H&M’s recovery hinges on supply chain and procurement strategies

Swedish retailer Hennes & Mauritz (H&M) has attributed its latest dismal quarterly financial results to…...

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Swedish retailer Hennes & Mauritz (H&M) has attributed its latest dismal quarterly financial results to a combination of poor product placement in the second half of 2017, bad weather and the “Amazon Effect” (the rise of highly agile rival e-commerce strategies). However, a supply chain expert believes that to turn its performance around it’s going to need a tech-driven, fast-response supply chain.

Speaking to Supply Chain Dive, Adheer Bahulkar, Head of Specialities Retail at global strategy and management consultancy A. T. Kearney, explained that H&M’s forte – the fast-fashion business it pioneered nearly 20 years ago – will become its weakness unless it makes big changes to its supply chain model. Specifically, he said, it needs a faster, more agile, technologically-powered supply chain, so that it can respond far more rapidly to product selections that are simply failing to sell.

Explaining that fast-fashion retail – the idea that customers prefer new products to seasonal sales – is akin to placing bets, Bahulkar said: “I’m essentially gambling that the consumer is going to like the product and I’m going to win big.”

But when consumers don’t like the products on offer, the “win big” outcome can rapidly flip into its reverse: “lose big”. H&M was left laden with inventories that no one wanted to buy.

The retailer appears to have taken on board Bahulkar’s view that, in today’s tech-enabled world, a bad product cycle cannot be permitted to become a problem: “Retailers need to have the ability to appropriately handle a bad product cycle,” he said.

The company announced in its latest humiliating earnings call that it is investing heavily in what it calls “key enablers” for the company’s future. That’s code for taking steps to improve procurement advice, build in greater operational resilience, and develop that more agile, tech-enabled supply chain Bahulkar spoke of.

Ed Cross

Ed founded Odesma in 2014 with the explicit intent of creating a new kind of procurement consultancy founded entirely on cloud principles. Deploying best-of-breed subject matter experts alongside the best on demand technology to deliver rapid and effective change for customers.

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