SVKM’S

Narsee Monjee College of Commerce and Economics

(Autonomous)
Academic Year (2022-23)

Name of the Course: MICROECONOMICS-I

FY BCOM Semester 1

Title of the Project/ Assignment

ANALYZING HOW BRANDS IN THE FASHION INDUSTRY ARE

MANAGING THEIR DEMAND SUPPLY CHAINS

Teacher In Charge SNEH CHOTHANI

SUBMITTED BY:

SR. ROLL NAME SAP ID CONTACT

NO. NO. NUMBER

1 A075 LEFT - -

2 A076 MANVI CHATURVEDI 45208220637 8291496859

3 A077 HARSH CHAUHAN 4520822482 8169126720

4 A079 SIMRAN CHAURASIA 45208220132 9930924598

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 TABLE OF CONTENTS
SR. CONTENTS PAGE
NO. NO.
1 INTRODUCTION OF TOPIC 3
2 ZARA 6
3 H&M 10
4 PUMA 14
5 CONCLUSION 19
6 BIBLIOGRAPHY 20
7 PLAGIARISM REPORTS 21

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INTRODUCTION:
In a competitive, fast-paced industry like apparel, supply chain management is crucial. 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 as this industry has very short product
lifecycles and high consumer demands.

Advance Supply Chain benefits almost every industry in today’s market. Fashion retailers must
carry variety of products to fit and satisfy the customer’s preferences. In today’s times the
fashion industry is constantly planning for the next season, bringing in new designs and styles
into production and perfecting them before the current pieces fall out of the trend. This industry
has a more complex supply chain. This includes manufacturers creating the fibres, textiles and
finished garments. Due to this, there are 3 links to the chain before involving wholesalers and
retailers. This new supply chain commences with new designs, which are then produced,
distributed, and sold.

In today’s times, consumers now expect more transparency in the supply chain. Due to Labour
exploitation overseas, many customers look at where their clothes are manufactured and under
what conditions. Clothing brands work with many manufacturers to create many unique styles
in a short time to meet their demand-supply chain.

Demand forecasting is also challenging in the fashion industry. New fashion trends come and
go quickly, resulting the product to have no sales history at the start of the season. Therefore,
retailers cannot look at the past year’s sales numbers to determine their performance. On the
other hand, consumer preferences are constantly changing. Previous year’s hottest trend may
look stale and out of touch, or maybe it may so happen that it could just as easily continue to
rise in popularity. Trends arise due to the influence of media, individual influencers, the
economy and even weather. Retail Fashion companies need to manage their stock to prevent
the shortage of stock and overstocked goods, which is especially important with shorter fashion
seasons. Running out of an item at wrong time can severely impact the season’s sales. Having
high leftover as new styles come into season reduces the firm’s profitability and wastes space
in the retail storefront or warehouse. Effective supply chain management helps in ensuring
supply of product, arriving just in time to meet current demands.

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How Supply Chain Management Works?

The fashion supply chain management includes a broad network of clothing designers, different
fabrics and finished products producers, transportation providers, wholesalers, and Direct-to-
consumer retailers. This industry brings together all these organizations involved in turning
raw materials into finished garments together and further distributing them to customers. In
Fashion Industry, the supply chain breaks down into 5 main links:

1) DESIGN: This is the first step where the fashion designers chose fabrics, trims, and
fits the finishes for clothing items. These fashion designers alter and manipulate on their
own to create a new product somewhat similar to that of latest trend that others might
like to replicate. Designers are often the ones who direct the rest of the supply chain.
2) TEXTILE MANUFACTURING: Each garment requires raw materials. Textile
producers spin, weave, blend, and dye cloth and create various other products for the
final product.
3) APPAREL MANUFACTURING: After this, the garment makers cut the cloth and
sew it into wearable pieces, following he patterns and design specifications.
4) DISTRIBUTION: Distribution in the fashion industry is very complex as the raw
materials and finished apparels are produced in various parts of the world and imported
into the key markets. The apparels are transported directly to retailers or to distribution
centre that may feed multiple suppliers at a time. A well-managed supply chain includes
detailed tracking, allowing the brands to manage and optimize the transportation.
5) END-USER PURCHASE: It is the customer at the end of the supply chain who
purchases the product. They may choose to buy from various options like local retailer,
departmental store, online e-commerce platforms or simply from a buy online pick-up
in store option. From the point of view of Online Operators, proper management of
supply chain is very important so as to cater various customers located in different
places. All the retailers must focus on inventory management to meet the Demand-
Supply requirements of the customers.

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FASHION BRANDS OFTEN USE ONE OF THE 3 STRATEGIES TO
MANAGE THEIR SUPPLY CHAIN:

PUSH SUPPLY CHAIN: This strategy uses market forecasting and predictions to drive the
supply chain. Producers and Designers create apparels keeping in mind the upcoming demand.
They then “push” these products to the end-consumer retailers.

PULL SUPPLY CHAIN:

This strategy waits for the demand for a product to rise rather than forecasting it before.
Manufacturers produce new products only when they know that consumers will buy them. This
strategy helps in reducing the risk of inventory becoming overstocked while the demand of
product is not very high.

HYBRID PUSH/PULL SUPPLY CHAIN:

In this strategy fashion brands combine both the supply chain strategies using push/ pull
method. This helps the brands saving their inventory costs while reducing the risks of
unpredictable demand. First, the supply chain starts as push system, where the producers
constantly produce products keeping in mind of new garment designs. The demand for new
fashion products pulls these materials into garment production units and rest of supply chain
to the end consumers. Other brands may push the finished garments to a warehouse, where they
wait to be pulled in by the retailer when demand arises.

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Now, let us study few fashion brands and find out how do they manage their Demand-Supply
Chain:

1) ZARA

Zara is Spanish multi-national retail clothing chain which is specialises in fast fashion selling
various clothes, accessories, shoes, beauty products and perfumes. The head office of Zara is
in Arteixo, in A Coruna in Galicia. Zara is the largest constituent company of the Inditex group.
Zara was started by Amancio Ortega in 1975. His first shop was in central A Coruña, in Galicia,
Spain – where the company is still based. He initially called it Zorba after the classic 1964 film
Zorba the Greek, but after learning there was a bar with the same name two blocks away,
rearranged the letters to read "Zara".

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Zara caters to all individuals of society. The majority of Zara customers are between the age
group of 18 to 35. Zara just needs about one week to develop new product compared to the 6-
month industry average. Once the products are designed, they take nearly 10-15 days to reach
the stores. Most of the products Zara sells are manufactured in Spain, Portugal, Turkey,
Morocco, Bangladesh and more recently - Armenia. Zara produces around 450 million items
per year.

Amancio Ortega dropped out of school and found a job at local shirt maker store in order to
support his family and for next 10 years worked at multiple jobs at Government business
starting from being an assistant to the tailor all the way up to delivering clothes directly to the
customers and during this 10 years of observations Amancio Ortega made 3 important
observations that went on to change the fashion industry for ever and even today Zara works
based on the same lessons. These observations are:

1) INSTRUMENT OF STATUS

Ortega find out that all the human beings depending on whichever age group they belong to,
the put in extra money and put in extra efforts on “Instruments of Status.” These goods are
nothing but snob appeal goods. Snob appeal goods are those goods which refer to the qualities
or attributes of product that might appeal to customer with “snobby” tastes. In simple words
these goods have high economic value but low practical value. Ortega found that the most
important instrument of status among human between age group of 18 to 35 were nothing but
the clothes they wore.

2) CRITICAL PARAMETERS FOR STATUS INSTRUMENTS:

Ortega found out that the parameters to judge instruments was never the quality or utility value
of the product. Instead, it was the variety and design which mattered the most to the consumers.
Just like this, in clothing, women have 2 primary parameters that define their status in social
circle and those parameters are= Variety + Design

VARIETY + DESIGN > QUALITY

3) WOMEN WERE EXTREMELY FASCINATED BY FASHION ICONS:

Women were extremely fascinated by fashion icons like filmstars and influencers. But the
existing fashion industry did not catch up quickly to get the latest designs of clothes in the
market. On the other hand, Designer clothes although caught up with these trends, they were

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too expensive so common people could not buy these clothes. Because of this, there was an
unfulfilled demand in the market.

Therefore, by using these 3 insights, Amancio Ortega built an agile supply chain which looked
something like this-

Instead of buying high quality clothes in less quantities, Ortega would buy medium quality
material in high quantities and then bargain with the seller to give it at a discounted price. This
thinking helped Zara with their customer demands even of the low-income group.

Then, he would do an extensive research to find out what type of designs are trending in society
and what type of designs are doing well at the most premium outlets. Ortega would travel to
various cities and observe their taste and kept a close eye on the pop culture. Later, as soon as
he spotted a lucrative design, he would immediately get the designers to design something
similar to that, pass it to the tailors and get the clothes on display within shortest possible time.

This strategy of Fast Fashion Supply Chain gave Amancio Ortega 3 incredible super-powers:

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1) EXCITED CUSTOMERS:

The customers were very delighted and happy to find trendy designs. The clothes available at
Zara stores were available at very affordable price as compared to any other stores or designers.
This is because the materials brought by Zara was at very cheap and affordable price.

2) VERY HIGH FOOTFALL:

As the clothes available at Zara stores was very cheap along with being trendy, there was a
very high footfall at the Zara stores. With every new design coming every 1-2 weeks, the
curiosity of customers was very high. Due to this, the sales of Zara increased rapidly.

3) POWER OF DISCOUNTING:

Due to huge footfall and high sales, Zara got the power of discounting. This again led to high
demand for Zara clothes in the market.

ZARA ACHIEVED THE GOLDEN EQUATION OF:

JUST IN TIME + JUST IN CASE CONSUMPTION

There are two types of Operations in Supply Chain Management and they are:

JUST IN TIME JUST IN CASE

LOW STORAGE COST AS INVENTORY STOCKED UP

PRODUCTS MOVE QUICKLY
LEADS TO HIGH STORAGE COST

SUPPLY CHAIN BECOMES

EXTREMELY EFFICIENT WASTAGE OF INVENTORY

Zara adopted the operation of “Just in Time” approach wherein they push out new inventories
every 15 days so they end up saving lots of money by not keeping inventory. This strategy of
Inventory Management has helped Zara to increase their profits. On the other hand, customers
buy with just in case mindset due to which they usually spend more than needed. The products
in Zara stores keep on changing every 2 weeks, so people buy the products with the mindset

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that they won’t find it next time and thinking that they can wear these apparels in any parties
or outings, etc. These clothes tend to last for 10-15 washes so people find it affordable and
trendy to wear.

2) H&M

H & M Hennes & Mauritz AB or H&M Group (abbreviated H&M) is multinational clothing
company located in Sweden. It focuses on fast fashion clothing for women, men and children.
As of Jun 23, 2022, H&M Group operates in 75 global markets with 4,801 stores under the
various company brands, with 107,37full-time equivalent positions.

H&M is the largest international clothing retailer, only behind the Spain-based Inditex (parent
company of Zara). H&M was founded by Erling Perssson. Its current CEO is Helena
Helmersson.

Competitive Strategies followed by H&M:

1) The competitive strategy of H&M in the market can be characterised as a combination

of cost leadership and elements of differentiation.
2) The H&M business of the company is built on the outsourcing of new designs to many
independent suppliers.
3) H&M manufactures small batches of products all around the world which allows it to
showcase the wide collection portraying the latest fashion trends.

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The reason for H&M’s Success:

The secret to the success of H&M can be attributed to a “fast fashion” business model.

Fast fashion relies on moving, in bulk, the merchandise from the producers/factories to the
showrooms/warehouses in the shortest amount time possible, that too at a reasonable price.
They aim at young, fashion-conscious urban consumers, their products and cheap and trendy.

H&M’s model also relies on a strong marketing team that can quickly determine what the
demographic desires of the target customers and according to their demand, design and produce
their goods.

The factors that determine the level of demand of H&M is income of consumers, price of
product and expectations of consumers.

1) First, the income of consumers affects the level of demand. If the income of the
consumers increases, the level of demand will increase because they have extra money
to afford luxury like buy more clothes from well-known retail clothing company such
as H&M.
2) Secondly what the consumers wish to purchase and how much are they willing the pay
for it.

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 3) With H&M, over the past few years THE SALES HAS INCREASED WITH THE
INCREASE IN THE DEMAND.
4) A representation of the sales of the H&M group is given below just to analysis how
much it has grown in the past years.

SUPPLY CHAIN ANALYSIS:

Given below is the H&M supply chain structure:

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(Pre covid) H&M controls each stage of its supply chain as an:
1) Importer
2) Wholesaler
3) Retailer
4) The continuous development of IT offers support for its logistics
5) Transportation is under contract with third parties while H&M handles its own stock
management
6) The flow of goods is routed through its terminal in Hamburg, Germany and later
distributed to various distribution centres in many countries
7) As soon as the products arrive at the locations, they are inspected and allocated either
in the showroom or in a centralized storage warehouse

Here are some of the ways H&M has improved their Supply chain (Post Covid)

1) Coded Couture App- Google and H&M came up with an app which is a part of H&M’s
fashion designing house. This app helps the buyers find outfits according to their own
taste and budget. The Android’s awareness API checks on user’s preferences and other
information like their locations etc. This information is passed through algorithms and
in order to increase the sales the consumers are made aware of more products of their
preferences as and when they come.
2) Monki x HoloMe- H&M group’s Monki has collaborate with Holome to make the
customers experience with high definition of human virtual reality. This will be
experience through any electronic device with not much data usage. Here, app will
showcase Hologram with different outfits to the users to allow them to select the best
fit.
3) Blockchain- H&M’s subsidiary Arket has confirmed that they are going to test some
new product through the blockchain technology. Here Arket will trace the data of
products and make sure that it does not get leaked outside. Each block has a unique
hash code. This is one of technologies that H&M is looking forward to use with its
supply chain to give some benefits out of it such as:
eliminating the risk of forgery, errors, reducing transport cost, identification of any
issues quickly, building consumer trust, minimizing delays in paper works and resulting
in better inventory management.

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 3) PUMA

INTRODUCTION:

India is considered to be an enormous marketplace for any trade goods and repair.

As we know with vast population comes huge responsibility.

India is currently hot associate degreed sizzling with an ever-growing sports trade. Whenever
cricket accustomed steal the centre stage, the new-found promotion once Olympiad 2020 and
numerous world championship events, India’s sports skilfulness is developing well. Thus
clearly, the activewear & accessories trade is prospering. You would possibly recognize the
massive ones like Adidas & Nike, that area unit the worldwide leaders in activewear However,
to everyone’s surprise, it’s Puma that rules the Indian sports product market. The company was
founded in 1948 by Rudolf Dassler. In 1924, Rudolf and his brother Adolf "Adi" Dassler had
jointly formed the company Gebrüder Dassler Schuhfabrik (Dassler Brothers Shoe Factory).
accessories.

Puma is the third largest sportswear manufacturer in the world.

HOW PUMA ENTERED THE MARKET?

Puma was the last one to enter India’s activewear market in 2006 and started with a modest
revenue of ₹22 crores. At that point, all the opposite giant sports brands already had a powerful
grip in Republic of India. Nike had a market cap of ₹99 crores, Adidas stood at ₹186 crores &
Reebok dominated with ₹354 crores. quick forward to 2020, the massive cat raced past all its
competitors to achieve the Numero Uno position with ₹1413 crores!

Puma posted revenues of ₹1,413 crore in 2019, the second consecutive calendar year in which
it has sprinted ahead of its competitors. Reebok and Adidas, which follow a March-end fiscal
year, were at ₹407 crore and ₹1,250 crore respectively in fiscal 2019. Nike reported revenues

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of ₹831 crore for the same period, according to the Registrar of Companies (RoC) filings by
the brands. However, a more accurate comparison of Puma’s year-ended December 2019
numbers with those of the rest would be once the competitors release their numbers for the
year-ended March 2020.

STRATEGY USED BY PUMA

As opposition North Americans, the bulk of Indians don't take sports terribly seriously. Shoes
area unit the foremost necessary accent for any sport and since we have a tendency to don’t
have several sports choices in Republic of India, customers typically use one combine for all
sports. a mean Indian won’t obtain two pairs of snug sports shoes however can obtain even five
pairs of fashionable sneakers for various social events during a year. This helped evolve a
replacement sneakers genre specifically for the Indian market that was high on the style
quotient however lacked sports-level options.

Puma understood the psyche behind Indian shopping for behaviour and began coming up with
product keeping in mind the Indian demand towards the style phase. That strategy worked
wonders for the company! whereas Nike sponsored the Indian Cricket Team & Adidas spent
on Sachin Tendulkar’s situation, Puma simply worked extensively on ameliorative &
modifying their product. Not making sports-oriented product additionally helped Puma in
lowering their costs by half-hour compared to Nike & Adidas.

Puma currently stood as a whole that was congruent with sports furthermore as fashion. That’s
what helped the whole climb up the ladder thus quick & thus well. Of course, Puma wasn't the
primary whole to do this plan of action in Republic of India. Reebok, the previous regnant
champion, gave birth to the present plan in a billboard with Mahendra Singh Dhoni & Yuvraj
Singh. however sadly, they couldn’t profit huge because of associate degree unprecedented
scam by Reebok’s company team. Puma then grabbed the chance, dead it dead and currently
has emerged because the Biggest Sports whole in Republic of India.

PUMA’S BRANDS

Puma has master and sub brands. They are as follows:

• Master Brand -

– Sport Lifestyle

– Sport

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• Sub Brands-

-Nuala

-96 Hours

-Mihara

-Starck

COMPETITORS OF PUMA:

1) NIKE

 Best sports brand within the world

 U.S.A. based: body activities & style and merchandise
innovation
 Sub brands like “Tiger Woods” or “Michel Jordan

2) ADIDAS

 Focus on core sports like soccer, tennis, athletics and

skiing
 6 times the financial resources
 Design and marketing department are located in France
and Germany

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3) PRADA

 Well known luxury brand

 4 years ago, Prada dared to step into the sport segment
 Focus on fashion and trends but their price strategy is
still too high

4) DIESEL

 Major fashion brand including: sunglasses, footwear,

watches, fragrances and writing tools
 Experienced an unexpected growth rate

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SUPPLY CHAIN ANALYIS:

PUMA’S SUSTAINABLE SUPPLY CHAIN:

Supply chain sustainability coverage could be a key feature of Puma’s overall strategy. At
the GRI international Conference in Amsterdam, equipment manufacturer Felis concolor,
in cooperation with the worldwide coverage Initiative, proclaimed its intention to expand
environmental issues and improve operating conditions throughout their strategic provider
network.

Reiner Hengstmann, Puma’s international Head of Social and Environmental Affairs

aforesaid, “Without property suppliers, we are going to not be ready to manufacture
sustainability merchandise or probably report concerning Puma’s own property initiatives.”

Puma originally joined a GRI run known as “Transparency within the provide Chain” back
in 2006. beneath this project 3 South African Puma suppliers were trained on issue property
reports. Managers learned a way to live property ideas like waste diversion, energy potency,
and alternative performance indicators.

About a third of Puma's footwear and attire production is completed in China, another third
in Vietnam with the remainder unfold across 5 or six countries

As the results of this coaching Impalah wear, a Puma provider in Capetown, was the
primary carbon-neutral garment provider on the African continent in 2009. Impalah’s 2009

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property Reports reveals a four-hundredth increase in production, a doubling of its
permanent employees, and a tenth call absence. The company’s bottom line improved
through the value savings gained.

By participating with its vendors and giving them any resources, Puma has authorised these
firms to proactively address the weak points in their operations, whereas additionally giving
them the tools to seek out those enhancements severally.

Many firms will learn from PUMA’s leadership. Puma has value-added worth to its giving
by dynamic its company mission from the foremost ‘desirable’ sporting whole, to ‘desirable
AND property.

Puma is currently accentuation transparency and exploitation provide chain coverage as a

central a part of its strategy to become the foremost sustainability sport-lifestyle company
within the world.

CONCLUSION:

The purpose of this study was to describe supply chain management in the fashion industry
and analyse the different demand-supply chain management in this industry. In today’s
time, fast fashion pushes the fashion industry in changing their supply chain management.
The fashion companies focus on agility, quick response, time and fulfilment of demand. In
the above analysis, we can find that the goal of all fashion companies are somewhat similar,
even though their way of fulfilling these depend on their supply chain management. The
reason for why companies chose different behaviour in their supply chain management is
connected and related to their vision and the price strategy they use. We can observe that
how the fast fashion strategies push the fashion companies like Zara, H&M and Puma to
move from a traditional push-strategy to a demand driven pull-strategy. Through this
research, we can conclude that the fast fashion strategy is shown to be applied by fashion
companies characterized by a mix of traditional and modern demand driven supply chain.

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 BIBLIOGRAPHY:

1. Launchmetrics. 3 Reasons the Supply Chain in the Fashion Industry Is Changing. Retrieved
on 8th November 2022 from https://www.launchmetrics.com/resources/blog/fashion-
industry-supply-chain
2. Purolator International (2021). What You Need to Know About Fashion and Apparel Supply
Chain Management? Retrieved on 8th November 2022 from
https://www.purolatorinternational.com/what-to-know-about-fashion-apparel-supply-
chain-management/
3. Wikipedia. Zara (Retailer). Retrieved on 8th November 2022 from
https://en.wikipedia.org/wiki/Zara_(retailer)
4. H&M. Annual Report (2017). Retrieved on 9th November 2022 from
https://about.hm.com/content/dam/hmgroup/groupsite/documents/en/Digital%20Annual%
20Report/2017/Annual%20Report%202017%20Customers%20the%20world%20around.
pdf
5. Statista. H&M Group - Statistics & Facts. Retrieved on 9th November 2022 from
https://www.statista.com/topics/3733/handm-group/#dossierKeyfigures
6. Wikipedia. Puma (brand). Retrieved on 9th November 2022 from
https://en.wikipedia.org/wiki/Puma_(brand)

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 PLAGIARISM REPORTS

1) In a competitive…. when demand arises.

2) Zara Content

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3) H&M Content

4) PUMA Content

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