Unveiling H&M's Approach to Streamlined Operations and Supply Chain Case Study

Unveiling H&M's Approach to Streamlined Operations and Supply Chain

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Introduction: Unveiling H&M's Approach to Streamlined Operations and Supply Chain

H&M is a retail industry and a multinational organisation of clothing based in Sweden which focuses on quick-fashion clothing for women, children, teenagers, and men. The organisation was established by Erling Persson in 1947 and its headquarter are in Stockholm, Sweden. The report will discuss about supply chain concerns through the implementation of improved stock management methods and improved interaction with suppliers. However, the report utilises opportunities through sustainable production and increases their e-commerce abilities. The report also highlights operational concerns like stock outs and quality-control that affect the performance practice of consumer satisfaction (Silva, 2020).

Figure 1: H&M strategy: Becoming more flexible, fast and efficient

Task 1

State the sector in which the organisation operates

Hennes & Mauritz AB (H&M) is an international rapid-fashion retailer in Sweden. The organisation operates in the style industry, particularly in the production, design, and accessories trade of clothing and beauty stuff for women, men, and children.

The key characteristics of this sector

The main characteristics of the retail sector are that it is customer-facing, with real shopfronts selling a varied collection of products and utilising diverse pricing tactics. It is extremely competitive, needing excellent consumer service and technological additions to develop the consumer experience. Retailers should handle intricate supply chains and maintain customer reliability through sales and promotions (De Vass, 2021).

Apply the Goods V Services Continuum

By implementing the Goods v Services Continuum in the retail industry, H&M, as a quick fashion retailer, mainly sells physical products like clothing, beauty items, and accessories. Though, H&M also provides a variety of in-store facilities to increase the consumer experience, for instance, private styling and variations, which drop on the amalgam end of the Goods-Services continuum,. H&M organization’s online store offers services like free delivery, online styling guidance, and free returns, which are extra densely loaded towards services. Generally,

Task 2

The input, output, and transformation process applicable to organisations

• Input: Raw equipment like fabric, dye, and thread, with capital and human resources.
• Output: The output is fast-style products involving clothes, accessories, and beauty items for everyone.
• Transformation procedure: It involves the design, manufacture, and supply of products through a universal set-up of stores, online channels, and franchises.

H&M utilises several supply chains to source raw materials, produce them, and distribute them to consumers and stores (Mukonza, 2020). The supply chains include various stakeholders, involving suppliers, producers, logistics suppliers, and retail associates, which are subject to continuous optimisation to ensure effectiveness and sustainability.

An organisation can resolve two problems faced in the supply chain

H&M faces many challenges in the supply chain, involving sustainability and moral issues linked to labour from the supplier workshop. To deal with these troubles, the organisation can take many steps.

Firstly, H&M might adopt an additional sustainable sourcing tactic by spending on sustainable resources and production techniques, like recycled resources and natural cotton.

Secondly, H&M can apply more accurate observation and auditing procedures to ensure the fulfilment of moral labour values in its supplier industry (Bustinza et al., 2019).

The two opportunities realised at various stages in the supply chain

H&M might utilise several opportunities in its supply chain to improve its company operations and productivity. Here are two possible opportunities discussed below:

• Sustainable sourcing: H&M might source resources and goods from providers who utilise sustainable and moral methods.
• Digitalization: H&M might exploit technology to get better its supply chain performances. For instance, it might utilize artificial intelligence to develop supply management and decrease waste (Attaran, 2020).

Where the raw material come from, their distribution, and how they may be stored before consumer purchase

H&M used raw materials originating from several locations all over the world, involving cotton from Bangladesh and India, and polyester from South Korea and China. These resources are then delivered to H&M's manufacturing facilities, where they are transformed into completed goods.

Once the goods are completed, they are transported to H&M's supply centres, which are placed in strategic locations all over the globe. From there, the goods are either transported directly to shops or district warehouses for additional distribution (Vincent, 2019).

H&M stores and depository stores the products in various manners, depending on the kind of product. For instance, clothing products could be hanging on the shelf or folded on the shelf, whereas accessories or other products can be reserved in cartons.

SWOT analyses

Task 3

5 key factors that need to be considered by organization when selecting its key suppliers

• Quality: The products and services quality offered by the trader is necessary to secure the finished product meets the company's values and expectations.
• Price: The goods and services costs are critical to H&M's monetary health. H&M want to equilibrium the price of products or services with their preferred revenue margins.
• Reliability: Dependability and well-timed delivery of products or services are important to H&M Company’s success. Delayed deliveries or undependable service can affect lost sales and incomes (Wieland, 2021).
• Moral and sustainable: H&M is more and more growing in moral and sustainable practices during their supply chains. Providers that line up with H&M's principles and sustainability objectives can be preferred.
• Advance and technology: Suppliers that provide innovative results and exploit technology to streamline procedures and decrease costs could be additional good-looking to H&M Company than those which do not utilize it. However, with these producing operations in their supply chain, the company has handled to decrease the average time by 15 to 20% through their constant developments in the purchasing procedure.

Consider other factors for example marketing, logistics, and human resources.

• Marketing: H&M wants to make certain that its suppliers are able to assist in its marketing strategies by providing goods that align with the personality of its brand and the preferences of its customers. The skills of the supplier in terms of product creation and growth need to be in line with its marketing goals.

Transportation, warehousing, and proper inventory control are all components of the logistics process. H&M's requirements must be met by the provider's logistical capabilities, and the provider must be willing to collaborate with H&M in order to enhance the quality of the supply chain service.

Human Resources H&M is responsible for ensuring that its suppliers have trained employees who are able to deliver goods and services that are in line with the company's requirements. The hiring and training practices of the supplier need to be able to support H&M's potential, and the supplier itself needs to have fair performance management in order to motivate and keep personnel (Ageron, 2020).

• Technology: H&M needs to ensure that its suppliers are able to maintain the essential elements of its technology, which includes web platforms, data analytics, and supply chain management systems. The suppliers have to be willing to collaborate with H&M to improve the effectiveness and value of the supply chain service, but they must do so as partners.

Figure 2: H&M to downsize Australian operations in March

Task 4

The two operational issues

The two operational problems are connected to the performance targets of reliability and quality, appropriately. These issues are described below:

• Stock-outs is happen when H&M finishes stock of specific goods, conducting to lost sales and unsatisfied consumers. This concern may have an important effect on H&M's profits and brand status. Stock-outs are connected to the performance purpose of reliability, as they affect the dependability of H&M's supply chain practice.

To deal with the problem of stock-outs, H&M wants to get better demand predicting and stock management operations. By correctly forecasting demand and improving inventory stages, H&M can reduce the threat of stock-outs and make sure that goods are available for consumers when they require them. H&M could also apply strategies like security stock and buffer stock to reduce the effect of unpredicted demand changes.

• Quality control concerns are one more operational concern that H&M can face in its daily business work. The quality control problem arises when H&M obtains goods from suppliers which do not meet up its quality values, leading to consumer complaints and item returns. This concern is linked to the aim of quality performance (Fisher, al, 2022).

To address concerns of quality control, H&M requires applying a healthy quality management method that ensures its providers meet its quality values. This method must involve clear quality standards and performance values, dealer audits, and daily operation reviews. H&M could also offer training and help suppliers to increase their quality control operation and make sure that they comprehend H&M's prospects.

The key operational issues

H&M can face other main operational problems that are discussed below:

• Staffing can affect H&M's everyday performance, while it can impact customer service quality, output, and employee preservation. H&M must acquire a skilled and inspired staff that can maintain its operations. This needs effective hiring, training, and performance practices that support H&M's customs and ethics.
• Utilization of technology could increase H&M's supply chain force, inventory management, and consumer support. H&M must ensure that they are using the correct technology infrastructure, and devices to sustain their operations. This involves investment in machinery and IT assets, and effectual IT management methods.
• Capacity management is a practical challenge that associates with H&M’s capabilities to come up with customer demand. H&M required assuring that it has enough ability to produce and supply the goods to its consumers. For this, there is a need for well-developed planning, resource, scheduling, and production allotment which can correspond with H&M’s production objectives and consumer demand (Song, 2019).
• Waste reduction is a challenge that is connected to H&M’s sustainability goals. H&M is required to assure that it decreases the wastage in its activities, involving manufacturing waste, packaging waste, etc. Although to control these kinds of waste H&M can adoptsustainable andsuccessful waste management methods and use environmentally friendly production technology.
• Another vital challenge for H&M is customer services which can impact H&M’s brand reputation and consumer trustworthiness. H&M needed to assure to offer great quality services to its consumers such as high-quality products, timely delivery, an easy return policy, etc. This needs effective consumer service practices, involving customer feedback.

Task 5

The three ways in which IT can be used

Here are three ways in which IT can be utilised to improve H&M's supply chain strategy:

• Inventory Management: IT could assist H&M in check its inventory status and track the movement of its stock in real time. By applying a centralised stock management scheme, H&M can decrease the uncertainty of overproduction or stock-outs, which can induce fiscal losses and decrease consumer satisfaction. H&M could utilise technology, for example, RFID (Radio Frequency Identification) to track stock movement, which could help improve supply chain procedures and diminish errors (Brailsford et al., 2019).
• Collaboration and Communication: IT could ease partnership and communication between diverse shareholders in H&M's Company supply chain, for instance, suppliers, producers, and logistics associates. H&M may utilise joint platforms like cloud-computing software and phone applications to split information, track growth, and resolve problems in real time. By increasing communication and teamwork, H&M can update its supply chain procedures and improve its entire efficiency.

The current technology

• Enterprise Resource Planning (ERP) Systems: ERP systems are usually utilised by retailers to handle inventory and supply chains. H&M can be utilising an ERP system to add data from its several departments and ensure a soft flow of products within its supply chain.
• Point of Sale (POS) Systems: H&M can be utilising POS systems to handle sales in retail shops. These systems permit for the well-organized handling of transactions, the tracking the stock levels, and the collection of consumer data.
• E-commerce Platforms: H&M has a digital store, and it is probable to utilise an e-commerce stage to handle its online sales. These stages permit the efficient handing out of orders, inventory management, and to consumer data collection (Hillmann, 2021).
• Social Media Platforms: H&M could be utilising social media platforms to connect with consumers and sponsor its goods. These platforms permit retailers to engage with consumers to raise brand awareness and make sales.

Conclusion

The report concludes that in the retail sector, the case company H&M operates through a worldwide network of stores, digital channels, and franchises. H&M's business model is mostly focused on trading products, but the organisation recognises the significance of providing services to increase customer understanding and remain competitive in the trade industry. It is recommended to the case company to collaborate with producers and suppliers that organise ethical and sustainable methods in their operations. This can include conducting daily factory audits, appealing to employees to make sure their voices are heard, and operating with suppliers to build up improvement strategies and address every issue that occurs. Moreover, it can also foster positive public relations, which can be beneficial for organisations in future.

References

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Bustinza, O.F., Lafuente, E., Rabetino, R., Vaillant, Y. and Vendrell-Herrero, F., 2019. Make-or-buy configurational approaches in product-service ecosystems and performance.Journal of Business Research,104, pp.393-401.

De Vass, T., Shee, H., and Miah, S.J., 2021. IoT in supply chain management: a narrative on retail sector sustainability. International Journal of Logistics Research and Applications,24(6), pp.605-624.

Fisher, R., de Sousa Jabbour, A.B.L. and Santibañez Gonzalez, E.D., 2022. Green and sustainable supply chain management in the platform economy.International Journal of Logistics Research and Applications,25(4-5), pp.349-363.

Hillmann, J. and Guenther, E., 2021. Organizational resilience: a valuable construct for management research?International Journal of Management Reviews,23(1), pp.7-44.

Mukonza, C. and Swarts, I., 2020. The influence of green marketing strategies on business performance and corporate image in the retail sector.Business Strategy and the Environment,29(3), pp.838-845.

Silva, E.S., Hassani, H. and Madsen, D.Ø., 2020. Big Data in Fashion: transforming the retail sector. Journal of Business Strategy,41(4), pp.21-27.

Shutterstock, 2020. H&M strategy: Becoming more flexible, fast and efficient, (Online). <https://www.fibre2fashion.com/news/retail-industry/h-m-strategy-becoming-more-flexible-fast-and-efficient-270828-newsdetails.htm> accessed on 15.04.2023.

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Vincent, J.L., 2019. The continuum of critical care.Critical Care,23(Suppl 1), p.122.

Wieland, A., 2021. Dancing the supply chain: Toward transformative supply chain management.Journal of Supply Chain Management,57(1), pp.58-73.

Dean Blake, 2021. H&M to downsize Australian operations in March,(Online). <https://insideretail.com.au/business/hm-to-downsize-australian-operations-in-march-202102> accessed on 15.04.2023.

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