Rajesh Masters Dissertation.

ROLE OF LOGISTICS IN H&M CLOTHING COMPANY 1

1. INTRODUCTION ABOUT H M.

Hennes and mauritz functioning as H&M. Which is world third largest

clothing retailers operating with 2300 stores in 43 countries over 90000

employees directly and indirectly. Its Sweden based clothing company known

for its fast fashion; in 1948 the founder Erling persson started the company in

Vasteras, Sweden. Initially when the company was commenced Erling were

selling only women’s clothes and the company was called as “Sweden for Hers

only”. Since 1948 the company started selling kids, men’s apparels and the

company was abbreviated to H&M.

H&M basically operated from Stockholm headquarters; the designs were made

at headquarters and supplied to 800 manufacturing units in China, India,

Pakistan, Bangladesh and Turkey. The designs for all the garments are made in

headquarters and send to the manufacturers, to avoid any damages, lead times,

slow shipping process the company setup the buyer office at capitals in

addition respond to competition and demand. The “interbrand” the branding

consultancy graded the company as 21st most valuable global brand in the year

2009-10 by the worth of 19$ million estimated*. Since 2009 H&M stepped into

home furnishing but the orders were done only on online catalogues and home

furnishing stores was launched only in Germany, Denmark, Sweden, Norway,

Finland and the UK.

The company was highlighted among the competitors like Zara, Inditex, and

Primark. When they made collaborations with Guest Designers like Karl

Lagerfeld, Avant-garde, Mathew Williamson and Madonna for their

promotion. In 2011 February the made a collaboration with Versace and

D&G. The details about logistics organization of H&M and problems will be

discussed in empirical backdrop.

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1.2 EMPIRICAL BACKGROUND

The theoretical contextual towards this research outlook the attitude in logistics

models on logistics strategy, logistics functions. The empirical backdrop of the

research is carried on sightings of companies that physical exercise their

logistics in developing under upheld profitability.

H&M, Primark, Inditex, Wal-Mart, Dell, Zara are the companies with high

level of logistics contents in their elements of approach (strategy). In this

dissertation we use Hennes and Mauritz, which is functioning as H&M. The

above-mentioned companies are also good examples companies with logistics

strategy as element of approach, H&M Company use their competency in

logistics to endow long-run development and profitability, in very distinct

ways.

After analyzing the CSR reports of H&M clothing for the last five years, the

company has brandished development under steady profitability throughout the

years (H&M annual report, 2001; 5006; 2007; 2008; 2009; 2010). The main

strategy of the company is to increase the profitability along with the growth of

company; the main target of the company was to increase the number of stores

across the globe nearly 20-25 percentages with an increase in sales (H&M

annual report, 2010). Basically the company operates from its headquarters at

Stockholm the major decisions related to Human resource, marketing, shop

designs, procurement, designs, finance, and logistics (hm.se). Even though

there are headquarters in most nations where the anxiety is present.

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Figure 1. profit graph of HM

Share price

Profit after tax

The figures are express in €.

(Source: hm.com, annual reports, 2010)

The logistics management of H&M is vast and uses roughly 5,600 employees

directly, while H&M deals with cross docking and inventory management and

transportations and 3rd party logistics (3PL) are carried out through TNT 3rd

party logistics providers, this can be predetermined within relation towards the

gross numbers of 32000 employees. Correspondingly, the cross docking

terminal at Hamburg receives the goods sent from suppliers and store it in the

Hamburg hub which is operated by company itself the goods are delivered on

the demand basis to the stores and the online ordered goods are delivered to the

customers by Hamburg terminal in the European regions.

The inbound logistics ensue from 890 distinct suppliers from Southeast Asian

countries. The company uses the formula introduced by Nissan-cogent, co-

development. Mostly production is intensified to Southeast Asian and European

countries. Here H&M implies early suppliers participation where the 32 buying

offices are established in different production place to avoid damages and get

benefitted of shortened lead-time, the main intension of setting up buyer’s

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office at production place is to reduce lean at every stage at earliest possible.

With decentralization the decisions related to productions are decided and

executed easily, by this system the company has précised the lead-time unto

20-25 percentages. The garments markets are always sensitive with its demand

and supply and alters according to the con-temporary fashions, with shortened

lead-time the garments of H&M clothing rules the garments market prior to

other competitors. The lead was adjusted according to the orders and demand

trendez garments are manufactured in short time period and transported with

more expenses, the seasonal garments orders are designed at headquarters and

placed to production units with longer lead-time which brings downs the

logistics cost and distribution cost. See appendix for customs clearance and

logistics operational cost.

Here the interesting part is strategy of H&M clothing, the company remain the

world 3rd largest retailing stores, and the companies turnovers has increased

more than 60 percentages. Correspondingly, profit after tax (PAT) is averagely

increased around 170 percentages in last 3 years and expansion of stores was

increased up to 48 percentages in last 3 years, this expansion growth is possible

without any monetary support for an enterprises, but it wouldn’t be possible

without of role of logistics. Here logistics plays a vital role in covering the vast

geographical area.

In increasing to novel geographical markets, H&M follows an approach of

moving into one market at time. In a high speed step the density of outlet in a

territory is broadened in order that economic procedures of scale can be arrived

at in environs for instance logistics and marketing. Instead of first initiating a

logistics quintessence the new markets demand are always measured for

intended efficiency.

In their fresh store developments in Germany, Poland, Czech Republic, Italy,

Spain, and Austria. The above examples shall be seen the company share the

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distribution center and transportation with neighbor countries headquarters

which bring down the operational cost and logistics cost.

The strategy of H&M, theory used by H&M shall be discussed in other

sections. In addition to that additional logistics models would be recommended

for H&M clothing with their advantages and disadvantages.

1.2 SCOPE AND LIMITATIONS

The backdrop of this study is founded on functional and theoretical fact of

H&M Apparel Company or any production and trading business units that is in

charge to achieve long-term growth under strengthened profitability by means

of logistics. In this research aside from achieving long-term growth under

strengthened profitability, role of logistics and logistics operations in the firm is

widely outspoken in the research. Here businesses with high grade of logistics

content like H&M apparel retailing business would be a broader focus.

But although, I powerfully accept as factual that the recommendations and

outcomes of this study would advantage the logistics content apparel business

to the bigger extent. It’s in the scope of the research to analyze and describe the

logistics roles and operation in the case of H&M clothing company. The

research covers only logistics strategy and logistics operations with it IT uses,

it doesn’t cover company strategy formation.

1. LOGISTICS

The term logistics was derived from Greek word ‘logistiki’ (λόγος). Initially

logistics was used in military forces to logistics weapons and arms during the

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war time later on it was used for business logistics purpose, It’s a part of supply

chain management, which deals with procuring raw materials, stocking

finished goods, transporting, and delivering goods to the customers, it

comprises of all materials flow and information for organization (Pollitt, 1998).

In short logistics puts right things at the right location at the right time. Some

times material management, channel management, supply chain management,

physical distribution management shall be known as logistics (ohannessen et

al, 2002). The scope and important of logistics have been extended with

improved new technologies and companies multinational operations in cross

boundaries. According to Bowersox in today’s highly competitive market every

company is trying to accelerate their product and efficiencies by means of

logistics. In recent days Logistics is considered to be most important

competitive advantage (Christopher, 1992). Logistics has advanced from

single-party (self managed) to 3rd party logistics (3PL) is used for storing

inventories and physical distribution; 5PL (multi-party) is used for

multinational operations e-logistics networking. The main purpose of using 3rd

party and 5PL is to bring down the operational cost, maintain inventory level,

to meet demand fluctuation and bring down the capital investment.

According to Christopher and Richardson, The corporate logistics faces some

problems like inability to provide service, improper and delayed information’s,

slow operations, high rate of operational cost and unable to meet the demand

when there is a fluctuation. The researchers have inspected the problems and

suggest integration of logistics, 3PL and 5PL would be better solutions to meet

the required demand in fluctuation, bring down the operational cost and to

provide good service (Fawcett et al, 1993) (Richardson, 1995). The main

functions of logistics are procurement, production, warehousing, distribution,

after sales logistics and disposal logistics.

Procurement logistics - It comprises of buying raw materials, market

research, requirement planning and order planning. Some time the

procurement targets might be inconsistent, procurement logistics always

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concentrate on core competency to maintain the autonomy of the

company that reduces lean in procurement with adequate inventory level

(Pfohl, 2004).

Production logistics - The principles of logistics concepts for

production is called production logistics, It include all the logistics

functions connected to procurement to production to warehouse

distribution. Production logistics is always placed centered to

procurement and production logistics like purchasing a raw materials

converting into product and send to warehouse storage (Pfohl, 2004).

Warehousing logistics (3PL) - Inbound logistics or incoming finished

products are stored in warehouse (Pfohl, 2004). Warehousing can be

also called as 3rd party logistics provider.

Distribution logistics – it deals with Distributing required amount of

goods with right quantity and quality to the retailing stores, customers. It

comprises of transportation and warehouses (Pfohl, 2004).

After sales logistics – It provides good customer service after sales,

replacing defective goods. It’s otherwise called as reverse logistics

(Pfohl, 2004).

1.3 LOGISTICS STRATEGY OF FIRM

Chandler characterizes Strategy; “strategy is the resoluteness of the absolutely

crucial long-run goals of the association and adaptation of main headings and

activities and the proposition of assets assigned to convey out the directed

goals” (chandler, 1962). Meanwhile Porters and Mintzberg argued that

strategy is just to attain market growth and market position by set of supported

activities, on resource based it can be strengthen competitive advantage in the

market (Mintzberg, 1987). However strategy cannot be defined as single

actions, so it was classified in to five definitions like perspective, positioning,

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ploy, pattern, and plan. Even though the word has only one meaning naturally

it’s essentially classified in many ways (Mintzberg, 1987) (Barney, 1991).

H&M clothing implies strategies like push and pull strategies, which would be

discussed in other section. According to Stalk and persson ‘logistics strategies’

importance have increased in recent days, as strategies weapons innovative

product, quality and time which is equivalent to monetary (Stalk, 1988).

According to persson time is the basic problems concerning logistics strategies

on competitive differentiation (Persson, 1991). Many authors like (Bowersox

and Daugherty; McGinnis and Kohn; Cavinato; Norrman; Christopher;

Abrahamsson; Stock et el) have argued on classification of logistics strategies

and logistics relationship to organization structure.

Here the classification of logistics strategies states the importance of logistics

role in the organization that can alter the strategy of the firm.

CLASSIFICATION OF LOGISTICS STRATEGY

Lots of research has been done on classifying logistics and strategy authors like

Kohn, Bowersox, Daugherty have done large numbers of research on logistics

strategies to get noticed of important aspects of logistics strategy in the

company (Bowersox, 1987) (Kohn, 1990).

Bowersox have classified strategy in three general types like information,

process and market strategy are discussed below in detail.

Information strategy - Information strategy, which can be termed

channel strategy. It analyzes the flow of information inside the

organization and converts its available information’s into business

strategy. Information’s strategy comprises of coordination in

organization and uses logistics to work together with good assistance

(Bowersox, 1987).

Process strategy - It comprises set of early 20th centuries logistics

activities, as value added system (Daugherty, 1987).

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Market strategy - Its similar to process strategy functions, which are

established over enterprise hubs (Bowersox and Daugherty, 1987).

Based on the strategic management and boarder notion of strategy Mintzberg

have five classifications strategies as…

Plan - Plan as strategy, which means the strategy is made in advance to

action

Ploy – ploy as strategy, which is nearly similar to plan c

Pattern –

Positioning –

Perspective -

Kohn and McGinnis have given the other classifications of logistics strategies

like intense, balanced, unfocused, low integration logistics strategies, low

effectiveness logistics strategies, integrated and intensive logistics strategies

in 1990’s. This classification of strategies will be discussed in literature

section.

DISPOSITION

In alignment to present the general of thesis’s structure, here pattern of journal

from the first section to the last part of the conclusion been outlined.

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Introduction and scope of the dissertation

Introduction and scope of the dissertation

Chapter 1. Introduction and scope of the dissertation, this section presents

backdrop of logistics, logistics strategy, and Hennes and Mauritz logistics

organization and importance of logistics in multinational operations. In

addition to that empirical data are provided.

Chapter 2. Research methodology this section presents how the research was

conducted and how methodology was chosen and how the interviews were

carried out. Followed by frames of references.

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Research methodologyResearch methodology

Analysis of Empirical study

Analysis of Empirical study

Conclusion and Recommendations

Conclusion and Recommendations

List of ReferencesList of References


Chapter3. Empirical analysis this section presents empirical analysis, the

business strategic tools are used to identify the H&M internal strengths and

external weakness. According to analysis suitable organizational theories are

applied to strengthen the company. The organizational theories are widely

concentrated eliminating waste in H&M productions, logistics and marketing.

And sustaining long- term profitability by means of logistics.

2. METHODOLOGY

According to (Li and Cavusgil, 1995) when carrying out an investigation on

any subject or topic or state of knowledge in the field. The authors can take up

three advances the first set about is Delphi procedure, where the professionals

who are experts in the specific subject are surveyed. Second set about is Meta-

investigation in which preceding forms on specific topics are assembled and

statically analyzed. In addition this approach was given by (Ashenbaum et al,

2005) to calculate the 3rd party logistics growth rate in European countries and

US. The third approach is the content analysis, which we ultimately use in this

dissertation. Normally content analysis can be done with two levels the first

level is definition of sources and analysis of articles, the second level is

classifying the collected articles. In the beginning 25 journals in the field of

logistics, reverse logistics, 3rd party logistics (3PL) covering time period 1960-

2011 the articles was searched dealing with any facet of logistics strategies and

logistics operations.

The area of this research is divided into two parts: logistics strategy and

logistics operations. Most of the theories from logistics strategy and operations

perspective have specified beginning in literature review, based on articles in

supply chain management and logistics journals that are available in online

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database from Coventry University library, National University of Singapore

(NUS), Brunel university. The journals are selected and studied in qualitative

method.

1. American society of transportation and logistics

2. European journal of purchasing and supply chain management

3. Journal of business logistics

4. Supply chain management (Scm)

5. International journal of logistics

6. International journal of physical distribution and logistics management

7. International journal of logistics system and management

8. International journal of logistics research and applications

9. The logistics manager

10. Transport research

11.Transport logistics

12. Others,

In searching appropriate articles I used ‘logistics strategy’ and ‘logistics

operations’ in keywords, nearly 119 articles were found, each articles contents

and text were reviewed in ordered to omit the articles that were not related to

logistics. At the end of eliminations 42 articles related logistics, 3PL, reverse

logistics were identified. An ancillary search was conducted using Business

Source Premiere, EBSCO, Proquest, ScienceDirect, Emerald, GMID, Mintel,

using these online database 28 paper was found related to logistics key articles

and citation were scanned for references purposes importance of logistics

strategy and logistics operations in organization is handled in logistics research.

DATA COLLECTION

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The written knowledge (data) collections for this dissertation were carried out

in the time interval of 10th day of June 2011 to 26th day of July 2011. Phone

interview was conducted to Mr. Sampath Kumar the managing director of

TEXFIELD & TANTEX TEXTILE PVT LTD, INDIA. Who were garments

manufactures and supplier for H&M clothing company since 1993; and Mr.

Abhimanyu Thilak Senthil the Manager of BLUEDHART PACKERS &

MOVERS. Interviews were pursued in the type of semi structured one suppose

interview manoeuver in appendix, the phone interviews was held come seal 50

minutes. All the companies’ details and interviews position in the companies

are clearly mentioned with contact numbers to avoid any misinterpretations but

the interviewees are not cited though they materials are used in analysis cases.

Aside from prime facts and numbers assembled through telephone meetings,

Lots of secondary data’s from journals, articles, online database, case studies,

and companies information’s from brouchers, annual reports, websites were

used in this dissertation. All the works are cited and referenced properly in

Harvard referencing style.

(Creswell, 1994) describe his three approaches to exert literature in a

qualitative research method.

(i) To structure the difficulty impersonated in the study.

(ii) To revaluate the publications and literatures through out the area of study.

(iii) To evaluate and incongruity the publications to the outcome in the study.

In our empirical background we found that the models is lacking to gain an

accurate strategy that how these company uses logistics and 3PL. Ergo,

structuring the problems in this case is impossible in unequivocal perception.

Consequently, the publications used in this dissertation are compared to the

present and previous studies, the strategy that are not provided in literature are

met in matching pattern.

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VALIDITY AND RELIABILITY

According to (Yin, 1994) the use of validity and reliability is widespread in

qualitative research study. Since, they are fixed within positivism viewpoint

then they should be defined again for their exercise in realistic model. (Yin,

1994) describes four pilot studies to be carried out in measuring the eminence

in the area of study.

(i) Fabricate validity, formation of appropriate operational pit against the

company empirical observation (Yin, 1994).

(ii) Inner validity, (which is valid only for larger study).

(iii) Outer validity, which is inception of realm where the output of study is

available.

(iv) Reliability, displaying that study can be replicated with identical output’s

(Yin, 1994).

To fabricate validity, (Yin, 1994) describes three methods. The first one is to

use several genesis of proof by using the similar questions to various

management authorities from the same organizations for a matching pattern.

The second approach is building a sequence of proof to the breath and depth of

contents throughout area the study, data collection and empirical study.

Third approach is matching pattern, ensuring the primary data and secondary

data to the exactitude. Here in our case we have conducted only phone

interviews so its not to possible to ensure the exactitude but matching pattern is

done with available sources (Yin, 1994).

Inner validity, generally this approach normally is used to larger research like

PhD, where the research is conducted more than years, in our research it’s been

used to ensure that no internal and external factor affecting this research, in

addition its used for benchmarking with Inditex company. Outer validity, is

analyzing the outcome of the research from the introduction to

recommendations (Yin, 1994).

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Reliability, when different methodology is not used there is a problem of same

findings repeatedly occurring (Yin, 1994). In our case vast primary and

secondary data’s are collected using various database system, interviews, and

journals, all the data’s are ensured to exactitude to avoid any misinterpretation.

2. LITERATURE REVIEW

This section broadly examines literatures associated with logistics and its

strategies, reverse logistics, 3rd party logistics (3PL), and literature related to

packing, roles of transportation and procurement process. The literature

reviews are classified into

3RD PARTY LOGISTICS (3PL)

According to (Bowersox et al, 1997) The pursuit of advanced effectiveness

improving virtue of logistics operations is still a business challenges. One start

that is verifying creative and permits enterprises to focus on their centre

competencies is the outsourcing of the logistics operations to partners,

renowned as third-party logistics (3PL) providers (lieb and Bentz, 2005a; Hong

et al, 2004). The 3PL is an opening for enterprises to advance the clientele

services and to retort the competition and reduce inventory level (Handfield

and Nicholas, 1999) the 3PL providers have increased their services in

manufacturing, warehousing, shipping, and distribution and freight forwarding

(Randall and Lieb, 1999).

GREEN SUPPLY CHAIN (G-SCM)

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According to (Stock, 1998), Integration of logistics is wholeheartedly essential

for the flows of green supply chain management (G - Scm) the preceding

procedures was restricted to accurate submissions for the firm, than preferably

seeking for the best methodical supply chain management. Similarly, the

comprehensive model involving reverse logistics strategy across green supply

chain is rare (Stock, 1998). Many authors have given supportive deterministic

models in the series (Mabini and Gelders, 1999; Richter, 1996a,b; Schrady,

1967). And stochastic models (Cohen et al, 1980; Cho and Parlar, 1991; Kelly

and Silver, 1989; Simpson, 1978; Heyman, 1997; Inderfurth, 1996, 1997).

These models differ typically according to the demand, supply and recovery

activities of logistics movement.

Thinking about continual product demand and returns rate connected to supply

chain chambers (Schrady, 1967) have given deterministic model to handle

damaged items or reparable inventories under the status of fixed lead-time for

outward orders and recovery. (Schrady, 1967) Models has been extended and

used in (Mabini and Gelders, 1991) when multi-repairing system was

established stock service problem and repaired items were optimized. (Richter

1996a, b) proposed similar model of (Schrady, 1967) with different stock

controlling policy, where optimum parameter results are searched with return

rates, in spite (Fleischmann et al, 2002) deterministic model argued that using

optimum parameter is impracticability when supply and demand in market are

different and uncertain.

In complement to aforementioned models, similar stochastic models was

concentrated mainly on obtaining optimal control polices by various

supposition and brining down the presumed cost by fixed planning horizon.

(Muckstadt and Issac, 1981) concentrated on concocting single item inventory

control in the status of zero lead-time with continuous model. In (Muckstadt

and Issac, 1981) research return occurrences and demand occurrences were

considered to be the units of Poisson distribution. Correspondingly, (Heyman,

1997) in targeting at single stock system, the author assumed trade off

relationship to the production and stock holding savings, where the demands of

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product and returns frequencies are considered to obtain the appropriate

stochastic process. (Cohen et al, 1980) in his research dynamic inventory

system, the author considered both serviceable and recoverable inventories but

(Kelly and silver, 1989) modified the dynamic system to be random returns

system to use the best maintenance and replacement activities.

In (Cho and Parlar, 1991) proposal on multi-unit inventory system where

serviceable and recoverable inventories are allowed to meet, assuming that the

damaged and returned items can be reused directly with zero lead-time. In

addition to (Cho and Parlar, 1991) the models were developed to reduce the

average cost involved in inventories return and long-term time horizon.

Correspondingly, push and pull strategies were introduced in reverse logistics

strategies to manufacture and remanufacture goods according to the demand

and supply, however (Van der Laan and Solomon, 1996a, b, 1997,1999) in

previous literature mention such postulation is practically not true in cases of

reverse logistics.

Assuming the restraint of applying the present models in green-supply chain,

Based on methodology this literatures gives a multi-objective optimization,

here integrated logistics theory is proposed in ordered to accelerate the net

profit of logistics by means of green supply chain which consist of both

product manufacturing and remanufacturing the returned products supply chain

and used product reverse logistics supply chain. Similarly the trade off

relationship, business logistics and used product reverse logistics flows across

the green supply chain G-SCM. The models in this literature review may be

more pertinent in the general case of G-SCM than other earlier models of (Van

der laan and Solomon, 1997, 1999) the author describe reverse logistics an

activities of reusing, recycling, and reducing the quantity of materials by which

the companies can be more environmentally efficient (Van der laan and

Solomon, 1997, 1999).

CLASSFICATION OF LOGISTICS STRATEGY

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McGinnis and Kohn have given score of articles in the year (1991: 1993:

1997b: 1997a: 2002) in the series of articles both authors have discussed

classification of logistics strategies from the general types of logistics strategies

given by Daugherty and Bowersox (1987), and given concentration on logistics

strategies from organization point of view. Daugherty and Bowersox general

classification on logistics strategies are information strategy, process strategy

and market strategies, which are discussed above in classifications of logistics

strategies.

From the typology of Daugherty and Bowersox, (McGinnis and Kohn, 1990)

have given other classification of logistics strategies those are: Integrated

logistics strategy, Low integration logistics strategy, Low effectiveness logistics

strategy, Intensive logistics strategy.

(i) Integrated logistics strategy is highly concentrated on integrated

computer systems, customer service, and logistics coordination (McGinnis and

Kohn, 1990) .

(ii) Low integration logistics strategy is with low level of importance on

integrated computer systems, and moderated importance placed for customer

services and logistics coordination (McGinnis and Kohn, 1990).

(iii) Low effectiveness logistics strategy is with moderate concentration on

integrated computer systems and customer service, and low level of importance

for logistics coordination (McGinnis and Kohn, 1990).

(iv) Intensive logistics strategy is highly concentrated on customer service and

logistics coordination, and integrated computer systems are not given much

importance(McGinnis and Kohn, 1990).

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McGinnis and Kohn (1990) have put forward these logistics strategies to be

used according to the requirements, according to the authors low effectiveness

logistics strategies is to be used when the company trying to establish

superiority over other departments than logistics, intensive logistics strategies

to be used when the demand level on flexibility is high (McGinnis and Kohn,

1990). Logistics executive made different strategies on basis on clustering

results.

On basis of cluster analysis many strategies were defined, McGinnis and Kohn

in 1993 after surveying 59 logistics managers in his articles author have

defined balanced logistics strategy, unfocused logistics strategy, intense

logistics strategy.

High Moderate

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High

Figure.2

External

environmental challenge and level of competiveness and unpredictability on logistics (McGinnis and Kohn, 1993).

(i) Balanced logistics strategy comprises of both market and process strategy

at moderate level, the market condition for this strategy is always unpredictable

and antagonistic.

(ii) Unfocused logistics strategy

(iii) intense logistics strategy

Cavinato (1999) in his articles ‘Matching logistics with strategic management’

in this articles authors fit development of logistics and strategic management in

organization, here author’s use Gluck et al (1980) four models of evolutionary

stages are; basic financial planning, forecast based planning, externally

oriented planning, and strategic management. All the four stages incorporates

of companies budget forecasting, performances, and strategic process and

decision establishing (cavinato, 1999, pp. 164-166), Cavinato commercials the

fifth stage of type called knowledge supported business which initiate a

Intense logistics strategy:

Market strategy and process

strategy are given importance.

Logistics coordination and

customer service are given

more priorities.

---------------

Balanced logistics strategy:


strategy at moderate level.

Logistics coordination and

customer service are moderate

priorities.

Unfocused logistics strategy:


strategy are placed low level.

Logistics coordination is low

priority and customer service is

low priority.

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ceaseless estimating on what is probable and how its probable, the intention of

Cavinato to bear out a orderly examine conditions logistics has strategic value

or uphold upright location entity in the firm. In his research methodology

cavinato interviewed 199 organizations logistics and supply chain heads, in

(Gluck et al, 1980) models there was fit in logistics and strategic management

in general but Cavinato concluded that from strategic management perspective

if logistics is ahead of rest of the organization its appreciated for the

contributions and activities to the organization nor if logistics in an

organization is lagging behind than rest of the organization it means that

logistics is not been valued and harming outsourcing or downsizing

organization.

STRATEGY ANALYSIS OF H&M COMPANY

Analysis of strategic position of H&M Company using business strategic tool

SWOT…

Every business is battled with some kind internal and external exertion, some

issues would be compensated in ordered to achieve the companies’ long-term

goal and objective. According to (Houben, 1999) the business manager should

analysis the companies performance and its hindrance in achieving full caliber,

since every company has dynamic strategies. Houben describes to strengthen

companies strategic planning; the company should have good internal behavior

to operate successfully. Consequently, company should be engrossed in its goal

while converting aside weakness to strength. In our case retaliating to H&M

weakness and strength, H&M concentrate on opportunities and external threats

for the success of strategic planning in external business environment. In

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accordance to 2010 financial year (FY2010) H&M Company’s internal and

external environments are discussed below (Houben, 1999).

STRENGTHS OF H&M

Low price, fast fashion, high quality, flexibility……

Responding to demand H&M provides fast-fashion and trendy garments for

men, women’s, and kids with zero lead –time, this fast-fashion chain would

accelerate and entice H&M commodities. Consequently, offering best standard

quality with low market price increase the sales and its competitive advantage

for H&M Company. H&M functions through E-commerce. It has manifold

option for customers, since it offers sales through catalogue, stores and online

shopping, almost 1600 retailing shops 24 countries are operated through online

shopping and catalogues. In addition the catalogue system initially launched in

Denmark and Netherland in 2007, the company produces four catalogues two

catalogues are used in spring and other two is used in autumn. Through low

price, fast- fashion, high quality, flexibility H&M has strengthened its market

Figure 3. business strategic tools

Strength

This section explains

about internal strength of

H&M in business

environment.

Weakness


about internal weakness

like internal company

performance and averting

its weakness’ to strength.

Opportunities


about external factor

favoring company in

external environment.

Threats

This section illustrate

about threats available for

company from external

market environment.

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environments (H&M annual reports, 2005; 2006; 2007; 2008; 2009; 2010)

(Datamonitor, 2005; 2006; 2007; 2008; 2009; 2010).

Equitable product mix, collaborations with Guest- designers.....

H&M offers wide range maquillages, frills and footwear’s from own

trademarks. H&M provides best quality of kids wear, men’s wear and women’s

wear and maquillages for low prices. This company is well known for its fast-

fashion and providing clothes from basic fashion to high fashion in the market.

This company is managing to sell high-end and lower-end products that can be

a competitive advantage for H&M. This company has achieved a big strength

joining hands with Guest designers and celebrities; H&M initiated this scheme

in 2004 with Karl Lagerfeld followed by many guest designers like Roberto

Cavalli, Stella McCartney, Victor and Rolf, and the famous Matthew

Williamson. Similarly, H&M made tie-up with famous Versace and Comme

des Garçons companies in France and US market. The company accelerated the

sale ratio with Guest designers fame.

WEAKNESS OF H&M

Product recall, Macroeconomics condition, low revenues…

In 2007 H&M garments were recalled due to presence of compass metals in

children’s jackets and liquid mineral, which were fitted along wit kids garments

for attraction were banned by United States consumer product safety

organizations considering that metals in children’s jacket and liquid minerals

might be harmful. These product recalls have agitated H&M reputation in US

market. In 2010 the company lambasted for launching its branches in Israel and

Palestine, by anti paletinis during Gaza war. When UNHRC condemned for

violating the rules.

23

When European countries was badly affected by recession most of the

teenagers lost their job. Where H&M target customers are teenagers, the

company nearly lost 22 percentages of its sales during the recession time, in

2008 South European countries were affected very badly, where again H&M

lost its 28 percentages of its sales. Most of the inventories were left unsold and

the stock level of H&M was unbalanced. H&M, in the recent survey it was

found that premium luxury customer and football lovers in US and European

countries prefer only premium brands like D&G, ARMANI, DIESEAL,

TOMMY HILFIGURE. Correspondingly, H&M looses its premium customer.

OPPORTUNITIES OF H&M

Business expansion in new and current market, online arena, Fabric

Scandinavians….

H&M has opened averagely 250 retailing stores in a year since FY 2007. And

it was planned to increase at the rate of 15-20 percentages at the end of each

financial year. The establishment was majorly focused on UK, Spain,

Switzerland, Turkey, Egypt, Saudi Arabia, and India. Considering that

expansion in existing new market would strength competition despite global

economic slowdown. As a result of improved technology E- commerce plays a

vital role in every market, in European countries the online shopping sales

grew up to 27 percentages to the gross sales of H&M in Europe contributing

4.9 percentages to net sales of H&M, from a customer perspective its brings

down unnecessary traveling by delivering at door step with good deals and

makes the customer to feel comfortable.

H&M New Home furnishing was established recently in Austria, Finland,

Denmark, Germany, Switzerland, Netherland, which turned out to be great

success. The vision of the company is to integrate fashion with house decors.

24


The company offered bedspreads, curtains, mattress, and household items at

best price. In March 2008, H&M took over fabric Scandinavians a Swedish

based clothing company that is operating as Fabric MTWTFSS weekend and

Sunday sun. The company was operated under the name of H&M

Scandinavians with 1200 retailing shops. Acquisition of fabric Scandinavians

would improve the efficiency and growth of H&M in other market.

THREATS OF H&M

Declining consumer confidence, high input cost, intense competition, and

rising energy prices……

The success of H&M is purely based on economic condition of European

countries and US. The slowdown in economic in these regions affects the

consumer confidence in procurement. Since the slowdown in economy led to

unemployment, the purchase rate consumer is declined to 32 percentages

according to GDP and IMF Economic in Europe and US is slowdown to -1.8%

and -2.3% and these countries economics are awaited to be enervated as per

2010 records. H&M makes considerable amount of income from these

countries, when consumer procurement rates are declined due to economic

crisis it would affect the companies business operations and profitability.

Fashion industries always have intense competition in the market; H&M faces

severe competition from premium luxury retailers, mall-based retailers,

warehouse retailers, departmental store retailers and E-retailers. On festivals

occasions to competitive with rivals the company offers garments at discount

prices from this the company loses its normal profit margin. As per European

Unions Euro Statdata Agency, retailer sales in Germany and Northern

European regions were dropped to 2.9 percentages since 2009. H&M revenues

were affected as outcome this sales slowdown.

25

In 2007 Uk Government and European countries increased its value added tax

(VAT) due to which the selling price of garments, cotton and fiber price have

been increased. In 2008 in order to increase the consumer purchasing power Uk

government reduced its VAT to 15 percentages, but however once again in

2010 the VAT was increased to 17.5 percentages and further more is presumed.

Correspondingly, other industry like house furnishing, automobiles, and

demands was increased rapidly to buy before tax increases. Apart from increase

in VAT and cotton, price hike in fuels declined the sales of H&M and other

industries. Rise in price of H&M apparels would lead to competitive

disadvantage from low price retailers. Due to these H&M sales is pressurized.

From the following analysis, the company determines its long-term objectives,

considering the above collections of internal and external SWOT. The strategy

analysis and system expert helps in decisions making of H&M Company.

Market Finance Production People Environment

Strength Weakness Opportunities Threats

Figure 3. Decision situation diagram

26

System ExpertSystem Expert


Applying lean and just in time (JIT) strategies on H&M

Many authors have discussed about the benefits of lean manufacturing and

agile strategies. Here in our case we would compare the benefits of both lean

and agile strategies, if both strategies were formulated in H&M Company.

The logistics management principles and concepts benefit most of the sectors

that are concentrated on production and competitive advantages, low expenses

and customer satisfaction. According to (Landis, 1999) the company involved

in the multinational operations has to ensure the expectations of consumers,

and to be successful the company has to understand the restrain and demands

of market environments and then instigate strategies that would provide

customer satisfactions and logistics requirements (Landis, 1994). The main

goal of logistics to meet customer needs, while reducing cost. According to

(Steele, 2001) the typical key example of eliminating waste and reducing cost

Is “Lean” and “Agile” to make it easier some ancient manufacturing are

described below.

(i) Craft production – craft produced is one of the ancient systems of

manufacturing, the products are manufactured without any tools by

hand making. This method was used for production before the

industrial evolution. Making pots, handlooms, boats were good

examples of craft productions

(ii) Mass production – mass production is called as series of

production or score of productions. This production is used for

producing goods in huge quantities. Producing fighters plan, fuels,

chemicals were a good examples of mass production.

27

(iii) Lean production – lean production, the strategy to eliminate waste

and reduce operating cost at every stage. Lean production were a

recent recognition for all manufacturing sectors, its combination of

mass production concept to reduce waste (Gonzalez-Benito, 2002)

Slowdown in economic, fuel price hike, stiff competition, value cognizance,

and high demand for logistics system, consistently defy the traditional methods

to manufacturing. At the first stage of lean production, it keeps only the half the

amount of materials needed for the production, as outcome zero defective

products. Lean today is used as “Toyota production system” (TPS), Toyota

automobile company stands as solidest testimony of lean enterprises. The

success above two epochs created a demand of lean production/ TPS system in

Health care, logistics and distribution center, construction and Government

services (Womack et al, 1990).

Corresponding to Lean/TPS system, agile strategy was developed

(Gunasekaren, 1999). Agile manufacturing is dissimilar to lean manufacturing,

agile concentrated on producing goods with high technologies like CAD, and

CAM with short lead-time and usually the goods are produced in low quantities

with high product mix. The below table classifications explains the importance

of all production method, the best method would be formulated as H&M

production strategy.

Comparison on production strategies.

Industry

objectives

Agile

production

Craft

production

Lean/TPS

production

Mass

Production

Importance of

eliminating

waste

High Medium High Low

28


Quantity of

production level

Flexible Low High Medium

Degree of

organization

Communication

High High High Low

Perception to

customer

demands

High High Medium Low

Scale of

advertisement

Low Low High High

Lead time Short Varies Short Short

Demand of

skillful

workforce

Highly Highly Depend on

production

pattern

Low

Operating cost of

SE relative to LE

Similar Low Varies

slightly

High

Operating cost of

SE relative to LE

Same Same Medium High

In the above comparison table, lean/TPS manufacturing system have been used

in most of the large-scale industries. (Noyel et al, 1999) argues, lean

production might not be vigorous enough to match with unstable market

condition. According to (Gunasekaren, 1999) lean/TPS production system

benefits automobile, textile, construction and health care industries to the large

Figure 3. Comparison on production strategies

29

extent. In our case lean/TPS strategies are applied in H&M production strategy

to yield best production out of manufacturers.

Applying Lean/TPS strategies in H&M Company……..

In 1980’s the authors Womack, jones and Roos first used the term ‘lean

production’, in the title of THE MACHINE THAT CHANGED THE WORLD.

It consist of total manufacturing chain from the basic product design to

product, to development, to product logistics, to product marketing lean

system. According to NATIONAL INSTITUTE OF STANDARD AND

TECHNOLOGY MANUFACTURING EXTENSION PARTNERSHIP LEAN

NETWORK (NISTMEPLN), lean production is used in every business firm to

bring down the waste using pull strategies (Cooney, 2002), (Kilpatrick, 2003).

H&M deals with 820 different manufacturers from South-East Asia, and

European countries. Lean production is widely used in all H&M productions

units. H&M uses 5S and Six Sigma in warehousing and distribution networks,

and uses JIT, and PULL strategies in production. The benefits of using JIT and

PULL strategies would be discussed below with strong evidence. The lean

principles and strategies are given below.

Seven wastes of lean operations

30


Source:(Stock et al, 1994)

Seven waste of H&M production

Seven wastes Description Occurring in H&M

production

Overproduction Producing above the

demand level or

manufacturing irrelevant

to.

Producing garments with

higher lead-time leads to

delay in deliveries, where

its becomes competitive

31

advantages for

competitors. The

garments produced with

degree of requirements,

result in excess of

inventory and remains

waste.

Defects units The scrap works, making

products with similar

mistakes.

When garments are

produced with defects, the

customer denies buying it

from the company and it

creates bad impression on

H&M reputation.

Obviously it results in

sales dropdown.

Over processing Un-necessary work

elements, non value added

When H&M produced

garments with liquid

minerals and compass like

stuffs in children’s

garments, the government

organization banned those

items from US market.

Due to which H&M faced

severe loss in 2007. H&M

should ensure the safety

and fashion requirements

of buyers, which can add

value to the company

reputation.

Inventory Maintenance of inventory The procurement

32


level. managers of H&M always

should measure the

market demand level and

maintain sufficient

inventory level to meet

customer’s requirement.

When the company fails

to meet demand level

during it looses it sales.

Correspondingly, when

the company maintains

inventory in excess, when

demand level is low. The

inventory remains lean.

Maintaining adequate

inventory level is

mandatory.

Motions Un-necessary marketing,

and advertisement that

doesn’t add value.

The unnecessary, store

innovations, decors and

advertisements do not add

values to the products.

When company uses the

reputation of popular

guest designers it boost

the sales. Similarly when

the companies uses

footballer it might attract

only selected costumers.

When the competitor’s

uses most popular

33

celebrities the customer

get attracted to those

advertisements and other

companies advertisement

left unnoticed.

Transportation European markets hold 70

percentages of H&M

sales. When company ship

its Christmas clothing’s

some part of European

ports are closed to severe

snow fall and bad climatic

condition, even the road

ways shipping is affected

due to this climatic

barriers. When the goods

don’t reach it stores at

right time it looses its

sales. Similarly, the

logistics manager should

deal with reputed shipping

company who are expert

in customs clearance,

packing, etc. incase if

customs authority doesn’t

clear the documents the

products ready for sale

cannot be shipped to its

destination.

Waiting Idle time, time delays. When a particular

34


retailing stores are

running out of stock, the

store manager can

communicate to regional

manager and use the stock

of near by H&M retailing

stores during festival

occasions. Instead of

waiting for goods to arrive

from regional warehouse.

It keeps flow the sales

without being idle.

The above table explains about the seven types waste existing in the H&M

production, logistics and marketing. Even though it’s not explained in detailed

all the major problems and solution are discussed in the above table according

to company profile and sources available in our research. As the first stage of

Eliminating waste, the seven major wastes are identified in H&M production,

logistics and marketing. Lean ideology seeks to cut the wastage any where in

company, elevate core resources and create a corporate culture devoted to

continuous enthusiastic buyers satisfaction. Here the five principles of lean

mentor reducing wastes and generalization of all manufacturing, logistics and

marketing (Petschnig, 2009).

35

Figure 5. Principles of lean/TPS manufacturing system

Source: (Robert McKee et al, 2004)

Production of value

Customer is the king of market always, they decide what to be produced and in

what quantity and where to be produced. An integration of best customer

service, best quality, reliability, and best price is expressed as customer values.

As per value proposition, manufacturing garments to this combination of all

those value is called value creation. The lean manufactures always concentrate

on improving product power and quality while lowering the product cost. But

there is a mistake that lean individually can’t function as cost cutting strategy.

The main objective of implementing lean in production field is to reduce lead-

time and reach customers with value (Robert McKee et al, 2004).

Optimizing the value stream

Values stream, encompasses of product design, product layout, product quality

and product deliver. Value stream mapping which act as integral part of

production, it establish a relationship between management and suppliers,

H&M 820 suppliers are gathered under one roof to discuss about their merits

and demerits supplying garments to H&M. its provides opportunities for both

suppliers and H&M top management authorities to discuss about their demands

and capabilities, this discussion eliminates the waste at every stage at earlier

stage. This co-development program was introduced by Nissan-cogent when

they were facing problems in supplying materials to Nissan. Value stream inter

36

Production of valueProduction of value

Optimizing the value streamOptimizing the value stream

Converting the batch based flowConverting the batch based flow

Establishing PULL systemEstablishing PULL system

PerfectProduct and customer service.

PerfectProduct and customer service.


connects all product design engineers, system experts, logisticians, and

companies top management authorities to discuss about their advantages and

disadvantages in product design, manufacturing, shipping and marketing

(Robert McKee et al, 1994).

Converting process into flow

Converting process into flow is the value adding activity for H&M customers,

the principles of flow highlights the lean management internally. When waste

is eliminated in H&M, the company should integrate the value stream and

production of value into flow. Here lean 5S explains how lean manufacturing

swapped the outdated batch production management operations (Robert McKee

et al, 1994).

Figure 6. 5S of lean principles

5 SSSSS Description Used in H&M

Sort Sorting according to the

need and demand of

work.

Sorting is similar to

inventory principles.

Here sorting is use of

manpower according to

the production in

manufacturing area. In

retailing stores sorting is

stacking the garments

according to the

measurements size and

prices for the

convenience of

37

customers.

Set in order Primary preferences. In production, shipping

and distribution area set

in order is widely used.

The garments cartons

should be palletized

according to the dispatch

code. All the cartons

should be labeled visibly

for shipping and

distribution purpose. If

not it’s very difficult to

recognize the cartons to

send it to particular

region.

Sweep and shine Attractive stores,

innovations.

When H&M shops are

very attractive with good

light setups, refreshing

stores products everyday

its yields the customer

attraction that can

market the store

equivalent to

advertisements.

Standardize Adoption of first three

5S in production,

marketing, logistics.

Standardize, which is

maintaining the goodwill

of the company with

standard reputation.

Sustain - Implementing all 5S with lean principles sustains long-term

38


profitability, when H&M reaches this position. The H&M reaches this position

it means the wastes are eliminated in the company and the main objective of

H&M is achieved creating customer value (Porters, 1985) (Robert McKee,

1994) .

Source: (Robert McKee et al, 2004)

Establishing PULL system in H&M

Pull and push system been widely used in H&M supply chain, prior to pull the

H&M company were using push, traditional manufacturing system. Which

manufactures goods on forecasting, under this system the demands and

supply’s are not static flow, where H&M resulted in overproduction and market

predication were often not constant. Averting traditional system to lean pull

system benefitted H&M in reducing lead-time, market predication and

customer satisfactions. Finally activating pull system means terminating H&M

traditional forecasting production planning. Averting push to pull might be

radical risk for some firms, but it brings more awards than risk (Robert McKee

et al, 2004).

Perfection of all products and services

When H&M implements first four lean principles, the company is equipped for

perfect product and services. Impetus achieves this momentous corporate

cultural change. Lean technologies and its functions in H&M brings

interminable production cycle, according to Henry Ford adaption of lean in any

business or service organization is easy than anyone think. Lean

comprehensible process and creates transparency. In recent days most of the

Manufacturing companies like Toyota, Nissan, Primark and Inditex, have

implemented Lean/TPS, PULL and JIT system in manufacturing process.

39

When H&M implements these strategies in production it gains more customer

value (Naylor, 1999).

Figure. 7 Five different stages of supply chain management

Source: (Roberts McKee et al, 2004)

Figure 9. Comparison between Traditional and Lean/TPS manufacturing

system

Traditional manufacturing

system of H&M

Applying Lean/TPS

manufacturing strategies in

H&M

Inventory flow High Constant level

Operating cost High Medium

Lead-time High Short

Scheduling Forecast, PUSH system Customer oriented, PULL system

Flexibility Medium High

Inspection Sampling, inspection Workers

40


COGS Rising Decreasing

Product quality Medium High

Required manpower Medium Low

Figure 8. Benefits of implementing lean/TPS system in H&M supply chain

Benefits of H&M company Change rates

Reduction in production cost. 52 %

Over all revenues without expanding manpower. 61%

Increase in sales and profits. 48%

Reduction in manual faults and paper works. 42%

Reduction in manpower handles with large

Production. 39%

Producing unique product with standard quality. 50%

Reduction in lead-time and logistics. 50%

Cost reduction in warehousing and distribution 28%

Reduction in advertisements, and marketing. 30%

41

Source: (Stock et al., 1994)

Figure 6. Comparison table

Using JUST IN TIME (JIT) concepts in H&M lean manufacturing

According to (Steve L Hunter, 2004) Just in time (JIT) is one of the tools of

lean supply chain. This concept widely used only in production, dealing with

procurement of raw materials and managing inventories. In our case we apply

just in time method for H&M production and stock control system. When

H&M Company uses JIT in production; the raw materials like fiber, organic

cotton, spindles and yarns are procured on the same day and used on same day.

The main objectives of using JIT in production are to reduce the inventories to

minimum level in some case to zero level, and finished goods are immediately

packed and dispatched for sales. According to the name just in time, the raw

materials are purchased just in time and manufactured just in time and shipped

to retailing shops for sale just in time as soon production is over. In just in time

method the manufacturing process is controlled by pull system, where the

garments are produced on demand rate not on forecasting rate. Just in time

totally reduce the 3PL and warehousing cost, since the goods are produced and

dispatch for sale just in time no warehousing required for storing goods. The

company can manage storing goods with shops store rooms (Steve L Hunter,

2005).

The productivity dimension of JIT is described as “nothing idle” which means

when the inventories are used to its capacities, raw material waste is

eliminated, when the raw materials are procured proposition to production

42


efficiency the machines are operated to full capacities, waste of energies is

eliminated. If all the raw materials are converted into finished products, then

raw materials, energies, manpower and recycling wastes are eliminated.

Implementing JIT in H&M production brings enormous of productivity

development, cost cutting and continuous improvement like reductions in scrap

work, reduction in overproduction, reduction in material handling. As outcome

of this reductions companies shortened the lead-time. The below diagram

explains manufacturing process of JIT. The JIT manufacturers use the benefits

if mass production and craft production while ignoring its demerits, JIT

manufacturer fixes clearly on perfection; continues lowering cost, zero scrap

work, zero reworks, Infinite product collections and designs. The new model

pioneered by Toyota took over the mass production model, which were used

production for more than 71 years.

Process of JIT manufacturing system

43

Figure. 9 process of JIT manufacturing

Source: (Daugherty et al, 1994)

Advantages of using JIT in H&M production

o For the domestic distribution around Europe, JIT ignores warehousing

the H&M products are delivered at doorstep of retailing shops. JIT

shortened the lead-time for H&M allows taking competitive advantages.

o The amount of money or funds invested on over processing shall be

used for H&M other purposes, like extension of stores or materials

procurements.

44


o Scrap works, recycling of garments are eliminated. It avoids reworking

with garments.

o Manpower’s are used properly with systematic workflow.

o H&M can produce infinite varieties of garments designs and collection.

The biggest demerits of JIT are the small scale manufacturing business unit can’t

implement this system, since it requires lots of capital investment. In our case

H&M could use this JIT system only for European markets from domestic

manufacturers, the garments ready for sales can be dispatched to stores

immediately just in time. Where as it not suitable system for Southeast Asian

manufacturers to exports the garments just in time, due to logistics expenses and

cross docking requires warehousing. H&M could use JIT manufacturing strategy

only for European market, and the research highly recommends only for European

markets.

JIT production cycle for H&M Company

Source:(Daugherty et al, 1994)

45

Applying Reverse strategies in H&M Company

According to (Stock, 1992) Reverse logistics (RL) is another logistics

strategies used widely by all the manufacturing companies. Reverse logistics

considered being a process through which the company could recycle or reuse

the product in an environmental manner, or it may be defined as process used

for returned goods. Reverse logistics functions are just reverse to normal

logistics functions, and the flow of entire supply chain is vice-versa in reverse

logistics (Stock, 1992). Every company introduced this reverse logistics system

to offer best customer service value, When the goods are returned for some

specific defects from customers to retailers or dealers or agents the goods are

sent back from agents to suppliers again for replacement or recycle or scrap

work (Stock, 1994) (Kopicki et al., 1993). In our research we apply reverse

logistics strategies in H&M Company for recycling, reusing, of garments when

its returned from customers for any defects or any reasons to become more

environmentally efficient. We use reverse logistics strategies in H&M clothing

company.

In retailing sector, reverse logistics become mandatory service in all

multinational companies due to stiff competition. According to (Meyer, 1999)

the goods returns in clothing industries have increased to 25-30 percentages.

According to council of logistics management executives nearly 70 millions

pounds are spend on returning goods, recycling and shipping the products to

suppliers. Reverse logistics in clothing industries were recognized recent days.

H&M returns goods nearly 20-25 percentages every year due to various

reasons like; damaged products, defective products, mismatching pairs,

irregular sizes, Vendor errors (wrongs sent destination), product recall and

warranty return. When the company uses this strategy it could recycle and

46


reuse the garments rather than disposing it. The process of reverse logistics in

H&M is illustrated in below diagram.

Figure .11 Reverse logistics (RL) process in H&M Company

Source: (Nandita Abraham, 2011)

When the garments are returned to H&M store, the storekeeper required

recording the reasons for goods returns and reasons are documented and sent

back to suppliers for altering business behaviors (Nandita Abraham, 2011). In

addition to returns of goods the H&M could take advantages unsold garments,

which are left unsold due to outdated fashions.

From supplier perspective, the H&M charges some financial penalties for

providing defective garments and shipping cost involved in packing and return

the goods. Due to returns of garments the suppliers are charged small amount

47

of financial penalties and garments are returned to suppliers. When suppliers

receives the returned goods, the manufacturing companies send the garments to

bleaching company to convert garments like T shirts, shirts, jeans, frogs,

kurthas, and women’s garments into white fabrications and then send to Dyeing

units to make it fresh colors and qualities. The suppliers’ faces loss only with

physically damaged garments, in some case even the physically damaged

garments could be converted like handkerchief, shocks, and inner wears. The

main objectives of applying RL in H&M to make use of unsold garments,

defective goods to reuse it to become environmentally efficient than just

disposing the garments for no values. Implementing these strategies on H&M

doesn’t require any capitalization.

The alternatives of reusing H&M products

1. The company could resell the products at discounted price.

2. The company could return the products to manufacturer and charge some

financial penalties for the defectives and acquires the shipping charges.

3. The company could sell the damaged products to the local buyers or local

stores.

4. The company could offer the products to the charity for poor people, who

don’t posses the basic needs.

5. The company could modernize the products, inspect and repacking for sales.

6. The company could scrap it to licensed companies.

7. The company could claim insurance money for defective products.

Source:(Author)

The H&M Company could use either reuse alternatives or remanufacturing

system to make of the defective products. According to author’s research,

remanufacturing system attracts the company economically and it makes the

company environmentally efficient. The general issues faced from supplier are;

48


irregular quantities of product returns, the company returns the defective,

damaged and unsold products, in unexpected quantities.

Reverse logistics (RL) manufacturing process

Source: (Dave Meyer, 2009)

Uses of Information Technologies in garments and logistics industries

According to (Shen Jin- sheng et al, 2006) with an expeditious development of

information technologies, limitless improvement of internationalization and

customer’s life style. The products have become more customized and

differentiated. As outcome of these developments it resulted in shorter product

49

life cycle. The companies are facing conflict between large-scale productions

techniques and customers fast-fashion demands. In order to respond to market

competition and buyer’s demands, almost all public and private enterprises

have to use Hi-tech modern technologies to alter the manufacturing styles, to

be more flexible to customer’s demands. The flexibility in manufacturing bring

downs the production cost, shorten production cycle, making the best use of

manpower and equipment’s and product quality to the efficiency of companies.

Here logistics information system proves that weather the companies have

adopted flexible manufacturing system or not. Since logistics system act as

central nerve of companies, that ties suppliers, 3pl, and customers. The

accuracy of logistics system defines the demand and supply of market

environment directly (YE qin et al., 2004). Therefore to construct logistics

system that matches with apparels industries are identified from secondary

publications and additional suitable advanced software’s for apparels designing

and manufacturing are discussed below with suitable snapshots of software and

technologies. The different types of information technologies used in apparels

manufacturing, designing, packing and shipping are listed and explained below

before manufacturing process.

o (ABM)

o COMPUTER AIDED DESIGNS (CAD)

o COMPUTER AIDED MANUFACTURING (CAM)

o (CIM)

o (CDI)

o (EDI)

o (ERP)

o (EPOS)

COMPUTER AIDED DESIGNS (CAD)

50


According to (Stephen Gray, 1998) CAD is abbreviated for “computer-aided

design” while CAM is “computer aided manufacturing” which is been widely

used on many industries like construction, textiles, electronics and automobiles

industries. (Karmani, 2010) describes that CAD is widely used on making

designs using computers, while CAM is used for manufacturing products.

(Karmani, 2010).

According to (Stephen Gray, 1998) Mr. Gerber first used the CAD application

in 1970s for marking the fabrications, rapidly more than 40 percentage of the

US companies used this applications on product designing in manufacturing

sector (Stephen Grey, 1998). In the recent days close to 99 percentages of the

garments manufacturing companies uses this as designing tool, developments

in software’s and technologies have brought down cost of cutting rooms and

fabrications involved in fabrications cuttings. According to (Wilson et al.,

2001) even the small firms and in-house enterprises uses this application to

design and measure the garments, the good other example are fragmented

Italian clothing industries (Wilson et al., 2001).

In recent days the textile industries have been more modernized and

personalized with Information technologies and software developments in large

scale (Stephen et al., 1998) CAD/CAM replaced the traditional manual

designing and man cutting, which consumes lots of time in designing and

cutting fabrication too. According to Mr. Sampath Kumar the managing

director of Texfield pvt ltd, Nearly 99 percentages of textile industries both

(handloom and powerloom) in India and China, uses ‘computer aided designs’

and ‘computer aided manufacturing’ for designing the garments and

fabrications cuttings. The basic designs and measurement of T shirts, trousers,

frogs, curtains and carpets are a entered in CAD application and CAM

performs the automated cutting within a minute, automated cuttings (CAM)

could cut around 1000-1500 garments pcs in a single perform where the

traditional manual cutting would consume around 5 hours. CAD/CAM

eliminates waste involved in manual cutting and provides many benefits in the

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form of reduction in labors charges, fabrications wastages, and space occupied

by labors, and scrap works (Sampath Kumar, 2011).

CAD/CAM IN DESIGNING PROCESS

Figure. 12 The snapshot of CAD designing process

Source: (Lectra Vectra, Company website)

According to (Helen Wilson, 2002) the entry of CAD/CAM technologies, with

inbuilt modern designs and limitless modern colors to clothes gives attractive

looks, the clothing company quickly able to respond to the market change and

customers requirements with inbuilt designs and limitless modern colors.

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Rajesh Masters Dissertation.

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