Case study on Supply chain strategy: Supplying Fast Fashion

The following case study concentrates on the changing garment retailing. With the fashion becoming faster and more complex, retail businesses need to adopt their supply chains accordingly. By comparing the brands H&M, Zara and Benetton, we can see the different (or maybe not so different?) approaches to meet the market requirements.

The analysis stresses on the following categories: Design, Suppliers, Manufacturing, Distribution and Retail.

  

All three businesses emphasize the importance of design in this market; therefore they highly focus on a high number of designers and market specialists. As it can be seen in the graphic above, all three businesses invested in almost full ownership. This further underlines how important this first step of the supply chain is to the companies and that it needs to be kept in-house to guaranty a certain success.

Manufacturing on the other hand is done quite differently. Although you can detect a strong preference of keeping the production in and around Europe, the question of ownership differs, especially between Benetton and H&M in comparison to Zara. Latter one owns most of its production, which is mostly based in Spain. The state that because of this production network and own operations they are able to shorten the lead time even further, even though they have to cope with the labor-intensive operations themselves.

This strategy of full, respectively part ownership by Zara is furthermore followed in their distribution. They invested in fully automated warehouses to support their retail network and guarantee their short lead times. Also Benetton is running this strategy and invested in part ownership in form of own warehouses as well. H&M nevertheless still focusses on a subcontracted distribution, but with its own centralized stock room.

In the area of the actual retail, all businesses concentrate on ownership. While Zara and H&M only sell via their own stores, Benetton is currently changing their strategy towards Benetton-owned stores. Especially Zara focusses on the store environment and the shopping experience to further develop their brand image with their stores. Similar to that H&M aims to create a comfortable and inspiring atmosphere for their customers.

In general you can see that, while having a look at the overall strategies of these three businesses, some important differences and focusses can be detected. Having a look at Zara for example the analysis supports their business strategy and confirms a vertical integration. Due to the high percentage of ownership throughout the supply chain it is possible to control and direct their business in the aimed direction.

Do you think H&M could adapt the strategy of Zara to shorten their lead times? Would that be of advantage?

How could Benetton improve their image and be seen as fashionable as Zara or H&M?

Do you think Zara can keep up this vertical integration in the long run, without having to cut the cost?