CEOCIO China Business Feature: Fashion Magnates' Supply Chain Contest in China

CEOCIO China Magazine
2007-05-10 16:27 1148

BEIJING, May 14 /Xinhua-PRNewswire/ -- CEOCIO Magazine, through its China Business Feature ( ), recently reported on the contest between two European fashion magnates in China, H&M and Zara. With H&M arriving in China in April, the key of the rivalry between the two would be determined by their different supply chain management strategy, CEOCIO commented.

China Business Feature reported that, "In April this year, Swedish fashion magnate H&M opened its first flagship store on the Chinese Mainland. Meanwhile, a strong company rival, Spanish fashion chain Zara, continues its success in China.

"Zara and H&M have similar business strategies. Both retailers open stores in prosperous commercial districts and carry a limited amount of garments in a variety of styles. Significantly, they also respond quickly to changes in the fashion world by updating their lines as fashion trends change.

"The Zara-H&M rivalry is strong to say the least. Both retailers are competing against each other for the lead market position. And behind the scenes, both have their own trump cards to play. Zara is proud of its high-speed supply chain, while H&M uses a three-in-one method that combines time, quality and price in two supply chains that work to balance efficiency and cost.

"H&M arranges 60% of its production in Asia, and the rest in Europe. The H&M strategy does, in essence, optimize both time and cost. The retailer has designed two supply chains: an "efficient" one charged with production in Asia and a "rapid reaction" one in Europe. On top of this, it uses the Offer Follow up System (OFS) to deal with information management and keep track of its supply chain. For more fashion-sensitive clothes, H&M places its orders with European suppliers who quickly respond with a rapid-reaction supply chain.

"H&M is skilled at balancing cost and speed, but Zara tweaks this somewhat by improving on its rapid reaction supply chain. Zara has concentrated its production in Europe. 70% of these suppliers are in Europe, and the rest are located in Asia.

"All Zara stores have independent information systems. Every night, the company headquarters in La Coruna, northwest Spain, exchanges data with each store. The information is so detailed that the sales volume, size, color, quantity, selling time, means of payment, discount information and price adjustment for each product is included. Afterwards, the departments will break down the data to assess local markets. To stay close to the market, Zara adopts a team design mode which is composed of purchasing personnel, designer and marketing specialists.

"With IT technology, Zara has established a closed communication network that facilitates the smooth transmission of crucial information related to design, purchase, production and sales."

This is an abstract of the report. Read the complete story on .


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Source: CEOCIO China Magazine
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