Digital Economy Blog

Explore a company using Enterprise systems and identify the key challenges they faced during Covid-19

H&M Hennes & Mauritz AB was founded in 1947 by swede, Erling Persson, Originating from a hunting and fishing store, H&M now offers couture fashion and designs in an exciting and sustainable way. Ranking number three on Gartner's Supply Chain Top 15, H&M is the worlds second-largest clothing retailer. With around 950 stores worldwide and a turnover in 2013 of a colossal 14.6 million euros, this poses the question as to how H&M manage to ensure efficient operations throughout each one of their stores globally? The answer to this is quite simply stock control management. H&M relies on efficient and integrated systems for retail inventory management and in the major components of its supply chain.

Design and Production

H&M is renowned for supplying elegant, trendy styles with rapid turnarounds - embodying the concept of 'fast fashion'. H&M's head designer, Van den Bosch, works tirelessly with her team of 100 designers to synchronize upcoming collections with the latest clothing trends. This strenuous season-by-season cycle is facilitated by H&M's two-fold design process which involves not only long-term planning of new product lines, but also reactionary, timely design responses that are quickly produced and distributed to stores while the trend is ongoing.

H&M relies heavily on outsourcing from design to production, which increases the retail inventory production rate. Despite the fact that H&M's core business depends on its designers, creative directors, and pattern makers to keep up with the latest trends, additionally, it employs fashion trend forecasting firms such as Worth Global Styles Network (WGSN). As a fast-moving retail giant, it takes an innovative approach in deciphering customer interests through traditional analysis and experimental augmented-reality technologies.

Manufacturing

H&M's affordable prices are a direct consequence of manufacturing choices. 80% of H&M's retail inventory is manufactured in advance, with the remaining 20% introduced based on current fashion trends. The companies' strong supplier relationships coupled with its manufacturing strategies to reduce lead times allows H&M to charge affordable prices.

H&M's ability to work effectively with its partners is one of the companies' most admirable qualities in my opinion! With no factories of its own, H&M collaborates with around 700 partner companies in approximately 20 countries and is dependant upon a network of external suppliers to handle its buying and production.

COVID-19

I think it is fair to say that H&M profited from the Covid-19 pandemic! The retail tycoon quickly arranged for its supply chain to produce personal protective equipment to be provided to hospitals and health care workers. This was a really clever idea by H&M to maintain the brands awareness during a time of increasing uncertainty. However, as the pandemic had a disproportionate impact on brick and mortar sales, H&M were forced to close four-fifths of its physical stores. On the plus side, H&M had already began investing in online before the pandemic had even started but the retail giant intensified its efforts when Covid-19 hit and shut stores worldwide. Nevertheless, an increase in the companies' online sales rapidly offsetted the hit! This swift change of direction to online retailing required that H&M invest heavily so as to survive the economical effects of the pandemic. However, this investment has quickly paid off with online sales jumping 24% year on year, accounting for 32% of H&M's total sales. Accelerating the use of AI technology and creating greater operational efficiency between its stores was the key to its survival throughout the pandemic, according to CEO, Helena Helmersson.

Fast Fashion Success

H&M's out-of-the-box strategies have aided in reaching such a prestigious position in the market - a position which enables H&M to gain a competitive advantage over fellow retailers. H&M epitomizes fast fashion done right and their Scandinavian approach to the supply chain makes them one of the progenitors of the fast fashion movement!