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1.1 H&M background
Figure 1: Business Revenue of H&M Group worldwide
(Source: statista, 2022)
Erling Persson, a Swedish citizen, introduced his company around 1947, constructing the company's initial location throughout Västers, Sweden. The company had previously been known and referred to as "Hennes". At that time, this company people who bought sold their necessary clothes for all kinds of women. The company did not survive until 1968 because Person Hunters were naming Mauritz Widforss's clothing brand. In addition, the company not only sold women's clothing but also included all kinds of men's clothing. For the reason of this, so the name of the company is completely changed to the Hennes & Mauritz name of the company. As a result of this, immediately shortly after the power source amalgamation as well as its official restructuring become known as the abbreviated H&M (hm.com, 2023). The company's development progressively proceeded towards growing 76 marketplaces as well as 59 marketplaces on the internet abroad from Sweden's boundaries.
1.2 Organisational Approach to Procurement and supply chain management
The company's recommended approach to obtaining items and offerings that fulfil its current requirements includes "procurement and supply management" (PSM). PSM's mission aims to make certain ensuring the resources that are required are perpetually forthcoming whenever required while at the same time increasing performance as well as decreasing expenses (Pinto, 2020). Along with this, through this method, the company achieves the business characteristics of the company in a very good way. Not only this, the company's variety helps its business suppliers to better understand the various specifications required (Hanaysha and Alzoubi, 2022). For this reason of this, all kinds of tools help the company to develop very well and consider all kinds of needs of the company very well.
1.3 Brief Discussion and Analysis
Technologies towards "procurement and supply management" (PSM) represent an outstanding foundation for evaluations and documentation retention. Along with this, "Procurement and supply management," Such various tools will be able to save all kinds of partners of this company in a very good way. Side by side the company will help all of its suppliers to fulfill their entire plan very well. H&M will be able to communicate very well with its various suppliers. H&M's various types of business in various countries market places and also their international markets their work will be discussed very seriously and very well.
2. Analysis of procurement and supply strategy
2.1 Macro and micro concerns and supply chain of H&M
2.1.1 PESTEL Analysis of H&M
Political Factor: The globally expanded fashion organisation has to maintain the rules and regulations of the different countries. The Brexit issue made the cost higher in the UK market (Tomaszewska, 2021). The high inflation rate influences the company to increase the product rate or lower the profit margin.
Economic Factors: The annual report of H&M describes that the sale decreased by approximately 15% in the year 2020 due to the lockdown. The increasing rate of the US dollar forced the brand to sell the product in a high range in the USA (Chen and He, 2020). On the other hand, increased focus on the online business helps the company to reduce the percentage of their loss amount.
Social Factors: The most popular fashion brand is working also for social development besides fashion product production. H&M is offering more job offers to women than a man to empower the ladies in society (Galica, 2022). The Brand has also collaborated with the international labour authority to provide better wages and safety to the employees.
Figure 2: PESTEL analysis
(Source: edrawmax, 2023)
Technological Factors: In this modern technology-based era, H&M is also following the trending path. It has improved its technology in production by concentrating on almost every sector. The technology department has tried to reduce the return percentage by launching an AI tool where people can try their product virtually to get an idea bout fitting the clothes (Candeloro, 2020). It has also started to apply or to trial the designer product using 3D technology and thus it has started Zero wastage of fabrics for the sample test.
Legal Factors: The brand is working all over the world and to sustain itself in the market of the countries, the company need to follow all the rules and regulations of the government. Being a social activist, the organisation has restricted the involvement of children in their manufacturing unit or any work for the organisation (Calderón Carrillo, 2019). The Authority believes in equality, so they started to provide equal wages to every employee depending on tier respective positions and departments.
Environmental Factors: According to the global report, the industry is responsible for second rank in terms of polluting the environment. H&M decides has set up a mission of a 56% reduction the Green House Gas emission by the year 2030 (Asif and Asif, 2020). The group has signed a contract with the European Country to use green electricity for all of the operations of the company.
2.1.2 Macro Environmental Factors of H&M
The business is also influenced by many external factors throughout the world to run a successful and sustainable business.
Figure 3: Macro Environmental Factors
(Source: linkedin, 2019)
Suppliers: The organisation maintains a healthy and transparent relationship with the suppliers by revealing the suppliers' names and locations and other details about the suppliers. The company has tied up with the mills too to supply the fabric to the suppliers of the ready product. The brand is working with the labour department to maintain or increase wages (Distelhorst and Shin, 2023). On the other hand, the brand is providing the liability to the suppliers to outsource any unavailable products to the factories with the approval of H&M authorities. The organisation has tried to focus on local people for the work in the factories and on the local market to supply the fabrics of respective factories.
Marketing Intermediaries: The second-largest fashion brand in the world does not believe in marketing through Intermediaries. They believe to reach the customer direct from the manufacturer by maintaining high quality and producing the latest design product in a large number of varieties (Putri et al. 2022). The marketing team focuses on digital promotion and subsumes advertisement to make aware people of the brand. The brand is attracting people by producing the latest fashion in price throughout the world to sustain its place in the textile industry.
Competitors: In this textile industry, there are lots of companies lined up in the competition to grab the market position. H&M has become the second-largest retail brand in the world by producing a quality products at a lower price than the others (Jamshid, 2019). The positive approach toward the customer increases the brand value of this fashion brand.
Customers: The H&M research team has made the target people of age 20-35 mostly as they intend to buy the latest styled product at reasonable prices (Sandberg and Abrahamsson, 2019). The fashion brand is focused to build a strong relationship with their customer through both online and offline stores (Tumundo et al. 2022). Also, they launched many rewards for the offline store to encourage them to connect their business to digital platforms.
2.2 Future trends for H&M leading to potential opportunities and threats
H&M is a global fashion company that has experienced several challenges in recent years due to changing behaviour of consumers, increased competition and disruptions in the supply chain. According to Salehi-Amiri et al. (2021), the fashion industry is increasingly focusing more on sustainability and H&M has already taken various steps to improve sustainable practices. It is also observed that by continuing to invest in sustainable materials and production methods the company is trying to position itself as a leader in the sustainable fashion market.
Figure 4: Future trends in the retail business sector
(Source: peoplemattersglobal, 2023)
As opined by Peng et al. (2020), e-commerce is growing rapidly and has taken various steps as the key channel for fashion retail. The company has already invested a lot of money in e-commerce capabilities and the improvements in this area are also helping the company to drive growth and improve customer engagement. H&M is already a global company and there are still various markets in which the company can expand. Contrarily, Jian et al. (2021), the pandemic has highlighted the fragility of the global supply chain and hence the company has faced supply chain disruption as an outcome. The fashion is industries highly competitive and H&M is usually facing huge competition from conventional retailers and e-commerce companies as well (Pretel et al. 2022). To stay competitive the company is trying to differentiate itself through various pricing policies customer experiences and designs of products. As consumers of become more conscious regarding various issues H&M have faced backlash and it does not continue to improve its sustainability and ethical practices as well.
2.3 Procurement and supply strategy of H&M
According to Hamadneh et al. (2021), H&M is it Global fashion retailer that designs and sells clothing, shoes and accessories for men and women and children. The procurement and supplies strategy of this organisation is focusing on sustainability and ethical sourcing. H&M has set a target to utilise only sustainable materials in its products by 2030. This usually means that the company is working with suppliers to ensure that the materials used to make their products are sustainably sourced and do not harm the environment. As opined by Wieland, (2021), H&M has a code of conduct for its suppliers, which is outlining the expectations of the company on social and environmental sustainability. The company is also working with suppliers to reduce the environmental impact of its supply chain which includes the usage of water and energy.
Figure 5: Supply chain operations of H&M
(Source: hmgroup, 2022)
According to Remko, (2020), to implement its procurement and supply strategy the company has a team of procurement and sustainability experts who usually work closely with suppliers to ensure that they meet the sustainability standards of the organisation. The company also conducts regular audits of its suppliers to ensure that they are complying with the code of conduct. The procurement and supply strategy of the company has helped it to build a reputation for sustainability and ethical sourcing (Xuejie et al. 2020). This has also helped H&M to attract customers who are concerned about the environment and social responsibility as well. The tactic has also had the company reduce the risk of supply chain disruption and improve the long-term sustainability of the business organisation.
2.3 Strengths and limitations of H&M’s supply chain strategy
According to Chang and Chen, (2020), the supply chain strategy of H&M has several strengths that enable the company to remain competitive in the business industry. One of the major students of this company is its ability to respond quickly to changing customer demands. The companies also use a just-in-time inventory system that is allowing the organisation to produce goods quickly in response to changing trends. On the other hand, Helo and Hao, (2019), another major strength of this organisation is its supply chain strategy which is focusing more on sustainability. H&M has implemented several initiatives to reduce its environmental footprint which include using sustainable materials and reducing its energy and water consumption. This approach has also helped the organisation to appeal to consumers increasingly concerned about sustainability and the environment. Moreover, H&M's supply chain strategy usually focuses on sustainability (Hemant et al. 2022). It is also focusing on maintaining a close relationship with suppliers through which the company works closely with its suppliers to ensure that they try to add here to the standards of the company for labour rights and environmental practices.
This approach has also helped the company to improve the working conditions of its suppliers and promote ethical practices in the fashion industry. According to Peters and Simaens, (2020.), the supply chain strategy of disorganisation has several limitations as well. One of the major limitations is the heavy Reliance of the company on low-cost suppliers. This approach allowed the company to keep its costs low and maintain its competitive edge in the market. However, it has also exposed the company to risks which include supply chain disruption quality control complex which is and reputational risk associated with unethical supplier practices. In addition to this, the focus of the organisation is on sustainability which has been criticised for not going far enough.
2.4 Sustainability and corporate social responsibility of H&M
H&M is a leading Global fashion retailer and as a part of its commitment to corporate social responsibility and sustainability, the company has developed a series of initiatives and programs. H&M has taken various steps to reduce the environment of its operations as well as to improve the working conditions in the textile and garment industries. One of the key sustainability initiatives of this company is its consciousness collection which characterises clothings made from sustainable materials which include organic cotton, recycled polyester and Tencel. It is also observed that the company is trying to encourage customers to donate their used clothing to recycle or re-purpose it (Peters and Simaens, 2020). The companies are also members of the Better Cotton initiative with areas to improve the social, economic and environmental circumstances of cotton farming. In terms of corporate Social responsibility H&M has taken various steps to improve working conditions in the government industry. According to Majumdar et al. (2020), the organisation is a member of the Fair Labour Association that is also implemented several policies and initiatives to ensure that workers in its supply chain at treated fairly. The company has also implemented a code of conduct for its suppliers with sets out standards for working conditions including wages and working hours. H&M has implemented various fair base methods which are designed to ensure that the workers in its supply chain are paid a fair wage (Liu et al. 2021). Another limitation of the sustainability of this company is the CSR initiative that may be viewed as a form of greenwashing or using PR and marketing strategies to present a false or misleading image of the environmental and social impact on the organisation. The company has also faced criticism for this, particularly for its use of eco-friendly marketing language that when not always reflect the true sustainability of its products and practices.
3. Recommendations to H&M
3.1 Vendor management
Through this management, H&M will communicate very well with the various types of sellers in their business market. Along with this, Vendors will have the opportunity better acquainted with this company more extensively over longer. As a result of this, H&M will have the advantage of being enabled to boost the performance of the service they provide by employing reasonable cost, outstanding customer service as well as trustworthiness (Seth and Rastogi, 2019). There is a very important aspect of vendor management which is E-procurement technologies assist departments of procurement streamline their buying procedures. As a result of this, this will help the H&M company to better engage and onboard their vendors (Erasmus and Marnewick, 2021). Enhanced compliance has become an additional benefit of excellent vendor management which helps H&M to grow their business globally and can improve the business in a better way. For this reason of this, H&M will decrease numerous vendor-related problems through partnerships with compliant vendors.
3.2 Lean manufacturing method
Through this method, this H&M will increase the quality of their products in a very good way. In addition to this, the number of errors in various internal and external work of the company will be reduced by this method. As a result of this, this H&M will grow their business very well in the international market and will take the business forward very well. Not only that but as a result, H&M will be able to grow its turnover very well and reach a much larger area (Hidayat et al. 2021). Along with this, this company will be able to develop the skills of their employees very well for their business activities. As a result, this company will be able to produce its products in a very short period. This method will allow the H&M company to deliver their products very well at home and improve their performance to a greater extent. As a result, the company will be able to profit more from its business in the international market due to the production of its products in larger quantities (Buer et al. 2021). Besides this H&M will satisfy their customers with their products very well through this method and attract customers very well. For this, the company has to keep the quality of its products and its business services very well. As a result, their customers will get their products very well and the H&M will buy more products, so the company will get a lot of profit.
3.3 Just-in-time (JIT) inventory management
JIT is an approach carried out by many companies, including H&M, to upgrade their stock levels and limit costs. H&M, a worldwide style retailer, has effectively used JIT to further develop its production network proficiency and fulfil the constantly changing needs of the design business (Siddiqui, 2022). JIT stock administration rotates around the guideline of having the right stock, in the right amount, with flawless timing. As opposed to keeping up with huge reserves of product, H&M centres around a smoothed-out inventory network that guarantees items are conveyed on a case-by-case basis, lessening the requirement for over-the-top stock stockpiling.
One of the critical advantages of JIT for H&M is the decrease in conveying costs related to unnecessary stock. By having a lean stock framework, H&M limits the costs connected with warehousing, taking care of, and capacity. This permits the organisation to apportion its monetary assets all the more proficiently, putting resources into different parts of the business like promoting, item improvement, and client experience (Milewski, 2022). One more benefit of JIT stock administration is the expanded responsiveness to advertising requests. The style business is infamous for its quickly changing patterns and customer inclinations. By executing JIT, H&M can rapidly adjust to these changes, guaranteeing that the perfect items are accessible at the ideal time. This assists with limiting the gamble of being left with obsolete or unsold stock, which can bring about huge monetary misfortunes.
3.4 Data-Driven Analysis
An important factor of H&M's prosperity is its capacity to use information-driven bits of knowledge for different purposes. The organisation gathers and breaks down tremendous measures of information, including client inclinations, deal patterns, and market elements. By outfitting this data, H&M can pursue informed choices with item configuration, stock administration, estimating procedures, and advertising efforts.
Regarding product design, H&M utilizes information examination to recognize arising styles and client inclinations. This permits them to foster dress lines that line up with current market requests, bringing about expanded deals and consumer loyalty. Besides, information investigation advances stock administration by precisely estimating requests and changing stock levels also (Fan et al. 2022). By abstaining from overloading or understocking, H&M can limit costs and augment income.
Moreover, information-driven estimating techniques assume a vital part in H&M's tasks. By investigating information on client conduct, buying examples, and contender evaluation, H&M can decide on ideal costs for its items. This approach empowers them to work out some kind of harmony between drawing in clients with serious costs and expanding benefits (Sarker, 2022). In addition, information examination engages H&M to devise viable promoting efforts. By fragmenting its client base and concentrating on individual inclinations, H&M can convey customised ads, offers, and proposals. This designated promoting approach improves client commitment, encourages dedication, and drives deals development.
3.5 Implementation of C.P.F.R supply chain strategy
H&M, a famous fashion retailer, executed the C.P.F.R strategy to improve its tasks and upgrade collaboration activities with its providers. C.P.F.R concentrates on further developing interest estimating, stock administration, and renewal processes through shared data and joint independent direction. H&M started cooperative preparation by laying out a nearby organisation with its providers (Hemant et al. 2022). They shared deals and datastore to work with accurate need anticipating. By analysing authentic deal patterns and market bits of knowledge, H&M and its providers cooperatively anticipated future demand, empowering effective production planning. The predicting data was then used to drive recharging decisions. H&M and its providers synchronised stock levels and laid out programmed replenishment processes. Besides, H&M incorporated innovation frameworks with its providers to empower constant data sharing. This considered consistent correspondence and permeability all through the production network, working with fast reactions to changes in popular or supply disturbances.
By carrying out the C.P.F.R system, H&M accomplished a few advantages. It improved item accessibility, diminished stockouts, and enhanced stock levels. The cooperative methodology encouraged more grounded associations with providers, prompting further developed responsiveness and deftness. Moreover, the technique empowered H&M to smooth out its store network, limit costs, and convey a superior client experience through quicker item conveyance and diminished lead times (Sajja, 2021). Overall, H&M's execution of the C.P.F.R process upset its activities by cultivating joint effort, upgrading and anticipating exactness, and further developing stock administration, eventually driving consumer loyalty and business achievement.
The overall study has demonstrated the global procurement procedure of H&M. This company is a fashion retailer, which has a significant impact on its prosperity and development in this specific retail industry. H&M obtaining and provider connections, H&M has had the option to keep areas of strength for a store network, guarantee item quality, and satisfy client needs effectively. The organisation has carried out severe rules and prerequisites for its providers, guaranteeing consistency with social and ecological principles. H&M effectively makes progress toward advancing fair work works on, decreasing fossil fuel by-products, and limiting the natural effect of its store network.
Through its worldwide procurement organisation, H&M has had the option to take advantage of an assorted scope of providers from various districts. This permits the organisation to use upper hands, for example, lower creation costs, specific aptitude, and admittance to remarkable materials. By obtaining worldwide, H&M can offer its clients a wide assortment of stylish and reasonable design items. Moreover, H&M's worldwide acquirement procedure underlines major areas of strength for building long-haul associations with its providers. The organisation values coordinated effort and open correspondence with its providers, cultivating a commonly helpful association. This empowers H&M to acquire bits of knowledge into market patterns, adjust creation to client interest, and adjust rapidly to changing design inclinations.
H&M's worldwide obtainment methodology likewise centres on effective operations and conveyance. The organisation enhances transportation courses, uses progressed stock administration frameworks, and uses innovation to guarantee smooth and opportune conveyance of items to its stores around the world. By smoothing out its coordinated factors activities, H&M can diminish lead times, limit stockouts, and further develop consumer loyalty. Besides, H&M's worldwide obtainment technique empowers it to oversee gambles and alleviate disturbances in the production network. By expanding its provider base and carrying out alternate courses of action, the organisation decreases its reliance on a solitary source or district. This guarantees congruity of supply, even notwithstanding unanticipated occasions like catastrophic events or political unsteadiness.
Overall, H&M's worldwide acquisition methodology is a vital driver of its progress in the style retail industry. By focusing on maintainability, building solid provider connections, and enhancing coordinated operations, H&M has made a strong worldwide inventory network that empowers it to convey in vogue and reasonable items to clients around the world. The organisation's obligation to moral acquisition and its capacity to adjust to changing business sector elements position H&M as a forerunner in the business.
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