Operations Management Strategy and its Impact

This assignment delves into the realm of operations management strategy, examining its crucial role in driving organizational success. It analyzes fundamental concepts like Volume, Variety, Variation, and Visibility (the 4 Vs) within the context of a continuous improvement framework. The assignment encourages students to explore real-world examples like H&M's e-procurement system, project management strategies, and sustainable business practices. Furthermore, it emphasizes the link between a company's strategic direction and its technological competence, network competence, and innovation success.

Business Operation Assignment

Table of Contents
1.Overview of the Company........................................................................................................3
2.Gantt Chart................................................................................................................................4
3.Operations challenges analysis of H&M Brand.......................................................................5
4.Performance objective analysis................................................................................................8
5.Evaluation of process..............................................................................................................10
6.Key performance indicators....................................................................................................12
7.Recommendations...................................................................................................................14
Conclusion.................................................................................................................................16
8.Refrences.................................................................................................................................18

1.Overview of the Company
H&M is Swedish multinational retail clothing company that sells clothing for men, women,
teenagers and children. Other products sold by H&M are cosmetics, footwear, textile interiors
and accessories. H&M is driven by a desire to create customer offering according to the needs
and wants and to do so in sustainable way. H&M starts its operation in 1947 and since that time
H&M is trying to maintain same quality standard based on their long term approach guided by
shared values. H&M strategy based on fundamental respect of individual and people's belief. .
From the business operation point of view, it has important to manage and improve the process
and other business activities in the right manner. It has helped the organization to gain
competitive advantages in the marketplace and create more customers data base.
Figure 1H&M Logo
Hennes & Mauritz
Employees 148000
Number of locations 3716
Products Clothing and accessories
Revenue $21.73 billion
Operating income SCK 22.168 billion
Total assets $10.29 billion
Total equity SEK 45.248 billion
Production of goods on annual basis More than 11000

H&M BRANDS

2.Gantt Chart
Figure 2: Gantt chart

3.Operations challenges analysis of H&M Brand
To determine the operation analysis of H&M Brand, 4 V model can be used which is as follows:
LOW HIGH
LOW HIGH
LOW HIGH
LOW HIGH
4V model:
Volume: Volume of the production is high and H&M produce more than 550 million
products every year so production is flexible at H&M along with the compliance of it to the
managed and profitable business (Anh and Matsui, 2011). Volume of sales is high and flexible in
H& M .There is the specialisation in each field work undertaken by the specialists and expertise
in the field. There is the defined structure made for the operations conducted at the business and
hence it acquires the economies of scale accruing large amount of benefits in different areas of
Years 2013 2014 2015
Sales 150,090 176,620 209,291
Increase in sales
per year
+6% +18% +19%
Variety: variety and flexibility is high in H&M. With the aim to satisfy large number of
customers around the world, H&M is offering the range of products and services to the
customers. (Boer, 2013). H&M focussing on all the segments of products are available for all
men, women, teenagers and children. such as cosmetic, accessories ,shoes etc. Wide product line
Volume
Variety
Variation
Visibility

for women such as Dresses, sportswear, blazers and waistcoats, shoes, shirts & blouses, Jeans
and many others. Also, products wide range of products for kids and men . Products are divided
into categories such as
For Men
Based on features Based on concepts
Collections Number of items Collections Number of items
Well suited 33 items Modern classic 112 items
Off duty ease 51 items trend 60 items
Off duty cool 17 items Divided 280 items
New season 44 items Basic 170 items
Beckham products 14 items Perineum quality 146 items
Conscious sustainable 63 items
For women
Based on features Based on concepts
Collections Number of items Collections Number of items
Easy luxe 32 items Divided 881 items
Precious glow 8 items Trend 199 items
Autumn layers 40 items Modern classic 199 items
Denim refresh 17 items Basics 227 items
For every victory 20 items Perineum quality 108 items
10 things we love 45 items L.O.G.G 231 items
Sportswear 165 items
Party 96 items
Conscious sustainable 167 items
Variation: Realising the need of fast fashion industry, H&M caters to present new
product to their existing and potential customers on the frequent basis. Such as in order to sustain
in the volatile market conditions and highly competitive world, it is imperative for H & M to
introduce innovative and creative product line (Britain and Treasury, 2013. H&M manufactures
its 80 % of inventory initially and remaining 20 % according to the demand of people and market
trends

Visibility: Visibility is the crucial component of the business operations. It includes
different segments of the working performed at the business. Such as there is the requirement to
fulfil the transparency needs at the internal and external operations. Visibility is low in H&M
because visibility of these operations are not exposed to customers.
Waste of lean management
The waste of Transport: The size and geographical spread of H&M business needs
various kinds of transportation. For the company, it is the biggest challenge to meet the
transportation needs with the use of limited natural resources and minimize the emissions from
this operation.

The Waste of Inventory: Although H&M Company use different types of medium for
communication such as social media, blogging, hauling etc to increase interaction with the
customers. The existing inventory management system of organization is efficient and
integrated. It gives the success to the firm to control over the stock and its management. So, there
is a no challenge face by M&S related to waste of inventory.
The waste of motion: It is one of the wastes which is the biggest challenge for H&M.
There are huge unnecessary motions by workers to bring the products from warehouse to stores.
For handling the commodities, manpower do not take help of machines. This increases the
unnecessary motion with the workplace and raises wastage of efforts and time as well.
4.Performance objective analysis
Organisational performance is evaluated through making comparison between the
competitive factors and performance objectives. With the aim to provide the quality and fashion
at the best price, operational objectives are set in terms of the following components:
H&M
 Low price as compare to
competitors.
 High Quality organic cotton
 slow delivery
 Wide range of products
 Flexibility
Figure 3 performance matrix

High Quality organic cotton: Company H&M is having competitive edge over the competitors
in terms of quality (Smith, Bruyns and Evans, 2011). Every year H&M use 200,000 tonnes of
cotton and out of which 31 % cotton used is organic and grown under better conditions.
wide range of products: Fashion industry is the dynamic industry with the continuous changes
in the wants and preferences from the demand side. (Mahadevan, 2009).H&M deals in clothing,
shoes, accessories, Undergarments and cosmetic.
Low price: Volatile economic conditions in world and rising inflation rate has enabled the cost
of production rising with the rate of 10-12% every year. H&M collects tonnes of recycled clothes
and reuse the fabric to create new collection. H&M produce 2.5 million pair of shoes by using
9.5 million plastic bottles.
Tonnes of clothes used to recycle in 2014 Tonnes of clothes used to recycle in 2015
7684tonnes of clothes collected for reuse 12341tonnes of clothes collected for reuse
Cost comparison with competitors:
H&M ZARA
Price span 1-291pounds Price span 5-322
Price point is 21.40 pounds Price point is 48 pounds
56% of offerings sit in price bracket 1-20
pounds
32% of offering sit in price bracket 20-40
pounds
so as compare to their competitor H&M deals in low price .
Slow speed:
Objective annually Outcome annually
H&M objective is to produce 13000 products H&M manage to produce more than 11000
products
Distribution time 11-15 days Distribution time 20-25 days
Flexibility:
H&M manufacture 80% of its inventory initially and remaining 20% inventory on the basis of
market trends so they have flexibility in changing the quality and time of product.

5.Evaluation of process
H&M is having the systematic and planned process adopted for the implementation of all
the related operations.
H&M Clothing production process map
In order to deliver the products and services, H&M is using the defined process with the
inclusion of certain set of activities where it has faced some problems of gap in communication

between product forecast and production planning, and decentralisation of power (Render, 2012).
with the help of pareto chart. (Carbone and Stoddard, 2011).author identify the problems.
(H&M, 2016).
Figure 4 Pareto Chart
Pareto chart shows that communication gap between product forecast and production
planning and decentralisation of power effect the production process more than any other
problem. (Chapman, 2015).
PROBLEM NO 1:
H&M manufactures 80% of its retail inventory in advance and introduces the remaining 20%
based on the current market trends so communication gap between product forecast and
production planning create difficulties in manufacturing.
PROBLEM NO 2:
With respect to the supply chain management, it is found that the process adopted by the selected
organisation is very complex in nature. With large number of stages and decentralisation of
powers and roles to different people has made the process cumbersome in nature (Eshun, 2009).
It makes the process ineffective and in appropriate in nature.

PROBLEM NO 3:
H&M do not own any factory so H&M do not store and purchase fabric all of its procurement
done by production centres so most of the time delay and shortage of fabric effect time duration
of the finish goods
Recommendations for process map
 There should a central national office to minimize the gap of communication between
production and design department.
 H&M trying to create the control over its production centres to make them responsible to act
upon code of conduct but some of its production centres are not doing that so H&M should
introduce a help line through which employees directly contact H&M and feedback survey
should be taken from the employees.
 To solve this problem, an inventory management system needs to be implemented. By doing
this, it becomes easy to know the status of different kinds of inventory. The following tool
sends a notification to the related departments about to decrease level of stock. On the basis
of this, it becomes simplify the entire process and minimize the time duration require to
process the request.
6.Key performance indicators
Economic indicators
Market share and growth rate of H&M products worldwide
Global clothing Industry
2014(billion) 2015(billion) Growth rate
Women 644 684 6%
Men 440 453 3%
Footwear 345 352 2%
Sportswear 245 255 4%
kids wear 149 157 5%
Accessories 72 69 4%
undergarment 55 56 2%
Total 1950 2026 4%

H&M worldwide
2014( billion) 2015( billion) Growth
rate
Market
share
Women wear 9.35 10.26 9% 1.5
Men wear 5.72 5.89 3% 1.3
Foot wear 0.69 0.74 7% 0.2
Sports wear 0.25 0.26 4% 0.1
Kids wear 1.64 1.88 14% 1.2
Accessories 0.72 0.76 5% 1.1
Undergarment 0.44 0.5 12% 0.9
Total 18.81 20.29 7% 0.9
H&M profit in women wear is 50% of its total revenue which is 34% of profit in the global
industry.
Global turnover in millions
Sales in the consoildated income statement icnlude the amount received from the sales of
H&M products. Itr shows significant growth for the brand, its suppliers and local economy.

Gross profit margin %
H&M products 2015 2014 Variation Difference
20898 19976 4.61% 922
H&M products 2013 2012 Variation Difference
17093 16867 1.33% 226
The percentage of gross profit is calculated as the Gross profit in absolute terms as a
percentage of net sales.
Non Financial indicators
Net store opening
Number of self owned stores shows that H&M is having good performamce in the market
and its sales of products increases year over and over.

7.Recommendations
From the analysis it is found that there is the requirement of adopting the amendments in
certain methods and procedures. In that regard focus has been laid on the four aspects that are
resources, tools and techniques used, framework for process used and the minimization of waste.
Blue ocean strategy: Firm should invest in a new market of over 60 aged population.
With high sending power this is one of the bigger segment as compare to young and fashionable
customers. All the process remain same H&M need to introduce large number of products on the
basis of customer segmentation and create a new sub brand to maintain customer based
perception for the brand. (Salem, 2012).
Framework and process: In order to perform all the operations in the effective manner it
is imperative two adopt the appropriate and effective framework that includes all the desired
components and enables the functioning in the most resourceful manner. Through this the
management is processed in the defined manner (Salem, 2012). Such as it enables the
formulation of the strategy and policies in the systematic and planned way By adopting flexible
and pragmatic approach, it becomes easy to change working strategies and methodologies as per
the alterations in the market place and influence of external and internal factors. Further, it is also
Illustration 1: Continuous Improvement Framework
Source: Ritter and Gemünden, 2004

found that it leads to the defined flow of direction for employees working in different
departments.
Tools and techniques: There are certain tools and techniques with are utilized in order to
escalate the expansion of the business operations and generate maximum amount of revenue in
all respects. It includes intangibles that are the communication and networking, performance
measurement and operational excellence. PDSA is the most appropriate technique use to
improve production it's a four step model that we can use first plan the goals to achieve high
quality and less errors then in next step implement it after that study the reasons of errors then act
upon it to minimize errors. With the help of PDCA cycle, fishbone methods, it becomes easy to
bring the expected improvement in the current system.
Resources: H&M is required to make the optimum utilization of the resources available
and required for the execution of the business operations. The resources used at the organisation
are Finance, human resources, infrastructure and other related. In order to derive the optimum
results from the resources in all respect it is found that segmentation of working and its process
is required to be done (Slack, 2015). Such as it is found that in order to make the proper use of
finance, quantitative assessment is made through making frequent comparisons between the
objectives set and target achieved. Further, for human resources, training and development of
employees on continuous basis will accrue desired results along with the bringing of adaptability
with the contemporary market scenario. Such as it is found that with the adoption of such
measures operational excellence can be improved as per the needs and wants.
Lean Synchronisation: It is being analysed that while having its operations in different
areas the organisation H&M is not focussing on the treatment of wastages in the effective
manner. Such as while manufacturing it has been accounted that there are significant amount of
wastages incurred which is required to be controlled in order to increase the operational
excellence in all respects. In this regard it is recommended to use the lean management and JIT
tool for the minimization of wastages (Tucker, 2011). In this structured approach is used to
identify the flaws, reasons that accruing wastages and the methods to resolve them.
Conclusion
Business operations is the framework which states about the process and methodology
adopted by the organisation in order to expand its profitability and revenue generation. Report is
prepared on the case study of Swedish multinational clothing retail company, H & M. In order to

consolidate large number of people, it offers the high quality products and services to their
customers. From the study, it is being articulated that the focus is being laid on four components
that are location, equipment, labour and process adopted at the organisation. The recognized
company is complying with the basic requirements of the business operations as analysed by 4 V
model and other comparisons made.

8.Refrences
Books and Journals
Acton, A., 2013. Amino Acids—Advances in Research and Application. Scholarly Editions.
Alidrisi, H. and Mohamed, S., 2012. Resource allocation for strategic quality management: a
goal programming approach. International Journal of Quality & Reliability Management.
29 (3). pp.265 – 283.
Anh, C. P. and Matsui, Y., 2011. Relationship between quality management information and
operational performance: International perspective. Management Research Review. 34(5).
pp.519 – 540.
Boer, H., 2013. Guest editorial: New challenges in operations management. International
Journal of Operations & Production Management. 23(10). pp.1108-1113.
Britian, G. and Treasury, H. M., 2013. Public expenditure statistical analyses. The Stationery
Office.
Carbone, G. and Stoddard, D., 2011.Open source enterprise solutions: developing an e-business
strategy. John Wiley & Sons, Inc..
Chapman, C. S., 2015. Controlling Strategy: Management, Accounting, and Performance
Measurement: Management, Accounting, and Performance Measurement. Oxford
University Press.
Eshun Jr, J. P., 2009. Business incubation as strategy. Business Strategy Series. 10(3). pp.156-
166.
Figge, F. and et. al., 2012. The sustainability balanced scorecard–linking sustainability
management to business strategy. Business strategy and the Environment. 11(5). pp.269-
284.
Mahadevan, B., 2009. Operation Management: Theory and Practice. Pearson Education India.
Nagarajan, K., 2014. Project Management. New Age International.
Render, K., 2012. Operations Management. Pearson Education India.
Ritter, T. and Gemünden, H. G., 2004. The impact of a company's business strategy on its
technological competence, network competence and innovation success. Journal of
business research. 57(5). pp.548-556.
Rotchanakitumnuai, S., 2013. Assessment of e-procurement auction with a balanced scorecard.
International Journal of Physical Distribution & Logistics Management. 43(1). pp.39 – 53.