H&M logistics management

For your reference, the following is a summary of dialogue exchange in the Zoom meetings and email communications:

Q1: Albert, could you give us some guidelines about the “green issues of H&M” to be studied in CW2 ?
Answer: OK, I will revise the “additional guidelines” posted on the module website and add a few useful references to help you finish this part in CW2.

Q2: Albert, could you please explain it, the green/environmental issues, more precisely for us? I have read some online materials about H&M’s sustainability report. Is my approach correct to just describe or study H&M’s sustainability efforts?
Answer: Actually, green issues are external pressures that can affect H&M’s business strategy as well as related logistics activities. A better approach is studying the current customer or public needs regarding green issues of fast fashion industry. And, find out the changes already taken place in H&M and discern what changes should be made in future if H&M want to increase its competitiveness.

Q3: CW2 requires us to create two maps (or diagrams). One for upstream activities and the other one for downstream activities. Please explain the meaning of upstream activities as well as downstream activities. And, where to begin and how to do it?
Answer: Upstream activities means “sourcing activities”. So, the map for upstream activities displays the distribution of H&M suppliers (or production partners). And, in our module website, I have posted two demo video files. The first one teach you where to download H&M’s supplier list and how to find out the numbers of suppliers by country using Excel. Actually, I have also posted the resulting distribution table on the module website. The second video clip teaches you how to produce a map showing the distribution of H&M’s suppliers in different countries on a world map using a freeware called INFOGRAM. You should copy and paste this map onto your CW2 report (and also indicate the source or the access link of your interactive map). Some students told me that they took only 10 mins. to create the first map.
The map for downstream activities should display the distribution of H&M’s retail stores on the world map. The minimum requirement is showing numbers of retail stores by country. By the way, a FT student told me that he could produce a map showing the number of retail stores by smaller region (i.e. province). It would be good but the min. requirement is showing number of stores by country only.

Q4: Albert, could you please brief us the suggested report layout?
Answer:
In the “introduction” section, word count requirement is 500 (with allowable deviation of 20%). First, you may write one or even a few paragraphs about the macro-view or nature of current fashion industry (e.g. short lifecycles, low predictability, high impulse purchasing, etc). The second part is one or more paragraphs about H&M (e.g. business model or concept, ranking or market share, financial performance, etc). The last part is a statement describing the purpose of your case study (i.e. investigating the current logistics management practices of H&M ….)

The second section is “Studying different aspects of H&M’s logistics management”. You just need to describe what relevant facts you found in each sub-section. Don’t use point form that each point is composed of one or two sentences only. Better to use paragraph structure and if possible, keep each paragraph to only one main idea. Generally, a paragraph should be at least 4 sentences. Of course, you may give short comments or interpretations in this part (but, please don’t focus your analysis in this part).

You should focus your analysis in “Discussion” section. Identify the key problems or issues to be discussed in this part. Why do they exist? How do they impact the company?

Conclusion is a brief summary of the key findings and key issues only

In recommendation section, recommend further action to resolve “some of the issues”.

Lastly, about referencing style, you should provide (1) sufficient in-text citation in “introduction”, “Logistics Management of H&M” and “Discussion” parts and (2) use Harvard Referencing Style for the list of references. Please don’t just copy and paste the reference links (I gave you) to the reference page of your report. Otherwise, 5 marks will be deducted according to previous Coventry’s moderation comments.

Q5: Albert, please explain the word count requirement to us more precisely.
Answer: The total word count requirement is 3000 words, but I accept max. deviation of 20% (i.e. word count ranges from 2400 to 3600).

Q6: Regarding the H&M supplier list, I found that the latest one posted on H&M website was dated 22/Mar. But, the supplier list, available on the module website was dated 9/Mar and some figures are different. Which one should I use?
Answer: Actually, H&M will update the supplier list every week or month. So, you may download the latest one from H&M website to produce the H&M supplier distribution map. Or, it would be fine to use the supplier list posted on our module website on 9/Mar. We accept minor differences.

Introduction (around 500 words ± 20%)
• Characteristics of modern fashion (or apparel) industry such as “High volatility”, “High impulse purchasing”, etc
• Current market situation of Fast Fashion (or H&M)
• Some useful references:
o https://www.researchgate.net/publication/275544737_Management_of_Contemporary_Fashion_Industry_Characteristics_and_Challenges
o https://www.mckinsey.com/business-functions/sustainability/our-insights/style-thats-sustainable-a-new-fast-fashion-formula
Logistics Management of H&M (around 2500 words ± 20%)
• Some key points about H&M’s procurement
o It outsources all production to independent supplier factories.
o 80% of its retail inventory is produced in advance and the remaining 20% is produced based on current market trends
o Usually, the products with longer production lead times (4-6 months) are produced in Asia and others with shorter lead times (2-3 weeks) are produced in Europe.
o H&M has 20 production offices in Asia, Europe Africa and Central America to collaborate with the partner suppliers to ensure the accurate time, quality and price and that the suppliers abide to the company’s code of conduct
o Becoming a pioneer in transparency, the supplier information is not only available on H&M’s website but will also be available in store by scanning an item’s price tag
o Pledged to reach 100% recycled or sustainable materials across the company’s supply chain by 2030 and 100% sustainable cotton sourcing by 2020
o Every year, H&M measures the sustainability performance of supplier factories
o Some useful references:
 https://digital.hbs.edu/platform-rctom/submission/hm-how-fast-fashion-translates-into-low-prices-and-success/
 https://www.tradegecko.com/blog/inventory-management/hm-retail-inventory-control
 https://www.businessinsider.com/hm-produces-new-fashions-in-two-weeks-2014-9
 https://career.hm.com/content/hmcareer/en_in/workingathm/what-can-you-do-here/production.html
 https://career.hm.com/content/hmcareer/en_se/workingathm/what-can-you-do-here/corporate/production.html
 https://about.hm.com/content/dam/hmgroup/groupsite/documents/masterlanguage/Annual%20Report/Annual%20Report%202018.pdf
 https://sustainability.hm.com/en/sustainability/downloads-resources/resources/supplier-list.html
 https://www.supplychaindive.com/news/sustainable-sourcing-scale-HM-production-visibility/560026/
 https://sustainability.hm.com/content/dam/hm/about/documents/masterlanguage/CSR/2018_sustainability_report/HM_Group_SustainabilityReport_2018_Chapter6_Standards%26Policies.pdf

• Demand Management, Order Management, and Customer Service
o H&M is turning to advanced data analytics (i.e. big data analysis) and artificial intelligence in areas such as demand forecasting, pricing, and allocation to improve efficiencies and effectiveness of its supply chain
o Adopted omnichannel strategy of integration of physical stores and online stores to enhance the customer experience.
o An e-commerce tool, called Thread, to create a personalised shopping experience
o Some useful references:
 https://www.supplychaindive.com/news/HM-AI-supply-chain-sustainable/570400/
 https://www.retaildive.com/news/hm-turns-to-big-data-ai-to-tailor-store-assortments/523137/
 https://www.chargedretail.co.uk/2020/02/03/hms-new-boss-says-its-5000-stores-will-change-as-it-focuses-on-digitalisation/
 https://www.supplychainbrain.com/articles/28612-how-fashion-retailer-hm-is-betting-on-big-data-and-ai-to-regain-profitability
 https://www.reuters.com/article/us-h-m-strategy-ai/back-on-trend-hm-makes-ai-loyalty-drive-to-ride-fashion-cycle-idUSKCN1RT1U7
 https://techwireasia.com/2019/02/hm-seeks-to-retail-smarter-with-more-data-analytics-this-year/
 https://www.retail-systems.com/rs/H_M_Cuts_New_Stores_In_Favour_Digital_Channels.php
 https://www.scmr.com/article/nextgen_supply_chain_hms_low_tech_approach_to_inventory_management
 https://fashionretail.blog/2018/12/26/hm-goes-fashtech/
 https://diginomica.com/hm-customers-can-click-and-collect-in-7-out-of-47-markets-a-boast-that-illustrates-the-retailers-omni-channel-nightmare

• Inventory Management
o Reduce the risk of dead stock
o Automation of warehouses (i.e. distribution centres or logistics centres) and adoption of RFID to improve inventory management
o Stores do not hold backup stocks – replenish from distribution centres or smaller regional replenishment centres
o Some Useful references:
 https://risnews.com/hm-inventory-woes-continue
 https://www.businessinsider.com/hm-plans-get-rid-of-discounts-2019-1
 https://notesmatic.com/2017/03/business-model-of-hm/
 https://www.gs1uk.org/our-industries/news/2019/02/13/how-hm-have-transformed-customer-experience-using-global-retail-standards
 https://about.hm.com/content/dam/hmgroup/groupsite/documents/masterlanguage/Annual%20Report/Annual%20Report%202015.pdf

• Factory Location
o Today, the company is a fashion retail giant with more than 4,900 stores in 71 markets. Of the 71 markets it operates in, H&M offers online retail in 47 markets.
o H&M was a pioneer in pursuing vertical integration with its own distribution network.
o H&M is investing in highly automated warehouses (i.e. logistics centres), with the ultimate goal of achieving next-day delivery for 90% of the European market and serve both physical stores and online business
o Some useful references:
 https://www.statista.com/statistics/268522/number-of-stores-worldwide-of-the-hundm-group-by-country/
 https://uk.fashionnetwork.com/news/H-m-to-open-new-uk-distribution-centre,1084901.html
 https://in.fashionnetwork.com/news/H-m-redoubles-efforts-to-reduce-digital-gap,1084602.html
 https://www.logisticsmanager.com/hms-new-milton-keynes-dc-puts-jobs-at-risk-in-stoke-on-trent/
 http://www.panattonieurope.com/sk/krajiny/poland/press-room/spravy/-213/
Warehousing Management
• If you want to get higher mark, you may search for information about H&M’ warehousing management

Transportation Management
• If you want to get higher mark, you may search for information about H&M’ transportation management

Environmental Issues
• Some useful references:
o https://www.independent.co.uk/news/business/news/hm-fast-fashion-boss-karl-johan-persson-environmental-damage-a9174121.html
o https://www.voguebusiness.com/technology/hm-fast-fashion-sustainability-recycling-hong-kong
o https://www.latimes.com/business/story/2019-11-03/fast-fashion-sustainable

Discussion
• H&M faces a dilemma — need to compete on price means most of its production is in Asia, but causing it to react slower to sales trends.
o https://uk.reuters.com/article/uk-h-m-results-idUKKBN1710K1
o https://www.businessinsider.com/r-hm-invests-in-supply-chain-as-fashion-rivalry-intensifies-2017-3
• Faces competition from faster competitor
o https://qz.com/951055/a-new-generation-of-even-faster-fashion-is-leaving-hm-and-zara-in-the-dust/
o https://www.forbes.com/sites/sanfordstein/2019/02/10/how-could-changing-consumer-trends-affect-fast-fashion-leaders-hm-and-zara/#36bf8c4a6f48
• From fast fashion to smart retailing
o https://www.supplychaindive.com/news/HM-turnaround-runs-through-supply-chain/520495/
o https://edited.com/resources/ai-in-fashion-retail/
• Others
o https://www.cbinsights.com/research/fashion-tech-future-trends/