{"id":22392,"date":"2017-11-14T15:56:09","date_gmt":"2017-11-14T20:56:09","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/"},"modified":"2017-11-15T14:53:19","modified_gmt":"2017-11-15T19:53:19","slug":"could-isolationism-be-a-drag-on-hms-fast-fashion","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/","title":{"rendered":"Could isolationism be a drag on H&M\u2019s fast fashion?"},"content":{"rendered":"

In their latest annual report, H&M asserted that for global companies like itself, trade intervention affects them to a lesser extent [1]. However, global trade growth has reached its lowest levels since 2009 [2] and isolationist movements are on the rise in the U.K. and U.S. \u2013 countries that contribute ~20% of H&M\u2019s total sales (see Table A).<\/p>\n

The fashion retailer has become a global tour de force by delivering \u2018fast fashion\u2019 to its customers, shortening the time it takes for new trends to hit the shelves. In order to deliver on this promise, H&M has built a Just-In-Time supply chain designed at minimizing lead times and inventory. Given the Swedish retailer currently operates in 64 markets, the effectiveness of their JIT model depends on the ease and cost at which goods flow across borders.<\/p>\n

In a 177-page report on the impact of Brexit on trade, Sweden\u2019s National Board of Trade asserts that there will be \u201cincreased administration, increased costs, and reduced stability in the flow of goods\u201d [3].<\/p>\n

Although future U.S. trade policy is unknown, an important concern for H&M\u2019s management must be: How will isolationism and declining global trade impact H&M\u2019s supply chain, which is critical to delivering fast fashion?<\/p>\n

To date, H&M does not manufacture their own clothing designs. Instead, they contract with over 700 suppliers across Asia and Europe [4], with approximately two-thirds of their sourcing from Asia as of 2011 [5].<\/p>\n

To address global trade decline and isolationism, H&M in the short term is actively monitoring purchasing and transportation costs, and developing strategies to respond to future changes in prices.<\/p>\n

In the medium term, H&M is making technological investments to develop a faster, more agile supply chain to shorten lead times. As Karl-Johan Persson, CEO, remarked in a press release in September 2017, \u201cTechnology is also enabling improved purchasing methods that allow shorter lead times and greater precision when planning the product range\u201d [6].<\/p>\n

Lead time is primarily a factor of manufacturing process time and travel time. A JIT supply chain depends on how well the company optimizes both levers \u2013 operations and the network. By investing in technology, H&M is focused on pulling the operations lever to improve lead time, rather than the network lever.<\/p>\n

Depending on the extent to which future trade deals adversely impact H&M, it may be not only prudent, but also advantageous for H&M to consider investments in optimizing their supply chain network in the medium term. If trade administration and costs do indeed increase as expected, lead times to deliver merchandise from distribution centers to stores (within the U.K., possibly the U.S. and other countries) will lengthen. While H&M is investing to improve lead times through operational efficiencies, these gains may be fully offset by increases in administrative burdens to move merchandise across borders.<\/p>\n

H&M will then need to shorten lead times through network optimization by reducing distances merchandise must travel across the entire length of the supply chain. Given the majority of H&M\u2019s sales are concentrated within continental Europe and the U.S., H&M could look to source their supply closer to Europe, thereby reducing the distance merchandise must travel at the front-end of the supply chain.<\/p>\n

H&M could achieve this through two means: 1) Shift sourcing from Asian suppliers to European suppliers, or African suppliers near Europe 2) Vertically integrate and build manufacturing capabilities in Europe or Africa. The second option is much riskier and more capital intensive, but H&M\u2019s primary competitor \u2013 Zara \u2013 operates in this manner today. In the future, H&M may have no choice but to vertically integrate in order to remain competitive.<\/p>\n

We have explored the potential impact of isolationist movements on H&M\u2019s supply chain, but have not explored how the decline in global trade may impact future transportation costs. Will the decline eventually lead carrier or air freight shipping costs to rise? If so, how should H&M mitigate this risk?<\/p>\n

Table A<\/strong><\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

Source:\u00a0 Hennes & Mauritz, 2016 Annual Report, p. 79, http:\/\/quote.morningstar.com\/stock-<\/span><\/span>filing\/Annual-Report\/2016\/11\/30\/, accessed November 2017. <\/span><\/span><\/p>\n

Word Count: 798<\/p>\n

Endnotes<\/strong><\/p>\n

1. Hennes & Mauritz, 2016 Annual Report, p. 74, http:\/\/quote.morningstar.com\/stock-filing\/Annual-Report\/2016\/11\/30\/, accessed November 2017.<\/p>\n

2. International Monetary Fund, \u201cWorld Economic Outlook, October 2017, Seeking Sustainable Growth: Short-Term Recovery, Long-Term Challenges\u201d (PDF file), downloaded from IMF website, p. 37, https:\/\/www.imf.org\/en\/Publications\/WEO\/Issues\/2017\/09\/19\/world-economic-outlook-october-2017, accessed November 8, 2017.<\/p>\n

3. National Board of Trade Sweden, \u201cBrexit, March 2017\u201d (PDF file), quoted in Lee Roden, \u201cTrade with UK will be more difficult and expensive post-Brexit, Swedish government warned,\u201d The Local se, March 14, 2017, https:\/\/www.thelocal.se\/20170314\/trade-with-uk-will-more-difficult-and-expensive-post-brexit-swedish-government-warned, accessed November 2017.<\/p>\n

4. Hennes & Mauritz, 2016 Annual Report, p. 72, http:\/\/quote.morningstar.com\/stock-filing\/Annual-Report\/2016\/11\/30\/, accessed November 2017.<\/p>\n

5. Source: Bernstein Global Wealth Management, \u201cInditex and H&M: Very Different and Very Similar,\u201d
\nFebruary 2011, p. 98, Business Source Complete, EBSCO, November 2017.<\/p>\n

6. \u201cH&M Hennes & Mauritz AB Nine-month Report,\u201d press release, September, 28, 2017, on H&M website, http:\/\/about.hm.com\/en\/media\/news\/financial-reports\/2017\/9\/2682788, accessed November 2017.<\/p>\n

Source: Barnes, L., & Lea-Greenwood, G., \u201cFast fashioning the supply chain: shaping the research
\nagenda.\u201d Journal of Fashion Marketing and Management Vol. 10 No. 3 (2006): 259-271<\/p>\n","protected":false},"excerpt":{"rendered":"

H&M delivers fast fashion to the shelves via an agile, global supply chain network. But could isolationist trade policies disrupt the JIT delivery model?<\/p>\n","protected":false},"author":10153,"featured_media":22405,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-22392","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nCould isolationism be a drag on H&M\u2019s fast fashion? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Could isolationism be a drag on H&M\u2019s fast fashion? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"H&M delivers fast fashion to the shelves via an agile, global supply chain network. But could isolationist trade policies disrupt the JIT delivery model?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2017-11-15T19:53:19+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/HM-pic-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"720\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/\",\"name\":\"Could isolationism be a drag on H&M\u2019s fast fashion? - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/HM-pic-1.jpg\",\"datePublished\":\"2017-11-14T20:56:09+00:00\",\"dateModified\":\"2017-11-15T19:53:19+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/HM-pic-1.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/HM-pic-1.jpg\",\"width\":1280,\"height\":720},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/could-isolationism-be-a-drag-on-hms-fast-fashion\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Could isolationism be a drag on H&M\u2019s fast fashion?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Could isolationism be a drag on H&M\u2019s fast fashion? - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/","og_locale":"en_US","og_type":"article","og_title":"Could isolationism be a drag on H&M\u2019s fast fashion? - Technology and Operations Management","og_description":"H&M delivers fast fashion to the shelves via an agile, global supply chain network. But could isolationist trade policies disrupt the JIT delivery model?","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/","og_site_name":"Technology and Operations Management","article_modified_time":"2017-11-15T19:53:19+00:00","og_image":[{"width":1280,"height":720,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/HM-pic-1.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/","name":"Could isolationism be a drag on H&M\u2019s fast fashion? - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/HM-pic-1.jpg","datePublished":"2017-11-14T20:56:09+00:00","dateModified":"2017-11-15T19:53:19+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/HM-pic-1.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/HM-pic-1.jpg","width":1280,"height":720},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/could-isolationism-be-a-drag-on-hms-fast-fashion\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"Could isolationism be a drag on H&M\u2019s fast fashion?"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/22392","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/10153"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=22392"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/22392\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/22405"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=22392"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=22392"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}