Supply Chain Management: Zara and H&M

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There are various approaches to supply chain management that companies can utilize, but the two most common ones are responsiveness and efficiency. Businesses that espouse the former value of the speed of delivery and aim at being first to offer goods to their customers often lead to an increase in prices. At the same time, the latter method implies significantly decreasing costs to gain a competitive advantage in the market by selling products at lower prices. Companies in the fashion industry also rely on these two approaches, which directly affect their sales. For example, Zara, a Spanish brand, prioritizes responsiveness, while H&M, a Swedish retailer, pursues the efficiency strategy. Despite their different approaches, the companies have similar types of customers and have achieved success in shaping their supply chains.

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Zara is a multinational brand that was founded in 1975 and, over the following decades, established its presence in many countries around the world. As of 2018, the company employed more than one hundred seventy thousand employees and had a turnover of several billion dollars which made it one of the largest fashion retailers (Knošková & Garasová, 2019). Currently, Zara provides an opportunity for customers to buy their products online, which significantly contributes to its revenue, especially during the COVID-19 pandemic.

H&M is a company that specializes in fast fashion and offers its clients a huge variety of clothes and accessories to choose from. It is committed to implementing and promoting sustainable production practices, for example, to minimize its impact on the environment, the company sources organic cotton (Javed et al., 2020). The brand is recognized as one of the major fashion retailers and continues to expand further, including online.

Zara is a company that is not oriented toward one particular demographic and instead focuses on offering affordable clothes which can fit people of all ages and both sexes. Nevertheless, despite the lack of concrete data, it can be suggested that the brand’s target audience is young people and those who want to own trendy clothes but cannot afford more expensive analogs. These include students, middle-class individuals, and office workers who follow new directions in high fashion and desire to own similar clothes but not pay extra. Zara is keen on providing its customers with apparel inspired by recent trends and does it in an extremely fast way and in limited quantities, which ensures that its products possess some level of exclusivity.

Compared to Zara, H&M focuses on encompassing as many demographics as possible, for example, offering special collections for plus-size persons. Yet, similar to Zara, the brand’s primary audience is young people and individuals who do not have many resources to spend on clothes. Moreover, since H&M is committed to keeping its prices as low as possible, the brand attracts those who view apparel, not as a fashion statement but simply as disposable products which must be cheap. Thus, H&M, due to its cost-efficiency, provides an opportunity for people with low incomes to buy affordable clothes which have relatively good quality.

As was mentioned earlier, Zara pursues a business model where it copies the latest designs from high fashion brands and quickly supplies them to its stores; this is made possible due to several factors. First of all, it efficiently uses data by tracking each item of clothing the company sells, so when one product becomes out of stock, the inventory management instantly orders a new batch (Aftab et al., 2018). Secondly, Zara produces fifty percent of its goods in its factories, which are located close to distribution centers, which allows the brand to ship new clothes to customers faster than its competitors (Xuejie et al., 2019). As a result of combining effective data utilization and geographical proximity of its facilities, Zara has achieved a position where it has one of the most responsive and fastest supply chains in the world.

H&M’s stress on low prices enables it to use a different approach to supply chain management to meet its ultimate goal of being a cost-efficient company. The brand does not have its factories, which significantly reduces expenses for maintaining and servicing buildings and paying salaries to workers; instead, it relies on seven hundred partner manufacturers (Xuejie et al., 2019). Moreover, the company utilizes a network of suppliers from Asia, where labor is much cheaper than in Europe or the U.S. Additionally, the company relies on sea and railway transportation to keep its logistics costs low (Rathore et al., 2019). Thus, H&M has managed to achieve its cost efficiency by outsourcing its manufacturing and production and using cheaper modes of transportation.

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Zara and H&M pursue different approaches to supply chain management; while the former focuses on responsiveness and quickly delivering products to its clients, the latter seeks to decrease its prices. Both companies are multinational fashion retailers which have a presence in many countries and sell large quantities of products. Despite having mostly similar audiences, Zara’s customers are more concerned about the fashion aspect of clothes, while H&M’s clientele value affordability and quality. Zara has reached its status of a responsive brand by relying on its manufacturing power and effective use of data, which allows it to replenish its stock in a fast manner. On the other hand, H&M manages to keep its prices low by using the help of foreign manufacturers, cheap labor, and inexpensive transportation.

References

Aftab, A., Yuanjian, Q., Kabir, N, & Barua, Z. (2018). Super responsive supply chain: The case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), 212−227. Web.

Javed, T., Yang, J., Gilal, W. G., & Gilal, N. G. (2020). The sustainability claims’ impact on the consumer’s green perception and behavioral intention: A case study of H&M. Advances in Management and Applied Economics, 10(2), 1−22.

Knošková, L., & Garasová, P. (2019). The economic impact of consumer purchases in fast fashion stores. Studia Commercialia Bratislavensia, 12(41), 58−70. Web.

Rathore, M. S., Maheshwari, K., & Jain, S. (2019). Fast moving H&M: An analysis of supply chain management. International Journal of Advance Research and Innovative Ideas in Education, 5(4), 1557−1568.

Xuejie, C., Chang, Q., & GuangHao, Z. (2019). Research on innovation supply chain management in fast fashion industry – A comparative analysis of ZARA and H&M. Proceedings of the 2019 3rd International Conference on Education, Culture and Social Development (ICECSD 2019), 344, 7−16. Web.

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BusinessEssay. (2022) 'Supply Chain Management: Zara and H&M'. 12 May.

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BusinessEssay. 2022. "Supply Chain Management: Zara and H&M." May 12, 2022. https://business-essay.com/supply-chain-management-zara-and-h-and-ampm/.

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BusinessEssay. "Supply Chain Management: Zara and H&M." May 12, 2022. https://business-essay.com/supply-chain-management-zara-and-h-and-ampm/.