H&M is one of the largest fashion retail companies in the world. Despite years of supply chain challenges, the company has remained profitable and popular. H&M has done this by strengthening its brand against growing concerns for the environment and human rights during manufacturing. Read on to learn more about H&M’s supply chain policies and current company struggles.
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H&M’s Labor Contracts
H&M produces most of its garments in Asian markets because labor contracts are cheaper there than in the U.S. The problem is that most countries do not have the same standards for working conditions as in the U.S., yet customers care about ethically sourced materials. H&M is different than other big retailers because it cares about working conditions and does not sacrifice this belief to boost profits. H&M makes sure to disclose all of the locations where its clothing is manufactured and report on labor conditions. It maintains over 1,000 suppliers around the world.
One current problem that H&M’s procurement team faces is the strengthening U.S. dollar. Labor contracts are typically negotiated in U.S. dollars, but most H&M garments are sold in Euros and other currencies around the world. This has had a detrimental impact on profits because of the currency exposure in the U.S. H&M must decide how to price garments appropriately to keep customers happy and also maintain profitability.
H&M’s Approach to Manufacturing
H&M’s procurement department likely noticed the currency exposure problem a long time ago and has since created some form of currency hedging. This is just a temporary fix, though. H&M must find a way to deal with labor contracts to protect its best interest in the long term. At the same time, H&M has continued to improve manufacturing processes to meet the growing concerns that customers have for the environment. Both human rights and sustainability are hot topics in the manufacturing industry.
H&M has devoted extensive time and money to sustainable growing practices. The company does not believe in pesticides or synthetic fertilizers. By focusing on organic cotton, H&M has reduced its environmental footprint. Most of the cotton currently produced in the U.S. does not follow the same sustainability practices.
Sustainable cotton is not the only thing H&M does for the environment, though. The company also has a zero waste policy. H&M accomplishes this by using recyclable material during textile production. The company also works with the World Wide Fund for Nature to conserve water and energy.
Impact and Advantage
Through careful planning and evaluation, H&M has worked to create a supply chain that is ethically sourced and environmentally friendly. The real test will be how the company deals with the currency exposure problems. International businesses often run into these currency problems as world economies push against each other.
One thing is certain. H&M will not sacrifice its beliefs for fair working conditions and environmentally safe manufacturing practices just to make more money. The company has proven itself over the years, and customers are happy as a result of these practices. [/show_to]
