Evidence-based interpretation of the management of supply chain: How do ZARA and HM survive in SCM

ABSTRACT

Since the process of global economic integration and continuous development of technology, the economic scale of fast fashion brands has been expanding. Many studies have shown that in the fierce competition of fashion brand fashion, how to adapt to the changing environment and establish an efficient supply chain model suitable for their own development direction is a very important problem for clothing enterprises (Bhardwaj and Fairhurst, 2010). However, there is a lack of research on how fast fashion brand retailers can survive and develop healthily in the complex and changeable market. In this dissertation, a comparative case is used to supplement the research results on the basis of the existing research. This dissertation mainly based on the evidence through ZARA and H&M to explain the supply chain management and explore what type of supply chain management mode ZARA and H&M enterprises are through to survive. In addition, the dissertation will use four main aspects of supply chain management mode: production control management, logistics management, information system and potential problems in SCM, as well as qualitative induction and interpretation methods to collect and analyze information from different secondary sources. The research results show that ZARA and H&M have achieved success to a certain extent by relying on the supply chain management mode adapted to their own development characteristics. By comparing the results of the two models, it can be concluded that although the supply chain models of the two enterprises are different, they both pay attention to quick response and cost control. However, in order to achieve quick response, cost saving, capital and other purposes, the two companies have also caused labor injury, quality crisis and other problems, which also provides some experience and lessons for the global clothing enterprise supply chain management.

Table of Content
Chapter 1 Introduction 5
1.1 Research background 5
1.2 Objective 5
1.3 Research methods 6
1.4 Structure of the dissertation 6
Chapter 2 Literature Review 7
2.1 Key Concept 7
2.1.1 Defining the term ‘supply chain’ 7
2.2 SCM in the fast-fashion industry 8
2.2.1 Agile supply chain 9
2.2.2 Quick Response 12
2.2.3 Offshore sourcing 15
2.3 Potential problems in SCM 19
2.4 Overview of H&M and ZARA 23
Chapter 3 Methodology 24
3.1 Research design 25
3.2 Data collection 27
3.3 Data quality 29
3.4 Ethics 30
3.5 Methodological limitations 30
Chapter 4 Findings &Discussions 31
4.1 Production control management 32
4.2 Logistics management 38
4.3 Supply chain information system management 41
4.4 Potential Problems in SCM 44
Chapter 5 Conclusion & Recommendations 50
5.1 Conclusions of Research 51
5.2 Limitations and Recommendations for further research 53

Chapter 1 Introduction
1.1 Research background
With the continuous improvement of global economic integration driven by new technologies in recent 20 years, the scale of fast fashion industry is growing rapidly (Bhardwaj and Fairhurst, 2010). The core goal of the industry is to shorten the delivery time to meet customers’ demand for new products. In this case, supply chain management (SCM) is crucial (Azuma, 2002). One of the special problems of supply chain management in clothing industry is how to keep the cost low and deal with the rapidly changing fashion trend quickly. This often requires modification of the logistics system to reflect changes in market and Technology (Doyle et al., 2006). The theory of supply chain management has two key problems: how to control supply chain cost and how to meet customer demand. This dissertation takes ZARA and H&M as examples to provide an evidence-based explanation for supply chain management.

1.2 Objective
This analysis aims to offer an evidence-based interpretation of the management in supply chain (SC) through the comparative analysis between ZARA and H&M. Research question has been made that:

1)What could enterprises learn from the SCM of ZARA and H&M.

2)How to solve the problems that ZARA and H&M shared in SCM.

1.3 Research methods
In this dissertation, two fast fashion retailers H&M and ZARA are selected as comparative cases. They are very famous all over the world and have rich experience in supply chain management. Through the detailed analysis of the supply chain model strategies of the two companies, it seems that their models have similarities and differences, and those different strategies and methods will have different effects and results. This dissertation analyzes and discusses the supply chain models of H&M and ZARA through four main aspects of the supply chain model, and considers the relevant strategies in detail in each aspect. This analysis helps to investigate how the two clothing retailers flexibly use their respective supply chain models and potential problems.

1.4 Structure of the dissertation
The structure of this dissertation is as follows. The first chapter introduces the research background, problems and purpose. The second chapter mainly includes four aspects of literature review. First, the concept of supply chain management will be elaborated. Secondly, several typical characteristics of supply chain management in fast fashion industry will be discussed. Third, the potential problems of supply chain management in the fast fashion industry will be analyzed and discussed. At the end of the literature review, the general situation of ZARA and H&M will be intruduced briefly. The third chapter describes the methodology, and explains how to collect and research the methods limitations. Due to the qualitative method, there is no direct contact with clothing retailers, so there is no statistical support. The fourth chapter mainly elaborates the supply chain of H&M and ZARA from four aspects: production control, logistics management, information system management and potential problems. Each part of this chapter discusses the similarities and differences between the two supply chain management strategies. Finally, the fifth chapter provides conclusions, limitations and suggestions for future research.
Chapter 2 Literature Review
This section first introduces the key theories and models related to supply chain, as well as the important supply chain management theories in the fast fashion industry, and then discusses the methods to be adopted in this analysis.

2.1 Key Concept
2.1.1 Defining the term ‘supply chain’

Originally, the term ‘supply chain’ referred to the process of expanding production, thereby lengthening or delaying completion of products. Har Harrison (2003) defines it as a network of key functions, including purchase of raw materials, conversion of raw materials to intermediate stage, then conversion to final products and final distribution to customers. Melnyk (2014) describes it similarly as the process of assessing the value of goods produced and guiding them through sales channels,  from the beginning of raw materials to the end of consumption. This view casts  supply chain as a series of links between suppliers and customers, taking under its umbrella the diverse areas of design, acquisition, stockpiling, distribution, service, and all activities undertaken to meet customers’ demands both inside the system and outside of it.

Kuglin (2000) emphasizes this aspect in particular, arguing that the goal of effective supply chain management is to design a supply chain which gives priority to customer experience and satisfaction. Meanwhile, Reutterer et al. (2000) argues that supply chain behaviours and patterns will be different due to a range of dynamic factors, including the nature of competition, economic circumstances, market opportunities, and so on. This means that discussions of supply chain design must make use of practical case studies and examples in order to establish useful mathematical models. Only through this process can a digital program be designed to create an effective supply chain structure.

To sum up, these previous theories illustrate the importance of managing and analyzing the supply chain, which depends on many factors, covering every stage of products from concept to raw materials to end-user consumption.

2.2 SCM in the fast-fashion industry
As the commodity economy has grown and consumption levels in the apparel industry have risen, customers have a stronger sense of fashion and style than ever before (Bailey, 2001). As a result, mass production is losing its value as target customers lose interest in standardized design and look for new, original and unique products (Doyle et al., 2006). Fast fashion companies have to cope with this trend by adjusting their supply chains to improve efficiency (Tylor et al., 2006). In other words, the market competition of fast fashion brand is very fierce and the requirement of product renewal speed is very high. The supply chain management mode adopted by fast fashion industry plays an important role in the success of enterprises. Now, this section reviews several key strategies that fast fashion retailers have developed and adopted to reduce lead times.

2.2.1 Agile supply chain
Agile supply chain refers to the integration of suppliers, manufacturers, distributors and consumers into a unified and fast response functional logistics network through the control of capital flow, logistics and information flow, thus forming a very competitive strategic alliance (Christopher et al., 2000). Compared with the traditional supply chain model, agile supply chain can be rapidly restructured and adjusted, and it is required to promote the alliance among enterprises through supply chain management, so as to improve the agility of enterprises. The traditional supply chain relies on forecasting because a relatively long lead time has been set (Christopher et al. 2004). However, agile supply chain emphasizes demand because of the need for shorter lead times and response times (Christopher et al., 2004).

It can be seen that in the era of increasingly fierce competition and changing market demand, it is necessary to apply agile thinking to the whole supply chain management, because it emphasizes the speed goal of the supply chain in responding to the diversified needs of customers. Therefore, compared with the previous concept of integrated supply chain, the connotation of agile supply chain is significantly different. Professor Alan Harrison proposed the framework of agile supply chain (Harrison, Christopher and Hoek, 1999). As shown in Figure 1, the framework is divided into four key components.

Figure 1: Agile supply chain framework (Harrison, 1999)

Agile supply chain and virtual integration
Agile supply chain will make use of skills and resources in all departments, which will help each department in the region to establish a common goal and communicate (Harrison, Christopher and Hoek, 1999). The characteristic of virtual integration is that the relationship between each department and different departments of supply chain is informal, flexible and dynamic (Harrison, Christopher and Hoek, 1999). Therefore, it is not the mode of centralized control of the operation of the supply chain, but the mode of promoting the whole supply chain. What’s more, because the structure and process are kept to a minimum in virtual integration and all departments are fully authorized, the supply chain is more agile and responsive. Therefore, agile supply chain is beneficial for all parts of the supply chain to benefit from it and work towards the goal together.

Agile supply chain depends on market sensitivity
In terms of internal performance evaluation, agile supply chain requires every measure to be connected with consumers in the market(Harrison, Christopher and Hoek, 1999). In order to achieve this goal, the diagram of every operation from the customer’s real concern to the enterprise’s execution needs to be carefully made. Moreover, quick response is an important index to measure the agility of supply chain, which indicates the response speed of supply chain to market changes(Harrison, Christopher and Hoek, 1999). To some extent, whether the supply chain can perceive the sudden change of market behavior will affect the realization of rapid response. Therefore, agile supply chain needs to establish high market sensitivity in performance evaluation and operation.

Process integration in Agile Supply Chain
Agile supply chain needs to improve the internal operation process into high-level integration (Harrison, Christopher and Hoek, 1999). Primarily, when a sales operation discovers changes in the market, it uses many other operations in the supply chain to trigger a chain of corrective changes(Harrison, Christopher and Hoek, 1999). Obviously, this shows that the change speed of internal operation greatly affects the response speed of supply chain. Therefore, agile supply chain will integrate the internal operation process composed of sales, forecast, production, purchase and so on into a whole to implement, so as to speed up the response of supply chain to market changes.

Agile Supply Chain based on dynamic network
The main choice of agile supply chain is dynamic network (Harrison, Christopher and Hoek, 1999). Dynamic networks depend on complex information systems between suppliers and buyers, as well as between suppliers (Harrison, Christopher and Hoek, 1999). In other words, when the market changes suddenly, it is easy to establish instant connection switching. Therefore, dynamic wangkuo can be regarded as a very useful network form in agile supply chain. In addition, agile supply chain also uses information technology, OE and so on to realize the way of production according to the needs of customers, which helps to reduce the inventory of the whole supply chain (Harrison, Christopher and Hoek, 1999).

Therefore, it can be seen that agile supply chain is a new strategic idea, which is helpful to bring new competitive advantages to traditional industries.

2.2.2 Quick Response
Agile supply chain creates an environment that supports rapid response to market trends (Christopher et al., 2004). Lowson et al. (1999) pointes out that this quick response requires a more acute and timely understanding of key changes in the market. This is an important factor in maintaining a good turnover in the production and sale of fashion products (Giunipero et al., 2012). Quick response refers to the continuous supplement and provision of goods and services by logistics enterprises through establishing good relations with manufacturers and retailers and using information technology for multi frequency and small quantity (Fiorito, May and Straughn, 1995). It can be seen that quick response supply chain is a kind of logistics management mode that is conducive to promoting sales, meeting customers in time and helping to reduce commodity and inventory risks. Mainly, quick response is related to two aspects.

On the one hand, quick response is related to whether a manufacturer can quickly meet customer service needs. Quick response supply chain adopts vertical integration mode to achieve higher efficiency (Hines, 2004). Similar to agile supply chain, quick response is also information driven (Hines, 2004). For example, sales information can be used to adapt to the changing needs of the market, so the focus of rapid response in the production process is the minimum order and the shortest delivery time (Birthe et al., 2003). Also, Perry and Sohal (2000) state that if the information sharing between the internal departments of the company and the cooperation in the supply chain is not sufficient and smooth, it will lead to the uncertainty in the operation process of the supply chain and the stock accumulation. For example, the information flow in the supply chain operation of many garment enterprises is not smooth, which not only causes the response speed of the supply chain to slow down, but also makes the company have endless inventory. Therefore, quick response requires companies to pay attention to the importance of sharing information. Further, Perry and sohal (2000) emphasizes that in addition to sharing information, information technology can help solve this problem because it helps improve the ability to complete logistics and deliver inventory as quickly as possible.

On the other hand, Perry and Sohal (2000) point out that quick response is related to the response speed of suppliers. For most clothing brands, if the production outsourcing leaves the supplier, then the responsiveness of the supply chain will be impossible (Perry and Sohal, 2000). For many local clothing enterprises, the weak supplier management will affect the performance of suppliers. For example, Christopher, Lowson and Peck (2004) explain that the purchasing director of a clothing enterprise said that their strategic supplier was a big problem, which not only had the characteristics of high price, long delivery period and poor flexibility, but also had lots of trouble in communication. In fact, the reason is that they have no cooperation agreement with suppliers or regular communication, but only rely on the market to manage suppliers (Christopher, Lowson and Peck, 2004). Therefore, the supplier’s problems can not be properly solved, which further brings various problems to the order. Even though the product cycle of the clothing industry is short and fast, it is very important for the clothing enterprises to select the right suppliers and improve the on-time delivery rate of suppliers, shorten the response time and so on.

To sum up, quick response requires the ability of quick commitment to customer needs and the ability to continuously shorten the delivery time. In addition, quick response supply chain has gradually become a tool for retailers to achieve competitive advantage. Therefore, when the production and supply chain lacks flexibility and cannot respond to the changing demand quickly, it can improve the fast response of the supply chain by properly controlling the product diversification.

2.2.3 Offshore sourcing

In addition to the much-needed quick response system, another problem that most fast fashion companies should consider is to cut costs in the supply chain. Offshore outsourcing is a common way for fast fashion companies to control costs. MacCarthy and Jayarathne (2013) state that the garment industry has started to transfer factories to developing countries. For example, according to the European Commission (2013), 42% of its clothing is produced in China and then transferred to Europe, which means outsourcing is a common method in the Western clothing industry. Offshore outsourcing refers to the mode that enterprises use external resources and foreign resources to carry out industrial specialty (Herath and Kishore, 2009). In other words, multinational companies can reduce production costs by taking advantage of differences in labor costs of countries or regions, which is conducive to increasing competitive advantage.

Moreover, Maskell et al. (2007) describe that as the level of technology, human resources and other factors in developing countries has been constantly improved and kept a low-cost advantage, a large number of enterprises offshore outsourcing from developed countries to developing countries. Further, Pellicelli (2018) points out that in recent years, offshore outsourcing has become extremely important for companies competing in the world, and has recently become a crucial part of the long-term strategy of leading companies. In addition, Pellicelli (2018) further emphasizes that the reasons for the company’s shift to offshoring have gone from cost savings to increased market flexibility, from shortened time to access to world-class capabilities to enable them to reduce risk.

The advantages of offshoring are obvious because of the lower labor costs in the less developed countries. However, the hidden costs are ignored. Mukherjee (2012) states that training costs and administrative travel costs are inevitable in the process of outsourcing. Also, offshore procurement will extend the delivery time, which will damage the ability to respond to marketing needs (Barnes and Lea Greenwood, 2006). What’s more, outsourcing also has an impact on the environment, with long-distance transformation leading to air pollution problems (Saicheua et al., 2012). Therefore, offshore outsourcing is not only a strategy that cannot be ignored, but also a model that must be treated with caution.

2.2.4 Logistics outsourcing

Logistics outsourcing can be seen as a form of enterprise logistics resource allocation in supply chain management, and also a mode of enterprise business outsourcing (Bolumole, Frankel and Naslund, 2007). Logistics outsourcing is to better realize the rational allocation of resources, so as to help enterprises improve the overall competitiveness(Bolumole, Frankel and Naslund, 2007). First of all, Liu et al. (2015) explain that logistics outsourcing could reduce the cost of operation and use limited resources in the main business. Besides, the logistics outsourcing strategy is very important for the rational use of limited resources of enterprises, and many enterprises at home and abroad break through the problems brought by the limited original resources through logistics outsourcing (Liu et al., 2015). In other words, outsourcing can help enterprises reduce the investment in logistics business such as transportation, warehouse and human resources to save costs. Through the use of logistics outsourcing strategy, the company can focus on resources to improve the core competence of the company, so as to obtain high profits. In addition, Sohail (2008) states that the form of logistics outsourcing can use the professional advantages of scale operation to improve the utilization rate of each link, so as to achieve the goal of saving costs and increasing profits.

More importantly, the logistics outsourcing mode will maximize the turnover of inventory goods through professional logistics planning and appropriate means of transportation (Power, Sharafali and Bhakoo, 2007). In other words, this is conducive to accelerating the turnover of goods and reducing the inventory of the warehouse, thus reducing the risk of operation. Therefore, to a certain extent, logistics outsourcing can help enterprises improve the speed of material circulation and save logistics costs and resources. However, it is necessary for every enterprise to analyze its own conditions carefully to decide whether to use logistics outsourcing.

2.2.5 Application of visualization technology in supply chain management

Visual management refers to the use of IT systems to enable managers to master enterprise information more effectively (Wu, Battle and Madden, 2014). This form can not only make the process and information within the enterprise visualized, but also make the management transparent (Wu, Battle and Madden, 2014). Also, Zhong et al. (2016) explain that the use of visualization technology in supply chain management is to collect, convey, store and analyze information through information technology. Moreover, Zhong et al. (2016) also state that visualization technology could be displayed in a graphical way according to the demand of supply chain. Thus, it can effectively improve the transparency of supply chain management and reduce the risk of supply chain management in a way.

First, in supply chain management, visualization technology will be used in order management system. Order management system is a system that can provide business communication and order tracking based on order, which could realize the visualization of the whole order process (Choy and Ng, 2006). That is to say, this system can manage the order process, realize the logistics distribution plan and help reduce the inventory. Secondly, the logistics information platform can not only use the label scanning of materials to record the use and information of products, but also use the process records in production to track the production details, and even monitor and manage the quality and process of the whole production process (Choy and Ng, 2006). Moreover, Chow et al. (2007) explain that the visual order system can effectively help the production planning, and monitor the production and quality of products. For example, RFID automatic identification technology is an effective way to supervise the production of employees (Chow et al., 2007). Therefore, it can be seen that visualization technology helps to establish a complete management system for traceability of production and orders.

Secondly, visualization technology can be used in inventory management system. The inventory management system forms the control platform of intelligent monitoring space by using video recognition analysis technology, geographic information technology and computer network (Saygin, 2006). Moreover, data and information can be transmitted and shared through the network, and can be queried remotely (Saygin, 2006). It can be seen that such a inventory management system can provide customers with the whole process of freight information with the help of visualization technology, and also provide enterprises with timely and reliable first-hand information.

Thirdly, visualization technology can also be used in transportation management system. Because the transportation management system supports many kinds of transportation modes, such as highway, railway, aviation and so on, it can help companies and customers improve the efficiency of transportation management (Lin and Zhang, 2012). Moreover, the transportation management system can monitor the vehicles and orders in real time. For example, when goods encounter problems in transportation such as damage and loss, the transportation management system can effectively monitor the process (Lin and Zhang, 2012). That is to say, the company can use the transportation management system to find problems in the transportation of goods as much as possible.

2.3 Potential problems in SCM

Exploitation of labor

Exploitation refers to the act that some people or enterprises take possession of the surplus labor of another part without compensation by taking possession of the means of production (Nielsen and Ware, 1997). Moreover, the essence of exploitation can be seen as an unequal performance of the interest subjects in their communication (Nielsen and Ware, 1997). From the perspective of Marxist theory, workers need to pay the surplus value of capitalists, such as profits and rents, in exchange for survival opportunities (Fuchs, 2010). This shows that the capitalist’s profit is the difference between the value of the goods that the workers survive and their wages. In the context of the global economy, developing countries have become the main targets of exploitation. Lam (1992) stated that many companies choose to set up factories in developing countries because of the low cost of labor in developing countries and the fact that the companies they pay for labor were far below the level of the places where products were sold (developed countries). However, the labor time of these “cheap labor” far exceeds the limit in the first world (Lam, 1992). Not only that, Snyder (2010) pointed out that the working environment of workers is also dangerous and unsafe. Further, some enterprises cut costs by exploiting labor force, such as some employees would not be paid during sick leave and even would not be paid (Snyder, 2010). Obviously, this shows that some enterprises do not pay attention to the rights of employees, but also ignore the law and morality.

Illegal use of child labor

The illegal use of child labour is also a potential problem. First of all, some labor-intensive enterprises reduce labor cost as much as possible by employing child labor (Smestad, 2009). Child labor is regarded as cheap labor by enterprises, and enterprises only need to pay low wages or even do not need to spend too much labor cost, so this is the reason why many enterprises employ child labor (Agrawal, 2008). What’s more, Smestad (2009) strengthen that the media found the working environment of a large number of children was very bad, and these children were always required to work overtime or even long night shifts by the leaders, but their salaries could not be guaranteed. In addition, their working environment is very harmful, because the working environment is not only dirty, but also a lot of dangerous products and machines such as inflammables and explosives in the production process (Smestad, 2009). Therefore, it can be seen that the issue of child labor in these news reports is very serious, which needs the attention of the government, enterprises and society.

Quality problem

There may also be a problem in supply chain management, which is the quality of products. First of all, Shapiro (1982) considers that the production technology of enterprises is one of the important factors affecting product quality. Some enterprises are often lack of investment in technological innovation, which will lead to the backward production technology and the problems of rough products and high rate of defective products (Shapiro, 1982). In other words, if the enterprise does not improve the production technology, then the quality of products can not be guaranteed. In this way, when a product enters the market, it will not only harm the rights and interests of consumers, but also may cause a product crisis. Secondly, Wisner (2003) states that the quality of products is influenced by the production process. The production process of an enterprise includes R & D, raw material purchase, manufacturing, production and final delivery. When the enterprise does not pay attention to a certain step in the process, the problems caused by this link will affect the whole process, resulting in the reduction of product quality (Wisner, 2003).

Moreover, the product quality management system is also a very important link to determine product quality (Kingston, 2007). Nowadays, enterprises are facing a vast international market, which requires strict and high requirements for product standards. However, the product crisis events in many enterprises show that some enterprises have some problems, such as confusion of product quality management system, lack of strict standards and monitoring(Klein and Dawar, 2004). Obviously, the crisis of product quality requires enterprises to formulate and strictly implement the quality management system in line with international standards, which is not only responsible to consumers, but also the performance of following the moral standards. In addition, whether employees have quality and quality crisis awareness is also an important part of supply chain management. If the employees do not seriously check or neglect the product quality in the business process, it will directly affect the final quality of the product (Klein and Dawar, 2004). Therefore, the quality of employees and the awareness of product quality crisis are also very important for the management of product quality

2.4 Overview of H&M and ZARA

The case of H&M and ZARA is different. H&M was founded in Sweden by erling person in 1947; the company was then known as Hennes or Haynes and sold women’s wear (H&M group, 2019). Subsequently, the company acquired the hunting equipment retailer Mauritz widforss in 1968 and expanded its market to men’s wear (H&M history, 2019). H&M has recently expanded its online market and opened up in four new countries (H&M annual report, 2018). This shows that H&M has been expanding the field of clothing and expanding the market in various places. What makes H&M unique is that it does not operate its own factories, but works with more than 700 independent suppliers in Europe and Asia (H&M group, 2018). In addition, since H&M plays a dual role of importer and retailer, it is more important than ever to ensure that every supply chain link is closely monitored and optimized. (H&M annual report, 2018). In this respect, it highlights the unique operation mode of H&M.

By contrast, ZARA, a subsidiary of Spain’s Inditex group, is a clothing retail chain founded in 1975 and currently ranks first among the country’s clothing retailers (Inditex, 2019). It overtook gap in 2008 as the world’s largest clothing retailer (Guardian, 2008). At present, ZARA operates more than 5000 clothing chains in 78 countries. It became the world’s top brand for the first time in 2005, ranking the 77th most valuable brand in the world, second only to Adidas in 2006. In 2006, its brand value was $4234 million, known as “Dell in the clothing industry” (Sina, 2007). ZARA has positioned itself as an affordable fast fashion choice, operating and producing with the concept of “fast, small and multi”, and keeping up with the fashion trend through rapid development and product launch (ZARA annual report, 2017). They also purposely store only a few pieces of each new type of goods in each store to ensure that they can sell and update their inventory quickly while designing and producing rapidly, so as to keep customers’ interest and increase their visits to the store (Strategic direction, 2005).

Obviously, these two large clothing retailers have achieved some success through different methods and strategies. In this dissertation, their supply chain management model as a case study and discussion can have a valuable understanding of the successful supply chain management in the fast fashion industry.

Chapter 3 Methodology

This chapter mainly describes the research methods of this paper. Mainly, it will revolve around four parts. The first part will describe the research design, which introduces that the research will adopt the method of explanation and induction to build the foundation of knowledge theory. In order to collect data better, the research also adopts the qualitative method of comparative cases in case study. Secondly, this chapter will analyze all the secondary data collected. The third step will elaborate the moral issues considered by the research species. Finally, the author summarizes the limitations of the whole research method.

3.1 Research design

Qualitative method is to use non quantitative means to explore the research object, mainly to understand the potential causes and perspectives (Sutton and Austin, 2015). Mainly, qualitative research includes many different methods of data collection, such as interview, observation and so on (Sutton and Austin, 2015). The main purpose of this dissertation is to research the relevant content of supply chain management so that enterprises can learn some useful knowledge from it, such as how to control supply chain cost or meet customer demand and so on. Therefore, it is advisable to adopt the method of qualitative research. Scott (2005) proves that many research methods have time constraints, but qualitative research pays less attention to the metrics of data collection, but more attention to the details of information. Rosiek (2013) states that this helps to make the data more detailed, so as to help collect more information and draw deeper conclusions.

This dissertation selects the methods of induction and interpretation in qualitative research. Thomas (2006) states that induction and interpretation are often used in qualitative research. In addition, Stenbacka (2001) explains that the use of inductive analysis is to seek patterns from observation through a series of assumptions, so as to achieve the goal of interpretation and development of theory. And Gioia, Corley and Hamilton (2012) proves that even though induction method is not as good as some analysis strategies of model development, its advantage lies in that it is a simple and easy to operate method to draw conclusions on the observation and evaluation of multi-source data.

This dissertation also uses another qualitative method case study. Noor (2008) states that the method of case study can help researchers to provide a tool to study complex phenomena in their situations. According to Zainal (2007), case study is an effective solution when it is difficult for researchers to obtain a large number of samples, because it can provide rich explanations for phenomena to help build research hypotheses. The case study of this dissertation is mainly aimed at the background of supply chain management of fast fashion clothing industry. With the rapid development of global economic integration, garment enterprises are facing a huge competitive environment and pressure. However, the supply chain system of fast fashion clothing enterprises determines whether they can survive in the complex market environment. In addition, different enterprises should also find and establish a supply chain model which is most suitable for their own characteristics to develop their core competitiveness in the changeable market. Therefore, this dissertation selects two successful models H&M and ZARA of global fast fashion garment enterprises as the research object to analyze the supply chain mode they adopted and the potential problems.

Mainly, this dissertation chooses comparative case study. Noor (2008) believes that selecting multi case analysis method can not only help to make the research more credible, but also construct a new theory by comparing the similarities and differences of cases. Therefore, I chose H&M and ZARA. First, ZARA is a Spanish company and the third largest fashion retailer in the world. H&M is a Swedish company and the largest clothing retailer in Europe, ranking the second in the world. Both of them are very experienced clothing retailers, so their case study is very useful. Second, ZARA and H&M have different supply chain management modes. ZARA is based on agile supply chain to form a fast supply chain. H&M chooses a dual supply chain management model that seeks efficiency and cost balance. Their different supply chain management models help them to achieve great success, so their supply chain model has something to learn and learn from. Finally, this dissertation compares the results of their two different models by summarizing and analyzing their supply chain models, so as to provide reference and solutions for enterprise supply chain management.

3.2 Data collection

This dissertation uses a variety of data and evidence collection methods. Observations, reports, industry reports, business or technical journals and so on are all feasible methods to reduce the vulnerability of single data and make the collected data more reliable (Alam, 2005).

Primarily, information is collected through secondary data sources. In order to improve the data related to supply chain management, it mainly measures and analyzes the four aspects of supply chain production control management, information system management, logistics management and potential problems of supply chain. Khan, Haleem and Khan (2018) states supply chain management is an effective management method of production, purchase, transportation and sales, which organizes suppliers, manufacturers, warehouses, distribution centers and channel providers together to minimize the cost of the whole supply chain system. Therefore, selecting these four aspects is conducive to collecting the relevant information of the whole supply chain system. Information about production control management includes: production line, supplier management. Information system management includes using technology to transfer information quickly in every link of supply chain and realizing resource sharing among enterprises of supply chain. Logistics management includes the establishment of warehouse network and the delivery strategy of sending customers. Finally, the potential problems of supply chain include illegal labor force, product quality and other major issues.

The key data source of this paper is secondary data collection. Mainly, this dissertation collects general information about supply chain management mode, production outsourcing, logistics outsourcing, information system, potential problems in SCM, ZARA and H&M. The data is mainly collected through some online network platforms, such as the official websites of the two companies, news media reports and articles, which is conducive to searching and collecting a large number of information about ZARA and H&M’s supply chain management strategies. Besides, the author also inquired the relevant books, authoritative business magazines and academic articles from the library platform to obtain useful information. Bowen (2009) believes that literature review plays an important role in qualitative research, which helps this paper obtain more data sources. Therefore, according to Mogalakwe (2009), the collected and collated documents are often used as the preferred way to collect data and can be used as an effective data source.

3.3 Data quality

First of all, the author carefully collects the secondary data. General information about ZARA and H&M companies comes from the official websites of both companies. News reports and articles are mainly selected from SCM Globe, Forbes, China Sina and other authoritative media. In addition, books, periodicals and academic articles are all searched and collected from online websites and databases, and library databases of schools. Because the official website, news reports and articles are not necessarily authentic, the author collected data from different sources to a certain extent to improve the reliability of the secondary data collected. Secondly, in order to ensure and strengthen the authenticity and reliability of information sources, the author visited many stores of ZARA and H&M to ensure that the survey information is not only accidental. In addition, the overall information of secondary data is compared and verified to screen, and the similarities and differences between these different sources are observed. What’s more, Leech and Onwuegbuzie (2007) state that the data triangulation method is to collect data from multiple sources to help reflect and analyze research objects from different aspects. Therefore, the author adopts data triangulation to help verify the research results to increase the completeness and quality of evaluation measurement.

3.4 Ethics

The importance of ethics in research should not be underestimated. Shaw (2008) points out that following the moral standards can ensure the effectiveness of research and promote the contribution of research to science. Giordano et al. (2007) explain that the research needs to follow the principle of respecting the privacy of all participants in the research morally. Research design must be reasonable and answer specific research questions (Giordano et al, 2007). That is to say, the selection, collection and analysis of data in the study need to ensure the quality of results in a reasonable and moral way. The results also need to be published in a reasonable way. Therefore, it is very important to study and abide by the rules of moral integrity and to be transparent and open.

3.5 Methodological limitations

However, one of the limitations of this method is that there are not enough channels and ways to reach the situation that retailers only rely on collecting data, which will lead to the relative shortage of original data. On the one hand, due to the limited time and resources, the research data mainly comes from secondary data. Zainal (2007) states that case studies are an effective way if access and time are limited. However, Zainal (2007) also argue that there is no standardized data analysis method in case study, and the presentation of evidence and interpretation of data are optional, so researchers’ differences in opinions and other biases of researchers will affect the results of data analysis.

On the other hand, Ying (2014) believes that a small number of cases may limit the depth of the study. Therefore, there are only two cases that I have selected. It is a relatively appropriate way to choose the comparative analysis and cross analysis method for these two cases. Golby (2001) points out that case analysis often lacks in-depth investigation, which makes it difficult to understand the factors behind the case events. Amerson (2011) further explains that case analysis relies more on intuition and judgment to analyze data subjectively, and lacks structural and objective analysis. As a result, the results of case studies of ZARA and H&M may be questioned because of the limitations of case studies that lack in-depth information mining. In the process of case study, the author will try to verify and compare the secondary data from various sources to state the facts comprehensively and objectively and improve the quality of research.

Chapter 4 Findings &Discussions

This chapter provides a series of research results based on the above literature review and methods. Mainly, this chapter analyzes the supply chain management mode of ZARA and H&M from the four dimensions of production control management, information system management, logistics management and potential problems of supply chain. In addition, the results are discussed in each chapter.

4.1 Production control management

Production control management is very important in the whole supply chain management of retailers. Retailers need to carry out comprehensive management in planning, organizing and controlling production activities to effectively manage the information of the production process, so as to make the operation of the production system meet the requirements of the established production plan and achieve the expected production goals.

H&M

H&M is mainly to establish a production system centered on Asia to make full use of the low labor cost in Asia and reasonably allocate the capacity of European suppliers and Asian suppliers to balance the low price, fashion and speed of products (H&M Group, 2019). In other words, H&M operates on the basis of dual supply chain.

As mentioned in the literature review, it is important for the clothing industry to choose the right suppliers to shorten the response time (Perry and Sohal, 2000). Therefore, the supply chain integration strategy adopted by H&M is to reasonably allocate the capacity of suppliers in the two regions according to the characteristics of European and Asian markets. Different supply chain management strategies have been applied in different regions: mainly, efficient supply chain has been adopted in Asia, and more attention has been paid to rapid response supply chain in Europe (Digital initiative, 2018). In general, the main production in Asia will focus on children’s wear and daily wear, and special attention will be paid to reduce the cost as much as possible while ensuring that there are goods suitable for this group. However, in Europe, the fast response to the characteristics of the supply chain will be mainly used to manufacture fashionable clothes to cater to customers’ high-level pursuit (Tradegecko, 2014). Therefore, in order to adapt to different situations, H&M has implemented a dual supply chain system to reasonably allocate supplier capacity in the two regions.

In the H&M dual supply chain, the Asian supply chain system reflects high efficiency, while the European supply chain system reflects rapid response (H&M Annual Report, 2018). Both ideas show that H&M seeks to maximize profits between cost and efficiency. This further reflects the idea that the shortest delivery time and the best efficiency in the rapid response to the change of market demand in the production process mentioned in the literature can be continuously adapted (Birthle et al., 2003). In addition, H&M attaches great importance to keeping in touch and coordinating with manufacturers all over the world. For example, H&M Annual Report (2018) points out that H&M always adjust its relationship with cooperative manufacturers by establishing offices in various regions. Therefore, this reflects that the regular communication and good relationship with suppliers described in the literature are conducive to order transaction and rapid response.

Christopher et al. (2004) mention that offshore outsourcing can reduce production costs by using cheap labor in other regions. This shows that the mode of production outsourcing is an effective way for enterprises to control costs. This is confirmed by the research, which shows that H&M places those clothes with long delivery time in Asia with abundant labor resources and relatively low production cost; however, H&M places the production of fashionable clothes in Europe to reduce circulation, because it has small production scale, low production and needs rapid production and shelf to occupy the market (H&M Group, 2019). According to H&M Annual Report (2018), a manager states: “if these garments are produced in Asia, it will inevitably lead to the distance between the production place and the main marketing place of H&M, Europe and the United States, and it will be difficult to quickly cope with market changes”. Therefore, the results show that H&M has fully obtained the advantage of low cost by using the production outsourcing mode, and let the low-cost product supply chain in Asia go hand in hand with the rapid response product supply chain in Europe.

H&M Group (2019) indicates that from the mid-1960s to the 1970s, H&M has successively established production sites in some countries and regions such as southern Europe, northern Europe and East Asia, and all of them have been outsourced to more than 700 independent producers. Therefore, this shows that H&M makes full use of outsourcing in production and manufacturing, and does not choose to build its own workshop. In order to have more advantages in product cost, H&M has moved closer to places with high production quality, excellent labor force and low wages.

ZARA

ZARA will vertically integrate all aspects of raw materials, design, production, distribution and sales, so as to greatly shorten the shelf life and achieve the fastest 15 day listing (ZARA Annual Report, 2017). These are based on the agile supply chain model to achieve rapid response.

As mentioned in the literature, agile supply chain can be reconstructed rapidly and suppliers, manufacturers and consumers can be integrated into a fast response functional logistics network through supply chain management, so as to improve the agility of enterprises (Christopher et al. 2004). According to SCM Globe (2015), ZARA changes designs every two months on average, while their competitors change designs every two to three months. In addition, ZARA sells 11000 new products in its stores each year, while its competitors only sell 4000 new products on average (SCM Globe, 2015). Therefore, the data results prove that ZARA creates a fast response environment by using agile supply chain and can quickly understand and respond to changes in the market.

Moreover, agile supply chain focuses on requirements (Christopher et al., 2004). The research results reflect ZARA’s continuous emphasis on “customer-centric” concept to meet the changing fashion needs of global customers (ZARA Annual Report, 2017). Therefore, ZARA establishes a demand oriented supply chain, that is, planning, organizing and coordinating production according to the actual consumption demand rather than the predicted demand, so as to realize the rapid satisfaction of customer service demand. In addition, ZARA Annual Report (2018) shows that ZARA production mode is mainly order based production, and stores will start to place orders every half week based on sales volume and customer demand. Therefore, such ordering method is based on high frequency and low intensity, which helps to prevent the large amount of inventory that may be generated by bulk ordering.

Quick response requires enterprises to continuously supplement products in a multi frequency and small quantity way (Fiorito, May and Straughn, 1995). According to the statistics of Forbes (2017), each dress of ZARA is produced in small batch and multi frequency, and ZARA’s customers will visit its stores 17 times a year on average, while customers of other brands are nearly once every four years. Therefore, this shows that ZARA’s supply chain mode of quick response can frequently update new products to attract customers, and thus help reduce inventory risk. For example, research shows that ZARA achieved sales of 6 billion euros in 2003, with an average selling price of 85% and inventory of only 10% (Aftab et al., 2018). To some extent, this low inventory rate is not only due to ZARA’s frequent updating of goods, but also because ZARA does not rely on external partners to manage and optimize design, logistics, warehousing and distribution, but also handles and controls each stage by itself.

At this point, ZARA’s approach is different from HM’s outsourcing model. It has a capital intensive manufacturing plant in Spain. Also, ZARA Annual Report (2018) indicates that ZARA has a vertically integrated team and lets 500 small factories or even family workshops around it to do sewing work, so that nearly 20 dyeing and cutting centers are concentrated in the production base. Besides, because ZARA has set up the underground conveyor network in the production base, ZARA can send the cut fabric to the co sewing factory through the low conveyor network according to the new order every day, and then the sewing factory will sew the clothes and send them back to ZARA for final treatment (ZARA Annual Report, 2017). It can be seen that although ZARA puts most of the production and logistics distribution in Spain with high labor cost, ZARA’s rapid response mode captures the very important time cost of the clothing industry. Therefore, this allows ZARA to speed up the flow of supply chain and reduce inventory.

In a word, ZARA takes the quick response of agile supply chain as its main supply chain strategy, which greatly shortens the time cost. H&M uses a dual supply chain to balance efficiency and speed, which helps to achieve an effective balance between cost and efficiency. However, it also brings challenges to supply chain management. In the dual supply chain management system, the different classification of goods in price, standard, fashion, implementation and sales strategy may lead to more complex products and information flow. Although the supply chain models of the two companies are different, their guiding ideology both attaches importance to rapid response and strict cost control.

4.2 Logistics management

It can be seen from the literature review that logistics management system is an important part of the whole supply chain management system. Therefore, this section mainly discusses the model of ZARA and H&M in logistics management.

H&M

Like the production outsourcing mode, H&M also adopts the logistics outsourcing mode in terms of logistic (Xun and Wei, 2007). The literature shows that logistics outsourcing is helpful to realize the reasonable allocation of resources and reduce the operation cost of enterprises. Therefore, H&M uses logistics outsourcing to help save logistics costs and resources. H&M outsources its logistics system to green cargo, DHL and other very professional companies, while ordinary goods are usually transferred to qualified professional transportation companies. (Xun and Wei, 2007). Nevertheless, the process is managed and supervised by H&M. As mentioned in the literature, the application of visualization technology in the transportation management system can help the company to monitor and track in real time. Mainly, H&M’s central logistics system uses a network-based supplier management platform to track all links from delivery to circulation (H&M Annual Report, 2018). Therefore, this helps H&M to supervise the transportation process of goods as much as possible and improve the efficiency of transportation management.

In addition, H&M’s logistics management system is conducive to planning the best transportation route of commodities. For example, the products produced by H&M suppliers are usually transported to the central warehouse in Hamburg, Germany, and then integrated and transported to various regions for sale. However, if the product is only produced in a certain regional market, the logistics information system will react quickly and send the product directly to the regional branch, so as to ensure the first time supply of the seller’s products (H&M Group, 2019). In terms of product transportation, H&M is different from the air transportation mode adopted by ZARA, and chooses the low-cost goods transportation. For example, Digital Initiative (2018) points out that H&M’s goods will be transported by rail from European suppliers, by sea from Asia and by truck from central warehouse to distribution point. Therefore, although these modes are slower than air transportation, they help H&M reduce the transportation cost.

ZARA

Different from H&M’s logistics outsourcing mode, ZARA’s logistics system is designed independently. More specifically, when the product packaging is checked, the orders of each specialty store will be placed in a separate box and sent to the distribution center through the underground conveyor belt. In addition, ZARA will use laser barcode reader, which can select and classify more than 60000 products per hour, so as to ensure that each order can arrive in time and accurately (ZARA Annual Report, 2017). Therefore, it can be found that ZARA also flexibly uses technology to help improve the speed of goods distribution.

In order to speed up the logistics, ZARA headquarters also has a two lane expressway through distribution center. All products will be sent out by the logistics center of La Coruna, and generally, the delivery time for each specialty store is no more than 8 hours (Sohu, 2018). According to the fixed departure schedule, the trucks in the logistics center will continue to move to various places. Sohu (2018) also points out that in Europe, goods are trucked directly from logistics centers to specialty stores. In Asia and the United States, however, goods are transported by aircraft and then by trucks operated by third-party logistics companies from nearby air bases to destination stores. The results show that European stores can receive goods within 24 hours, American stores can receive goods within 48 hours, and Japanese stores can receive goods within 72 hours (Sohu, 2018). However, this pursuit of speed comes at a cost, which leads to ZARA’s profit margin being lower than H&M’s.

In a word, ZARA and H&M adopt their own logistics methods to optimize supply chain management. H&M is trying to reduce the total cost through logistics outsourcing and low-cost transportation. ZARA, by air transport, ensures that all goods outside Europe are delivered to stores within three days. However, such a mode increases ZARA’s transportation cost to some extent.

4.3 Supply chain information system management

As mentioned in the literature view, the transparency of supply chain is determined by the smoothness of information flow. Therefore, this part mainly discusses and analyzes the information system management of H&M and ZARA.

H&M

H&M supervises the whole logistics process and sets up an information sharing platform called information and communication technologies (ICT), which enables production, procurement, sales and inventory to be shared within the company (Sina, 2007).

Literature review shows that technology can be used in order, warehouse, transportation and other aspects to help effectively provide enterprises with timely first-hand information. Therefore, ICT, the information sharing platform used by H&M, helps H&M to ensure the maximum efficiency of logistics, save valuable time and allow convenient and flexible procurement. According to H&M Annual Report (2018), the platform greatly helps the close communication between purchasing and sales departments, and enables stores from different regions and countries to understand each other’s inventory and sales situation, so as to facilitate the rapid transfer of goods. Therefore, this proves that using visualization technology can effectively let each department share information. In addition, the logistics and purchasing departments use this platform to track and supervise the inventory and sales of each product in a timely manner, so as to distribute goods at any time according to demand (H&M Annual Report, 2018). Therefore, it can be seen that this way can reduce the negative impact of shortage as much as possible.

H&M Group (2019) proposes ICT information platform to enable H&M to grasp the international fashion trend more accurately with more rapid market response. Then, H&M can identify and design in time according to fashion trends, so as to produce products meeting these needs. Therefore, this not only enables the company to reduce risk, reduce inventory, but also shorten the delivery time between design and sales as much as possible, so as to ensure that the product can meet the needs of current consumers without falling behind. In a word, the research results not only confirm that the shared information and information technology mentioned in the literature review can help to solve the problem of inventory hoarding, but also further indicate that H&M has successfully established an information network system and feedback system by using ICT, which improves the transparency in all aspects of supply chain management.

ZARA

Not only H&M makes full use of information technology, but ZARA also flexibly applies information and communication technology in all links. Every time ZARA stores sell a product, the clerk will input the identity of the consumer and the characteristics of the purchased product into the online computer (ZARA Annual Report, 2017). ZARA’s headquarters in Spain received information, through analysis, to determine the design of the next batch of styles, the raw materials to be purchased, the quantity and the different delivery species of each store (ZARA Annual Report, 2017). That is to say, each link of ZARA supply chain is inseparable from it application. They integrate ZARA clothing design, production, logistics distribution and sales through information sharing.

In terms of design, ZARA’s design team will archive various fashion information through the fashion information database, and then quickly change and combine the products, so as to develop new designs; moreover, they will refer to the information of the database system of inventory information management to make the best use of the existing raw materials to design the clothing styles that can be completed, thus reducing the cost for the company (Forbes, 2016).

The literature review points out that when visualization technology is used in inventory management, managers can query freight information and share information at any time to master real-time data. Therefore, ZARA is just because of the use of such information system, it is conducive to ZARA designers to quickly grasp the cloth, design list, inventory information and other information to complete the design. It can be seen that this standardized information system is an important support for ZARA design team to rapidly launch a large number of different fashion design styles.

In addition, ZARA also uses information technology in production and distribution. In the warehouse of the Spanish headquarters, robots are on standby 24 hours a day to make cloth dyes (Forbes, 2016). As mentioned in the literature, information technology can help optimize and monitor the whole production process and improve production efficiency. ZARA is aware of this and transmits specifications directly to tailoring equipment and other systems in the factory. Then, a standardized barcode will be given to the cut fabric, which will accompany the whole process of its production, distribution and transportation to the store (Forbes, 2016). It can be seen that this uniform bar code identification system is used in the whole process from production to sales, so as to ensure the smooth circulation of ZARA products in the whole process.

4.4 Potential Problems in SCM

According to the literature review, there are some potential problems in supply chain management. However, the potential threat of these problems may affect or even destroy the supply chain. Mainly, this part analyzes and discusses the main problems of H&M and ZARA’s supply chain.

4.4.1 Illegal use of labor

According to reports, H&M employs children in its factories in Myanmar, some of whom are only 14 years old, and those with an average age of about 15 need to work 12 hours or more a day (Theinitum, 2016). According to the internal statistics of several clothing brands, this kind of situation is very serious in India, Bangladesh and Cambodia in Asia; although the age registered on the employee registration form of the factory is above the legal age, in fact, many people have falsely reported or concealed the age (Theinitum, 2016).

As mentioned in the literature review, the problem of child labor is a serious phenomenon in some labor-intensive enterprises, and these enterprises employ child labor to save labor cost to the greatest extent. H &M also exposed the use of child labor in supply chain management. Many juveniles under the age of 16 come out to work early to lighten the burden for their families. However, many enterprises without conscience use this point to let these minors work for a long time at a price lower than the market average wage or even lower, so as to extract the labor surplus value of minors. According to Theinitium (2016), one of the children, Zu Zu, who started working at the age of 14 said: “they will hire anyone who wants to work.” Obviously, because the economic policies and labor laws of these countries are not as strict as those of developed countries, companies take advantage of this illegal or exploited labor resources. However, it not only violates human rights, children’s rights and related labor laws, but also constitutes a major moral issue in terms of corporate social responsibility. Therefore, H&M also faces the risk of negative publicity and reputation damage due to such scandals.

In addition, H&M also has the problem of providing unhealthy or unsafe working environment for workers. According to The News Lens (2016), H&M is committed to ensuring the safety of supply plants for workers; however, in fact, workers in these plants are still often exposed to hazards such as toxic chemicals and harmful dust, and do not provide sufficient protective equipment to manage these risks. What’s more, the News Lens (2016) reports that some workers also need to operate the machine without training. In addition, there are no proper safety measures, narrow fire fighting access and other problems, which greatly cause the highly dangerous working environment of these workers. Therefore, it is obvious that H&M company does not attach great importance to the life and safety of employees, and even violates the human rights of employees.

Although ZARA is different from H&M’s mode of complete production outsourcing, ZARA, like H&M, has foundries in developing countries and mainly in Asia. The results show that ZARA’s supply chain has similar problems. News Footage (2017) reports that Brazilian authorities found illegal migrant workers working for ZARA’s suppliers under conditions equivalent to “slavery”. In particular, they include 14-year-old children who work 14 hours a day and earn only 20 euros a month (the local minimum wage is 238 euros). Meanwhile, in Cambodian factories, workers can only get $3 a day for 18 hours of work; there is a risk of being shot when they protest for higher wages (Sina, 2013). It can be seen that the research results show that ZARA company has a lot of problems in terms of employing child labor and exploiting labor force. In addition, it also further reflects the behavior of some enterprises mentioned in the literature review to exploit labor force for the benefit of cost reduction.

In addition, according to the Fashion Show (2013), an Argentinean NGO led by Gustavo sent an undercover to investigate ZARA’s factories in South America. According to the survey, the working environment of the factory is very messy, with materials and wires everywhere. Moreover, a reporter of the Fashion Show (2013) also stated: “the sewing machine is placed next to the bed, and the mattresses that the workers sleep on are worn and sunken. Workers have to start work at 7 a.m. every day until midnight to rest, and their income is only 1.7% of the final price of a garment.” Obviously, ZARA also has the problem of exploiting labor force, which is not only not concerned about the life safety of its own employees, but also ignores morality and law.

As a result, these findings reflect that workers in ZARA and H&M supply chains are suffering from poor working conditions, illegal wages and employer exploitation. These behaviors not only violate the social responsibility of enterprises, but also can be regarded as the very dark side of the supply chain management labor market.

4.4.2 Quality problems

These results show that H&M and ZARA supply chain management model in the rapid response and cost saving features. However, strategy is a double-edged sword. To some extent, it will cause quality control problems while ensuring speed and low cost. This part mainly discusses the quality control of ZARA and H&M.

In the case of H&M, orders are distributed among multiple manufacturers through a series of factory and workshop subcontracts. Yicai (2015) points out that after receiving these orders, first tier companies subcontract complex areas such as packaging or embroidery to smaller OEM plants and spread the workforce to multiple locations. “It is common to order tasks and then subcontract them to other manufacturers in the industry” (Yicai, 2015), said a Hangzhou manager. Large orders are subcontracted. As long as the delivery is completed on time, many brands will not conduct too much investigation on the production situation. That is to say, the quality inspection is only carried out in the sample, so this allows the company to take the opportunity to avoid or cheat in the product quality inspection.

According to Xinhua Net (2015), there are many quality problems in H&M’s orders. An H&M representative factory employee disclosed to reporters: “H&M’s procurement in China can be divided into two ways: one is that H&M purchases raw materials in person, and then delivers the fabrics to the representative factory for production; however, the other is that H&M designates a generation factory to purchase and then orders from this generation factory to the fabric manufacturer.” (Xinhua Net, 2015). In fact, the process of this procurement method may cause many uncontrollable factors, including whether the raw material handler can send the tested fabric to the factory, and whether the quality control standard will be forged. Fabric with nominal quality control can be sent directly by the manufacturer to the subcontract factory and transferred to the production process without testing. Therefore, quality inspection is a key issue in the operation that H&M fails to fully control, which undoubtedly may lead to major problems in the whole supply chain.

For ten years, ZARA has been reported many problems about the unqualified product quality. ZARA’s sandals were identified as unqualified by the Shanghai Municipal Bureau of industry in August 2009 and by the commerce and Beijing Consumer Association in December 2009 (Netease, 2011). Moreover, ZARA’s coat was found to contain fake cashmere, up to 10%. Subsequently, in January 2010, Shanghai Municipal Administration of industry and commerce again raised an objection to the quality control of ZARA, believing that the color fastness of infant overcoats produced by ZARA was unqualified (Netease, 2011). More seriously, the monitoring results of Harbin Administration for Industry and Commerce show that the pH value of ZARA products exceeds the standard (Netease, 2011). These results show that ZARA does not produce and manage products in strict accordance with the quality management system in line with international standards. Therefore, this is not only the lack of consumer responsibility behavior, but also against the embodiment of production ethics.

According to incomplete statistics of Sohu (2019), public data from 2017 to 2019 show that 15 batches of ZARA products were randomly selected in China, while 4 batches of non-conforming products were detected and the detection rate of non-conforming products was nearly 26.6%; the main non-conforming items were fiber content, friction resistance color fastness and identification labels. In recent years, the data results show that ZARA has not made great improvement in quality problems, and the product quality problem is still a serious problem of ZARA company.

In conclusion, it seems that the product quality problems of ZARA and H&M have not been fully solved. In these years, their products are often exposed to problems such as color fastness, PH value, formaldehyde content and so on. However, for “fast fashion” enterprises, they should not only consider how to react quickly in the market, how to save costs and get the maximum profits, but also pay attention to how to control quality while responding quickly and saving costs.

Chapter 5 Conclusion & Recommendations

The purpose of this dissertation is to provide an evidential explanation for ZARA and H&M’s supply chain management model, so that enterprises in all parts of the world can learn from their experience of supply chain management model to obtain useful strategies and lessons from improper practices. This chapter mainly provides conclusions for research problems, results and contributions. Finally, this chapter will discuss the limitations of this study and suggestions for the future.

5.1 Conclusions of Research

In this dissertation, H&M and ZARA companies are selected as comparative study cases, in order to better analyze what kind of supply chain model they use to help them survive in the fast fashion industry. Besides, this dissertation analyzes the two companies in detail through the four main aspects of supply chain management mode: production control mode, logistics mode, information system and potential problems. It is an effective angle to analyze from these four main ways, because it can measure the production and purchase of supply chain management mode of two companies, the coordination relationship with suppliers, logistics and distribution, technology application and other aspects of information, and can help other retailers to gain rich experience and lessons.

Both companies are world-famous fast fashion industry leaders. By comparing their supply chain models, the results show some similarities and differences. First of all, the research shows that both ZARA and H&M rely on fast response mode, which is a very important factor to help them develop in the long term. However, ZARA mainly solves the problems of difficult market demand prediction and high inventory level through the quick response mode in the agile supply chain, thus accelerating the circulation speed of products. H&M mainly adopts the mode of double supply chain to control the efficient supply chain of Asian production and the fast response supply chain of European production to find the profit balance point between efficiency and cost, which saves cost compared with ZARA’s fast supply chain mode.

Secondly, the research results show that ZARA puts most of its production in Europe to ensure the response speed of its supply chain. However, H&M mainly adopts the mode of production outsourcing, which has lower production cost than ZARA, but the lead time will be longer. In terms of logistics, ZARA and H&M both use efficient central distribution centers and use information technology in logistics management system to help supervise and manage the transportation process. However, ZARA relies on its own design system to carry out logistics distribution, and adopts air transportation mode outside Europe. Compared with ZARA, H&M adopts the mode of logistics outsourcing, and the main logistics mode of railway, sea transportation and truck is more cost-effective than ZARA’s air transportation mode.

In addition, ZARA and H&M both flexibly use information technology system to make the process and information of production, inventory, purchase and sales in the supply chain model transparent, so as to improve the efficiency and control cost of the whole supply chain. Finally, the results focus on the main problems of ZARA and H&M in the supply chain management, such as illegal use of labor force, exploitation of labor force, and product quality, leading to their criticism by the media and the public and affecting the brand reputation. This also further reminds enterprises to pay attention to this kind of problems, and do not violate the interests of employees and social ethics for more profits.

5.2 Limitations and Recommendations for further research

Although the supply chain mode adopted by ZARA and H&M is studied in this paper, there are some limitations in the research. First of all, it is limited to the four main aspects of production control mode, logistics mode, information system and potential problems to examine the main strategies and problems of ZARA and H&M supply chain mode in detail. However, the supply chain management model not only covers these four main aspects, there are other details that have not been studied. Therefore, the research needs to cover more perspectives to make the results more comprehensive. Although this paper has proved the advantages and problems of the two companies’ supply chain model through some reliable evidence, it is impossible to ensure that this study comprehensively explores and obtains all the advantages and problems of the two companies. Moreover, this research relies on a large number of secondary data and information. Even if these materials are based on careful exploration and selection, the quality of research reports, academic articles and news may not be enough.

Therefore, the following improvements can be considered for further research. First of all, this dissertation adopts the research method of qualitative analysis. However, the types of secondary research are limited. Therefore, the future research can try quantitative methods to obtain the information and ideas of customers and employees through the mode of questionnaire. This kind of way is helpful for retailers to understand the ideas of employees and customers and improve the way in the future. Further, the interview form is also a way worth trying, which can not only help the research to verify whether the information obtained is reliable enough, but also may obtain new research results through interviews. In addition, even though ZARA and H&M are well-known and experienced enterprises in the world, they may not be able to represent global fast fashion enterprises, let alone enterprises in various industries. Therefore, future research may be able to select representative enterprises from different countries or regions.

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