H&m and Zara-Global Sourcing

ABSTRACT

The purpose of this paper is to use supply management as a tool in analysing the global sourcing processes and activities within two successful leading textile companies: Zara and Hennes and Mauritz (H&M). To describe their logistics and supply chain processes in order to understand how these two companies can add a good value to its customers, to its stakeholders and to its suppliers.

Pressure for companies to create and deliver value to customers manifests itself in every stage of the business today. Therefore, we believe it is significant to compare and to contrast these two companies' activities and processes which lead them to success.

Ultimately, we intend to provide some suggestions for Portuguese and Turkish textile manufacturers in order to strengthen their competitive strategy as they are very successful to be supplier and preferred by these two leading companies, however not yet in the position to compete in the markets.

KEYWORDS:

Zara, H & M, Supply Chain Management, Global Sourcing, Logistics, Total Cost Analysis, 9 month industry, Just in Time (JIT), Forecasting, Demand, Information Systems, Information Technology (IT), Four D's, Supply planning.

INTRODUCTION

Today's competitive global markets require that companies add value to their customers. More and more companies become aware of the fact that this could be achieved through well-functioning logistics system/supply chain management and global sourcing which allow companies to reduce costs and increase quality. It is therefore in the global markets of today, logistics/supply chain management and global sourcing play a crucial role in the companies' long-term success.

Supply chain management includes all the activities and processes from the raw materials to selling goods to the end customer. Therefore, supply chain management can be described as the "network of organizations that are involved through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and service the hands of the ultimate consumer." Through exploring closely the supply chain, the organizations can create a competitive advantage among other companies. In addition to having a well-established supply chain management, more and more companies today are in search for, or prefer, global sourcing in order to increase their competitiveness and profitability. The reasons are evident: Cheaper cost of production and good quality. Two of the most successful companies in textile industry, Zara and Hennes and Mauritz (H&M), are good examples of successful supply chain management and global sourcing.

H&M is a world leading company when it comes to efficiency and low costs and it is also reputed for its shortest lead-time in textile industry. Started all its production in Sweden in 1947, today H&M has 21 worldwide production offices: 10 are located in Europe, 10 in the Far East and one in Africa. Another successful example is Zara. About 60 % of its production is made in the North Spain and Portugal, 30 % in Asia and 10 % in East Europe. The Company uses direct management stores (fully owned by Zara) and in some specific cases they can use franchising stores (very rarely) .

These highly successful models in the industry made other textile companies realize the significance of analysing the supply chain . It is therefore we intend to analyze these two companies' global sourcing activities and processes in their supply chain. By doing this, we would also like to draw some beneficial