Operations Management: The Case Studies of H&M, Benetton, and Zara’s Supply Chains

Posted: August 26th, 2021

Operations Management: The Case Studies of H&M, Benetton, and Zara’s Supply Chains

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Operations Management: The Case Studies of H&M, Benetton, and Zara’s Supply Chains

Executive Summary

The paper provides a summary overview of the case studies of H&M, Benetton, and Zara in respect to the retailing of the garment in the market. It further discusses the Supply Chain Management (SCM) strategies that these very companies have employed as measures of responding to the ever-changing fashion trends of the garment market in the world. Conceptually, the paper provides a contrasting and comparison analysis of the varied strategies applied by each brand company throughout the supply chain, ranging from design, manufacturing, distribution, and retail stages. It concludes by recommending the best applied SCM strategies among the three brands.

Introduction

The constantly changing needs in the garment market have compelled the retailers to respond relatively to the present trends in fashions. Unlike the previous times where the garment retailing chain looked standard, it has now reshaped by cutting down six-times on its product life cycle due to the arising of the one-minute fashion trends. H&M and Zara have responded to the garment market trends by producing and selling high-quality catwalk design products at affordable prices. In contrast, Benetton has concentrated on high fashions and durability at high pricing. Therefore, this report seeks to compare the superiority of the varied supply chain models used by Zara, H&M, and Benetton in responding to the fast-changing fashion in the garment market, thus recommending the best applied SCM strategy.

Discussion

Design Stage

Both H&M and Zara have moved from the traditional concept of offering only 2 collections yearly to a non-season idea of producing and retailing products throughout the year cycle. The continuous retail of newer products by H&M is attributed to its highly regarded designer Karl Lagerfeld who values high fashion and quality (Baker, 2010). On the contrary, Zara focuses on top fashion designs that do not repeat on brands as it splits its design functions into three vital sections. The setup of buyers placing orders at the supplier’s section has made Zara impact the day-to-day shift in fashion trends (Baker, 2010) positively. However, Benetton focuses less on high fashions; instead, it designs top durable brands at affordable prices after constant researches on new materials and customized clothing concepts that suit each country’s demand needs.

Manufacturing Stage

Both Zara and Benetton have a similar production strategy where they operate capital-intensive technologies on the production of dyed and undyed fabric. More so, they operate their wholly-owned subsidiary supply factories and sub-contractors to facilitate quick and flexible delivery of supplies volumes. Contrastingly, H&M does not own supplies factories but instead works with over 750 suppliers in Europe and Asia (Baker, 2010). However, H&M and Benetton have a similar supply lead time approach, where they encourage late placement orders as it offers them the chance to learn better choices and decisions from the buyers. 

Distribution Stage

The use of highly automated warehouses by both Zara and Benetton facilitates faster storage, packing, and assembly of garments from the production centers, thus saving on time and resources. Unlike H&M that sub-contracts the internal and physical handling and distribution of stock, Zara and Benetton have invested heavily in owning the automated warehouses in a bid to cut down on costs of services from the sub-contractors (Baker, 2010). As a result, they have established a faster and more cost-effective distribution process by the application of capital-intensive technology.

Retail Stage

Whereas Benetton had initially let third parties operate the smaller retail stores, Zara and H&M companies owned and ran bigger ones which varied in size from 800 to 1,300 square meters. According to Baker, Benetton has now shifted the strategy by integrating smaller stores into grander sized ones of about 3,000 square meters in a bid to cut down on rental expenses (2010).

SCM Strategies

H&M

Recruitment of a lead, high designer to work with over 100 designers and 100 buyers in fashion ideals, achieves the brand’s SCM goal of exclusivity, high fashion, and quality goal (Yang, 2012). The use of a highly diversified manufacturing stage with over 750 supplier factories in Europe and Asia and longer order lead time up to 6 months creates supply reliability. It also lowers the risk of buying the wrong supplies (Yang, 2012). A more substantial part of its flow of goods is done by its terminal courier, thus minimizing possible loss goods while reducing the transit overhead costs. The use of more spacious and larger retail stores of 1,300 m² floor size to create a feel-at-home atmosphere among customers to walk freely and find the products easily.

Zara

The application of uniquely different and separate design functions with a mix of designers, market specialists, and buyers in each workshop for both gender and kid’s wear impacts positively on the ever-changing fashion trends (Zhelyazkov, 2014). The use of high manufacturing capability like capital-intensive and labor-intensive operations from a network of over 20 Spanish factories to promote the fastest order lead time of 15 days across the garment industry while exciting and stimulating customer demand (Zhelyazkov, 2014). The use of highly automated warehouses promotes faster storage, packing, and assembly of orders, cutting down twice on the warehouse capacity. The use of averagely smaller-sized retail shops of 800 square meters matches with the company’s SCM objective of shorter stay of non-repeated product designs in store encourages frequent checkups among customers, leading to high sales.

Benetton

Benetton strategized on consolidating its global brand image by producing standardized design products, hence cutting down on unnecessary costs associated with customized garments. Likewise, it displays its full range of products in larger megastores of about 3,000 square meters in size, thus reinforcing an excellent customer experience (Mohan, 2018). Further, the employment of a diversified manufacturing and distribution processes via expensive technologies like the highly automated warehouses facilitates labor-intensive operations, leading to a high level of specialization of garments.

Conclusion and Recommendations

Zara employed the best SCM strategy of designing a wide range of products that suit all genders and children, and further manufactured and distributed the garments via the use of capital-intensive and labor-intensive technologies that cut down on costs (Supply Chain, 2014). More so, the short-time display of design products is in smaller retail shops frequently encourages high sales while reducing the costs of running these stores.

References

Baker, C. R. (2010). “Supply chain operations model.” Journal of Supply Chain Management, 10(1), pp.1-24.

Mohan, P. (2018). Supply chain management of the united colors of Benetton. https://www.slideshare.net/PramUdhaMohan/supply-chain-management-of-united-colors-of-benetton

Supply Chain 24/7. (2014). Zara’s fashion retail supply chain strategies. Retrieved https://www.supplychain247.com/article/zaras_fashion_retail_supply_chain_strategies

Yang, Z. (2012). “Stimulus material case study – Hennes & Mauritz (H&M).” International Supply Chain Management.

Zhelyazkov, G. (2014). “Agile supply chain: Zara’s case study analysis.” Design, Manufacture, and Engineering Management.