
system distribution system
Lead time As less as two weeks In Asia- 3 months

In Europe- 3 weeks
Inventory management Centralised inventory Follows centralised as
management system well as decentralised
management system
Logistics Third party logistics In house logistics
provider- Inditex limited provider- H&M
International
Transportation, Inc.

ZARA being the king in the Apparel Industry followed by H&M, therefore, comparison
of ZARA and H&M is of great significance in evaluating their supply chain operations
throughout the world.
ZARA, the leading firm in the Apparel Industry and also the youngest one, is spread
across 96 countries with around 2200 stores spread across these countries. ZARA’s
Supply chain is designed in such a way that a product could be designed and have the
same product sold in the store a month later. Whereas H&M, the 2nd leading firm in
the Apparel Industry and the oldest one, is spread across 61 countries with around
4968 stores spread across. ZARA follows a Vertically Integrated Supply Chain where it
manages its own supply chain, that is, the whole process is totally run by them whereas
H&M follows a Double Integrated Supply Chain where there is more than one supplier
for the company.
ZARA owns its production activities and is solely responsible for its outcomes whereas
H&M outsources its production activities to suppliers and there are high chances of
delay in the production process. ZARA uses the fastest mode of transportation to get
the first mover advantage whereas H&M focuses more on cost cutting and therefore
uses the cheapest mode of transportation, thus reducing the chances of getting the
advantage.
ZARA uses Centralized Inventory Management System in order to ensure the best for
the customers at any cost whereas H&M uses Centralized as well as Decentralized
Management System which gives equal power to the customers as well as the
employees. ZARA uses Third Party Logistics Provider named “Inditex Limited” which
helps in reaching the market in lesser than 48 hours across all the countries but is
expensive whereas H&M uses in house logistics service provider named “H&M
International Transportation, Inc.” which is cost effective but comparatively takes
longer time to reach its customer.
The lead time of Zara is lesser than 2 weeks. This means that ZARA can manufacture a
product and make it available in stores in lesser than 2 weeks. Whereas H&M takes 3
weeks to make the product available at the stores. One of the reasons why H&M’s lead
time is more than that of ZARA because the production produce from the suppliers are
mandatorily to be sent to the central warehouse in Hamburg, Germany. The longer
the time H&M takes to make the products available at stores, the more chances of
losing its customers. The more the customers they lose, the more it helps its
competitors create a value for themselves.
As H&M does not own any of its factories, it has heavy dependence on production and
design in countries like Cambodia, Bangladesh & China, since the labour is found cheap
in these countries. There are high chances of labour being unskilled in these countries
and also there are chances of delay in the production process due to uncertainty of
events which would make the customer wait for a longer time. ZARA owns all of its
production activities due to which it is able to reach the stores very quickly. A customer
does not want to wait for any product and if it does happen, there are high chances
that the customer might switch to other substitutes that would accommodate their
preferences and therefore it should be made sure that the product is available at right
place and at right time to the right customer.
H&M has its entire focus on price of the product whereas ZARA focuses on the Value
of the customer (Danziger, 2018). The concept of selling it cheap in the market was
prevalent in the older days but in the 21st century, it’s not only about price but also
about value created for the customers by the product. Only selling the product
comparatively cheaper does not create value for customers, but rather the product
should be available at right format and at right time and with right quantity is what
customers look for these days. And this strategy is well adopted by ZARA.
H&M focuses mainly on Product. On a comparison with ZARA, H&M is widely
diversified in terms of products. In fact, according to the Annual Report of H&M 2018,
there is an excess inventory of $4.3 Billion which is unsold. Whereas ZARA believes
that it’s not only about the product but it is more about experienced shopping, that is,
designing new fashionable trends which makes the customer come back for more
passionately.
H&M though has 4968 stores worldwide but 80% of its stores are located in malls
where it competes with other Fashion retailers thus making it difficult to be attracted
by customers whereas ZARA has around 2200 stores worldwide and in 39 online
markets. Most of the ZARA stores are located in crucial areas which attracts more
customers, precisely, the loyal customers. Moreover, ZARA has the power to shut
down the stores which are anymore not profitable unlike H&M.
CONCLUSION
Fast fashion industry is highly dynamic. For retailers earn higher profit margins and to
maintain constant supply of latest products in stores they need to have a quick
response to the changing market trends and accommodate a fast delivery and
distribution system.
This requires precise warehouse planning and stocking to quickly transport the
inventory for order fulfilment. This also includes knowing what is in transit and what
is waiting to be distributed to the stores as any delays would lead to loss in inventory
thereby reducing retailer’s margins.
But, some of the industry’s most successful fast fashion retailers such as Zara and H&M
keep products constantly moving with current trends and a balanced inventory to
minimise inventory losses and maximise profits. Quick response supply chains hep
retailers like Zara and H&M to move their goods from design to distribution over a
short period of time. Such an effective and efficient quick response model enables
these retailers to avoid stock outs and ensures continuous rotation of latest products
for consumers and this would in turn increase store visits and full price. The main
objective of fast fashion retailers is to keep their goods continuously moving with the
latest fashion or trends. A well-oiled quick response and inventory management
process enables retailers to continuously get new stock into the stores in small batches
which prevents products stagnation and redundancy as wells as liquidation promotion
and markdowns leading to better profit margins and lesser unnecessary overstock.
The innovation of supply chain management is a continuous process. The new mode
formed by one-way innovation is not enough to support the long-term development
of an enterprise. First of all, the fast fashion enterprises must take the customer as the
center, attach importance to the cost and quality of products, and not simply rely on
the speed advantage of supply chain to respond to the market. Secondly, it is
necessary to continuously innovate supply chain management, from product design,
modern scientific and technological means to product marketing strategy innovation,
by reducing the risk of being copied, adapting to the rapidly changing market demand
and forming unique competitiveness. These two parts are not just for ZARA, but are
worth the attention of all the fast fashion companies.
From the basis of our analysis, we can conclude that H&M’s dual integrated supply
chain has been a key factor in enhancing their supply chain operations by integrating
leagile” in their manufacturing processes from continents like Europe and Asia,
therefore, bringing out the cost and quantity advantage in order to effectively and
efficiently respond faster to the changing demand of their customers.
H&M, the second largest retailer of apparel industry are constantly striving to
strengthen their supply chain performance in the market with its technological
integration through initiation of artificial intelligence, RFID, Automated Warehouses,
blockchain technology to enrich their customer experience. In order to make the
supply chain efficacious, H&M believes in making the product available at the stores
at the right time at the right place and at the right price. But when compared to ZARA’s
supply chain management, ZARA has significantly been successful in its supply chain
operations, having distinctive competitive edge over H&M’s supply chain
management, since, ZARA is purely customer-oriented striving to provide better
customer service whereas H&M is product oriented facilitating mass production with
high variety at reasonable prices. Also, to mention that ZARA’s lead time is 14 days as
compared to H&M’s lead time that is 21 days meaning H&M takes longer time from
initiation to completion of its supply chain operations. This implies that the customer
might have to wait for longer time period and therefore they tend to venture out
opting for substitutes. Henceforth, H&M is performing better in terms of supply chain
operations provided that they are the second largest clothing retailer but in
comparison to ZARA, H&M has to look out for alternatives in terms of supply chain
management strategies.
We can further differentiate the companies on the following basis,
Differences in Design

H&M and Zara use almost the same approach towards design with designers, buyers,
and other specialists. For Zara, designing starts at retail stores through feedback from
buyers. Both Zara and H&M offer new products continuously throughout the year.

Differences in Manufacturing

Zara has production factories in Spain and Italy, respectively, where it concentrates on
capital-intensive operations like dyeing and cutting. H&M, however does not own any
factories, and thus it depends on a network of 750 suppliers in Europe and Asia for its
production.

Differences in Distribution

Zara uses automated warehouses located close to manufacturing centers to store,

pack, and assemble orders for their retail outlets. At H&M, an in-house team manages
stock but physical distribution is handled by third parties. Goods flow from the
production site to the countries where retail outlets are located whereby, they are
inspected and taken to different stores or are put in a central stock store known as
“Call-Off warehouses”.
Differences in Retailing

Both H&M and Zara own and run their retail stores. Zara’s retailing model stands out
because garments stay in stores for less than 14 days as production is done in small
batches without repeating designs.

From above, we make bring the following conclusion,

Zara uses an agile supply chain management strategy by focusing on its ability to
fulfil customers’ changing demands within a short period. It manages the flow of
goods from suppliers through manufacturing to distribution and retailing. H&M, on
the other hand, employs a collaboration strategy by partnering with over 750
contractors in Europe and Asia for its manufacturing purposes.
REFERENCES
CASE STUDY H&M ( 10TH OCT 2022)

- https://en.wikipedia.org/wiki/H%26M

CASE STUDY-ZARA (10TH OCT 2022)

- https://en.wikipedia.org/wiki/Zara_(retailer)

ANALYSIS OF H&M’S SUPPLY CHAIN MANAGEMENT (12TH OCT 2022)

- http://ijariie.com/AdminUploadPdf/Fast_Moving_H_M__An_Analysis_Of_Supply_Chain_Ma
nagement_ijariie10784.pdf

SUPPLY CHAIN MANAMGMENT AT ZARA AND H&M (13TH OCT 2022)

- https://business-essay.com/supply-chain-management-zara-and-h-and-ampm/

OVERVIEW OF SUPPLY CHAIN MANAGEMENT (13TH OCT 2022)

- https://www.investopedia.com/terms/s/scm.asp

PROS AND CONS OF ZARA AND H&M SUPPLY CHAIN MANAGEMENT (14TH OCT 2022)

- https://www.just-style.com/analysis/supply-chain-pros-and-cons-for-top-10-global-apparel-
companies/

EVOLUTION OF THE FAST FASHION INDUSTRY (14TH OCT 2022)

- https://impakter.com/from-hardwear-to-quickwear-the-evolution-of-the-apparel-industry/

THE GLOBAL FASHION INDUSTRY (14TH OCT 2022)

- https://www.purolatorinternational.com/what-to-know-about-fashion-apparel-supply-
chain-management/

CASE STUDY-ZARA(INDITEX) (15TH OCT 2022)

- https://www.inditex.com/itxcomweb/en/home

CASE STUDY- H&M SCM IN COMPARSION TO ZARA’S SCM (15TH OCT 2022)

- Fast_Moving_H_M__An_Analysis_Of_Supply_Chain_Management_ijariie10784.pdf

VALUES AND MISSIONS ZARA HOME (15TH OCT 2022)

- https://mission-statement.com/zara/#Vision_Statement

COMPARITIVE STUDY OF SCM OF FAST FASHION GIANTS ZARA AND H&M (16TH OCT 2022)

- file:///C:/Users/VASHIST/Downloads/Comparative-Study-of-Supply-Chain-Management-
Offast-Fashion-Giants-Zara-HM-2.pdf

ZARA AND H&M COMPARITIVE ANALYSIS (16TH OCT 2022)

- https://ivypanda.com/essays/zara-hampm-united-colors-of-benetton-supplying-fast-
fashion/
RESEARCH METHODOLOGY-ANALYSIS (16TH OCT 2022)

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