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H&M’s supply chain strategies have played a major role in revolutionizing the fast-fashion supply chain as consumers grow increasingly concerned with sustainability and responsible sourcing. The company’s supply chain has led to reductions in lead times and waste while adhering to high sustainability standards.
Sustainability
One of H&M’s hallmarks has been shifting from the traditionally heavy-footprinted world of fast fashion to a more sustainable version. The company has attacked this from several angles, including:
- Cleaner materials and energy
- Better demand planning to reduce waste
- Traceability of raw materials
- Sustainable sourcing of raw materials
- A goal to reach 100% recycled or sustainable materials by 2030
- Minimized packaging
- Collection of unwanted clothing for reuse or recycling at retail locations
The company drives sustainability improvements by requiring suppliers to abide by H&M’s code of conduct. This code aims to ensure that suppliers source textiles from responsible, sustainable manufacturers and items created for the company adhere to a set of ethical standards that include fair wages for workers, no use of child labor, and acceptable working conditions.
H&M also have clothing brands specifically dedicated to sustainable, ethical sourcing.
Artificial Intelligence
H&M has implemented AI functions across several segments of the company. The organization’s advanced analytics and AI team is dedicated to finding new applications for AI and predictive technology. AI-driven improvements include more precise demand forecasts, more sustainable business decisions, and waste reduction.
Inventory Management
Inventory management has been a historical issue for H&M and fast fashion in general, with the retailer accused of burning twelve tons of unwanted clothing in 2017. When retailers must plan several seasons in advance due to lead times, it can be difficult to predict consumer behavior at the time of a line’s release.
H&M moved to solve this problem through better demand planning assisted by AI. Leveraging modern technology combined with hard-earned experience, the company has greatly improved its forecasting and demand-planning.
Effective inventory management affects more than the company’s bottom line. It will also help H&M meet its sustainability goals: by reducing waste, the company will reduce its environmental impact.
Outsourcing Speeds Production
While H&M’s world-famous design team is at the heart of each season’s production, H&M does not own any manufacturing facilities. The company relies on outsourcing to bring its massive collection to market on time. Work begins a year in advance and picking trends so far out is made possible with the help of fashion trend-forecasting companies.
The designs are then sent to one of H&M’s 700+ manufacturing partners across the world with the necessary fabric available in their region. H&M also outsources the procurement of fabric.
What’s Next?
Increased Transparency
As the company moves towards more sustainable operations, it is leveraging transparency to help socially-conscious consumers make better purchasing decisions. Last year, H&M added a product background feature that tells customers in which country a garment was made, which factory, and how many employees work at the factory.
Sharing Sustainability
Recognizing that climate change cannot be tackled alone, H&M recently announced it will make its sustainable supply chain available to third parties, including rival fashion companies. The initiative is called Treadly and the company hopes that collaboration will help build collective knowledge in the fashion industry.
H&M has published a breakdown of its goals for a sustainable fashion future from 2020 to 2040, covering the areas of climate, chemicals, materials, packaging, and water.
Built-in Agility
To compete in the ever-changing fashion retail market, H&M will need to continue to develop supply chain agility and flexibility.
Building a more agile supply chain will require finding ways to further cut down lead times, drive continuous improvement in AI-boosted demand planning, and find innovative ways to avoid waste.
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Image Credit: Afif Kusuma / Unsplash
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