SCM Strategy in Fashion Industry: H&M, Zara, Benetton

This article analyzes the SCM strategies of H&M, Zara, and Benetton in the fashion industry. It discusses the different strategies employed in the design, manufacturing, distribution, and retail stages, and provides recommendations for better performance.

Supply Chain Management Strategy
Analysis of Fashion Industry
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Executive Summary
This article is meant for SCM strategy of three major global stakeholders of fashion industry-
H&M, Zara and Benetton. Basic SCM strategy for fashion industry evolves in four different
levels of operations- Designing, Manufacturing, Distributing and Retailing. This article will
highlight difference of SCM strategies for four stages of operations of three referred players with
recommendations for better performance.
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Table of Contents
Introduction.................................................................................................................................................4
Discussion....................................................................................................................................................4
Design Stage............................................................................................................................................4
Manufacture Stage..................................................................................................................................4
Distribution Stage....................................................................................................................................5
Retail Stage..............................................................................................................................................5
SCM strategy...........................................................................................................................................5
Recommendations.......................................................................................................................................6
References:..................................................................................................................................................7
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Introduction
Fashion industry has four stages of operation in the form of designing, manufacturing,
distributing and retailing, SCM plays vital role in every stage of this industry. H & M, Benetton
and Zara have their own unique SCM strategy to enjoy the edge in the competitive world of
fashion industry in different level of operation management, as highlighted in the case study
named Supplying Fast Fashion. (Basak A, 2014)
Discussion
Design Stage
H & M puts emphasis on three basic pillars of designing- fashion, price and quality. Through
these pillars, buying volumes and delivery dates are being fixed. This brand is insisting on
exclusivity rather than standardized trend prevailing in the market. SCM of this company is
monitored by more than 100 designers with exclusive contribution by 50 pattern designers for
around 100 buyers and a budget monitor.
For Zara, the SCM of designing is maintained with three different functions- the designers,
market specialists and the buyers with distinct differentiation of three main product domains-
men, women and kids. A system of gathering regular customer feedback for retail stores to
explore new designs is essential part of design SCM. The company deploys 300 designers who
produce around 40000 items annually and 10000 of them are selected for production.
(TradeGecko, 2018)
Benetton is more prone to SCM practice of designing by emphasizing on R & D through its
designers. The company had earlier insisted on customized designing as per the needs of
geographical areas, but later they have curtailed this practice to ensure designing of generalized
product range to have more global customers.
Manufacture Stage
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H&M is more insisting in decentralization of their manufacturing process by maintaining balance
between production offices and suppliers. They are not inclined to maintain least lead time as
quality assurance is the main focus area of the company. (Lopez, 2018)
On the contrary, Zara is mainly insisting on least lead time by concentrating on owned network
of SCM stakeholders. In each level of manufacturing operation, Zara uses its own network for
supply of raw materials with customization of manufacturing process. (Marah, 2016)
Benetton has cost effective practice of manufacturing by diversifying its production units
between Europe and other global stakeholders with standardized mode of operation. The central
office at Italy decides the variety and quantity of production for each production centers with
good SCM by monitoring the stakeholders for inputs of production process. (Benetton, 2019)
Distribution Stage
For this stage, Zara and Benetton had followed same route of financing for automated
warehouse. Zara was introducing second automated warehouse, while Benetton had introduced
RFID tags for its products.
H & M has centralized system of inventory management with distribution network depending
upon sub-contractors. (Kondracki, 2018)
Retail Stage
Retail stores of H & M and Zara are exclusively owned by the Brand. H & M stores are bigger in
size while Zara stores are smaller. Uniqueness of Zara stores is that customers often visit those as
Zara keeps exclusive non-recurrent designs which do not stay in the shelves for long.
For Benetton, they have changed their old strategy of maintaining stores run by third party
owners. They have converted those small shops by attaching them to Benetton bigger shops to
provide better shopping experience for the customers.
SCM strategy
SCM Strategy
company Stage
5

Design Manufacture Distribution Retail
Zara
Uniqueness
prevails with
non-recurrent
designs with
customer
segmentation.
Insists on small batches of
production with least lead
time
Through Automated
Big warehouse
Own outlets of Zara
Brand
H & M
Exclusivity with
three pillars-
fashion, price
and quality
Decentralized system to
maintain quality.
Centralized system
of distribution with
insistence on sub-
contractors.
Own outlets with H
& M Brand
Benetton
Insists on R & D
by their panel
of professional
designers.
Insists on domestic and
global stakeholders with
standardized mode of
manufacturing.
Through company
owned automated
warehouse.
Converting old
small outlets to the
company owned big
outlets.
Recommendations
Although these three brands have their own existence in the fashion industry, scopes are there for
development in their operation by adopting proper steps for better implementation of SCM. They
should more insist on choosing proper SCM stakeholders for their operation in each level-
designing, manufacturing, distributing and retailing operations. Selection of proper stakeholders
will encourage more perfection in operation and will lead to more loyal customers with brand
awareness.
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References:
Basak A, M. M. (2014). Supply Chain Management in Garments Industry.
Global Journal of Management
and Business Research: A Administration and Management , 14 (11).
Benetton. (2019).
Sustainable Supply Chain. Retrieved March 22, 2019, from Benetton Group:
http://www.benettongroup.com/sustainability/sustainable-supply-chain/
Kondracki, C. (2018, April 5).
NextGen Supply Chain: H&M’s low tech approach to inventory
management. Retrieved March 22, 2019, from Supply Chain Management Review:
https://www.scmr.com/article/nextgen_supply_chain_hms_low_tech_approach_to_inventory_
management
Lopez, E. (2018, April 3).
H&M's turnaround runs through its supply chain. Retrieved March 22, 2019,
from Supplychain Dive: https://www.supplychaindive.com/news/HM-turnaround-runs-through-
supply-chain/520495/
Marah, K. o. (2016, March 9).
Zara Uses Supply Chain To Win Again. Retrieved March 22, 2019, from
Forbes: https://www.forbes.com/sites/kevinomarah/2016/03/09/zara-uses-supply-chain-to-
win-again/#6534d7361256
TradeGecko. (2018, June 25th).
Zara supply chain analysis - the secret behind Zara's retail success.
Retrieved March 22, 2019, from TradeGecko: https://www.tradegecko.com/blog/zara-supply-
chain-its-secret-to-retail-success
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