H&M’s (supply chain) strategy is essential for its success

H&M, founded in 1947, nowadays has about 3500 stores in 55 countries, making $20.3 billion yearly sales. One of the basic pillars of its success its quick turnaround time on styles: Lead-time for H&M products is only 2 weeks (in Europe) – where traditional companies like GAP need about 6 months to design and execute new styles. But how can H&M achieve this?


Designing, planning and controlling

  • 100 in-house designers at the headquarters in Stockholm analyze emerging fashion trends and translate them into product designs, another 400 designers expand these styles into H&M collections
  • Inventory levels for each style are determined by designers, buyers and pattern-makers, tailored to region and store (e.g. high-fashion limited editions only in certain stores in key markets)
  • 20 production offices around the world place orders, ensure that products are delivered on time and at an agreed-upon price, enforce fair labor standards at supplier factories and choose the right suppliers
  • Reverse Logistics: Customers can hand in unwanted clothes, H&M collects these unwanted garments from any store and recycle it –> improves brand, customer gets discount on next shopping, sustainability (20% of specific clothing line are made entirely from recyclables)


Suppliers as strategic partners

  • All manufacturing is outsourced to ~ 900 suppliers, mainly in Europe and Asia
  • Suppliers are graded by H&M based on their performance and are vertically integrated
  • 80% of its retail inventory is manufactured in advance and the remaining 20% are introduced during the year, based on present-day market trends
  • Short product life cycle and quick respond supply chain system
  • Each store is linked to a global ERP system delivering information to warehouses, production offices, suppliers, etc. –> allows forecasting and quick reactions to new trends and avoids overstocking


Transportation and warehousing

  • Transportation is outsourced, mainly shipping and rail transportation (due to economic sustainability)
  • Currently 13 DCs or call-off warehouses (but plans to centralize them into a smaller number of bigger hubs)
  • Transportation either directly to stores or to DCs /Call-off warehouses with one centralized stock room to replenish item levels in stores quickly and according to selling trends (based on the ERP data)
  • Electronic Point of Sale (EPOS) system in the stores –> connects store floor to the Call-off warehouse’s stock room –> no storage in stores necessary
  • Mini load system for fast moving items and high bay racking for 50,000 pallet locations to improve storage efficiency
  • Challenge: flat and hanging garments –> automated hanging garment system to handle both flat and hanging garments

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Thus, flexibility and short lead times reduce the risk of buying the wrong items. Together with a well-connected software and communication and well-selected suppliers, this allows H&M stores to restock quickly with the bestselling products at economical prices.

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