´SUPPLY CHAIN MANAGEMENT

Through its organic cotton collection

PART I: INTRODUCTION

H&M in few words…

Description of the supply chain

Conventional vs Organic

Organic label certification

H&M main competitors

H&M IN FEW WORDS…

Established in Västerås (Sweden) in 1947 by

Erling Persson

Today: huge multinational that sells clothes,

cosmetics, accessories and footwear

1.700 stores worldwide.

Rate of expansion: 10-15% stores per year

Approximately 800 independent suppliers

and around 2700 production units, mainly in

Asia and Europe.

“H&M offers fashion and quality at the best price” –

Slogan

H&M´ SUPPLY CHAIN

1- Raw material harvesting

2- Manufacturing

3- Packaging

4 -Transportation

6 - Sales

7- Marketing

8 - Final disposal

9- R&D

CONVENTIONAL VS ORGANIC

Pesticide dependent crop

(25% of all pesticide use)

Seeds - GMO (pest resistant)

Soil - mono crop culture

intensively cultivated

Weed - chemical removal

(treating soil with herbicides

use to inhibit germination)

Pest control-insecticides use

Defoliation- toxic chemicals

Natural materials &

methods, pesticide

free(organic ferilizers, manual

crop)

Seeds - natural ingredients

Soil- annual crop rotation

stable fertlity.

Weed- through cultivation and

hand hoeing

Pest control- beneficial insects

Defoliation – seasonal freeze

leaf removal

CONVENTIONAL ORGANIC

ORGANIC LABEL CERTIFICATION

Ensure organic status of farms & cotton

Encourages payment of premium prices to support farmers

Ensure fibers are grown naturally & production processes follow

criteria of environmental responsibility

GOTS – Global Organic Textile Standards for controling textile production

Eco-label (approx. 100 in textiles) - Oeko-Tex standard 100 mark (health

standards), European Eco-Label for Textile Products (reduces water

pollution)

MAIN COMPETITORS

Direct competitors

Big players

Organic clothing varies from moderate to high price

PART II: ANALYSIS

The supply chain step by step…

Positive & Negative Impacts

Environmental & Social Impacts

Growth of the sector

Top Ten Organic Cotton producing countries

(2007-08): India, Syria, Turkey, China, Tanzania, USA,

Uganda, Peru, Egypt and Burkina Faso

Suppliers of H&M: India, China, Pakistan and Paraguay

No direct relationship with farmers

Contribute to improve life and labour conditions of

farmers through collaborations with 2 NGOs:

RAW MATERIAL HARVESTING

Increasing demand of large

retailers such as H&M

Expanding

organic agriculture

Minimizing

cotton cultivation´s impacts

Ensure Fair Labor Conditions

- Organic product line 2007

- Code of Conduct (production policies)

- Full Audit Program (production conditions)

- Member of Better Cotton Initiative

- Chemical restrictions (safe use & waste disposal)

Manufacturing stages

- Spinning

- Weaving

- Dyeing

- Cutting& sewing

- Quality inspection

- Finishing

MANUFACTURING

PACKAGING

To understand the next steps

Description of the travel of a garment from the external factories to the shops

PACKAGING

Packaging produced by the suppliers

Protection transportation from production plants to distribution center

Code of conduct – no polyethylene

Packaging produced by H&M

For transportation from the distribution center to the shops

Packaging in the shops

No specific actions to reduce packaging

TRANSPORTATION

Climate smart methods of transportation

Monitoring environmental performance of logistics services providers

Clean Cargo Working Group

B2B initiative (shippers of cargo and the companies they are

working for)

Clean Shipping project

Central warehouse based Hamburg - Germany

13 distribution centers all over the world

DISTRIBUTION

SALES

Customer and company interaction

POINT OF SALE

Location and Design: crucial

Internet and catalogue sales in several countries:

Sweden, Denmark, Norway, Finland, The Netherlands, Germany and Austria

Organic Cotton in store: INTEGRATED

Environmental Impacts

Energy Consumption: lighting,

cooling and heating

Waste Generation: hangers, tags,

boxes and plastic bags

Water Consumption: staff use

NO campaign to promote Organic Cotton Collection

Special Campaign

Fashion against AIDS

Environmental Impacts

MARKETING

Social Issue

Waste Generation

Water Consumption

Energy Consumption

3 principals: reduce, reuse, recycle environmental & economic benefits.

Recycling energy saving (50% less when producing fabrics of recycled fiber)

water saving - 15% decreased volume of Aral Sea - irrigation demands

- 10.000 L of water needed to grow cotton for 1 t-shirt

pollution reduction (coming from transportation, dyeing etc)

Approx. 95% of the land filled textiles each year could be recycled

Textiles that can´t be recycled, cloth scrap Post-industrial waste

Old/used clothes to be reprocessed Post-consumer waste

The most important clothing recycling initiative:

Marks & Spencer and Oxfam – creation of clothes exchange (for raising money for

Oxfam´s work to tackle poverty& decreasing the tons of textiles sent to the landfill.)

H&M reduces material & energy consumption in stores

FINAL DISPOSAL

RESEARCH & DEVELOPMENT

Cooperates with customer service & sales

Market source: Shapes the trend (print designers & product

developers)

Technical source: Advances technical quality & development

(mills, yarn, trim)

Services offered: microbiological testing & fabric and process tests

(wash trials etc)

Areas of activity:

Laboratory testing (control water systems, physical garments

testing)

Process development & validation (improve hygiene processes &

repair systems)

Fabric and component investigation (evaluate new textile

components)

Product design (reusable & biodegradable materials for

reprocessing)

PART III: RECOMMENDATIONS

The supply chain step by step…

How to improve?

Which competitors to look at?

Proximity H&M and farmers

Gaining knowledge to estimate

future supply of organic cotton

Building long-term relations

with suppliers to assure future

supply

Community development with

community investment

Minimizing environmental

impacts

Ensuring fair conditions for

farmers

RAW MATERIAL HARVESTING

OBJECTIVES ACTIONS

Education

Educational Programs in the

communities (suppliers H&M)

Grants for Universities

Economic

Micro-credit for Indian

farmers Grameen Bank

Environment

Partnership Soil

Association

Partnership Pesticide

Action Network

International

Social

Partnership with FLO

1

2

3

4

MANUFACTURING

Objectives

Reduce carbon emissions, become carbon neutral

Assure quality in labor conditions

Reduce waste water

Actions

“Eco-buildings” (materials, paints, insulation, natural lighting, “green roofs” )

Increase use of renewable energies, wind, solar

Installed by H&M´s factories or by participating in partnerships, ex BGMA, WWF

Used for H&M´s consumption or to be sold

Funded by World Bank or International Finance Corporation.

Partnership with Fair Wear Association

Water recycling

Water low flow

PACKAGING

Main area of risk = Transit terminal

• “Packaging scorecard”

• Software – training to reach reduction targets

In shops

• 100% recycled hangers

• Use of recycled carton for socks and tights

• Possibility to dispose packaging in store

“Education tool”

• CSR label

• Green Rating Index

ACTIONS OBJECTIVES

PACKAGING

TRANSPORTATION

No “airfreight policy

Reduction of business travel

Development of river transportation

Fleet of truck running with natural gas

Partnership with companies to share transportation

ACTIONS

Rethink the location of the facilities

“Green” transit terminal

DISTRIBUTION

ACTIONS

Raise awareness on

environmental issues

among customer and staff

Gaining consciousness

about H&M organic

cotton line

Change to sustainable

marketing

Differentiate the brand

Increase customer

retention and brand

loyalty

Mitigating risks and

identifying opportunities

Building a bridge

between MK and CSR

department

MARKETING

OBJECTIVES ACTIONS

1

2 New Policy Paper

New Place for the

Organic Cotton

Collection per section

in H&M stores

4 Strengthen the

Environmental

Message:

promote the

Organic Cotton

Collection

http://www.youtube.com/watch?v=ZLUX5EdlIDo

3

SALES

OBJECTIVES

Reducing waste

generation in the shops

Reducing energy

consumption

Reducing emissions

generated through sales

materials (bags)

Changing customers’

attitudes towards a more

environmentally friendly

behave

Retaining the best staff

“Bring your H&M Bag”

ACTIONS

1

2

Partnership Cáritas “Give your unwanted clothes to

Caritas for people who need them”

Help farmers through

customer spending:

3

5% out the price of

every item certified

as 100% organic

6 Extend online

shopping

Guide to recycling

5

4 Energy Efficient

in Stores

Decrease post-industrial waste

Decrease post - consumer waste

Make textile accessories with textile waste

Create outlet stock centers

Locate recycling bins in stores

Recycle stock clothing

Marks & Spencer and Oxfam: created the clothes exchange

(raising money for Oxfam´s work to tackle poverty & decreasing the

tons of textiles sent to landfills)

FINAL DISPOSAL

OBJECTIVES

ACTIONS

RESEARCH & DEVELOPPEMENT

Decrease use of non recyclable/artificial materials (synthetics, nylon)

Increase product durability (reduce water consumption)

Increase use of innovative and recyclable materials

(hemp, bamboo, wild silk, linen etc), which are degradable

Increase longevity, promote up-cycling

Redesign and restyle used clothes

OBJECTIVES

ACTIONS

FUTURE…

WHY & HOW

TO IMPLEMENT THESE RECOMMENDATIONS?

WHY ?

- Competition

- Risks reduction

- Cost

HOW ?

- Commitment entire supply chain

- CSR department

H&M has all the qualities and strenghts…

+ -

Internal

Strengths

International brand

Successful company

Fashion brand – Good designers

Excellent logistics process

Website good CSR tool

Organic cotton line

Weaknesses

Intermediaries no direct selection raw material

Increase transportation by air

Increase business travel

No actions to reduce or recycle packaging

Poor marketing to promote CSR /organic line

External

Opportunities

Fashion industry-Fast pace-Innovation

Large audience – Educate people

Large demand ethical products

Global sales online

Organic Exchange

Better Cotton Initiative

Green Cargo working group

Clean Shipping project

Threats

No direct relationship with farmers

Energy consumption : cotton production

Pollution: cotton production

Human rights manufacturers– Medias - NGOs

Asia main production / Europe main market

Organic cotton not fair trade

Competitors ahead: innovation fibers,

packaging “education tool”, promotion of CSR,

recycling actions

Change in the supply chain could happen only if:

- Commitment of the top management

- Considered as a strategic topic (reduce risks & costs)

- Environmental-social strategy for the whole supply chain

BUT…

THANK YOU!

ANNEX

H&M’s supply chain recommendations map

Detailed SWOT analysis