MICROSOFT H O LO L E N S FO R H & M
CASSIE ASKIN | ALLYSSA BROWN MACKENZIE DAKIN | EMILY FAYSSOUx professor meeta roy fasm 415
table of contents
04 Executive summary
20 distribution models
05 H&M company summary
20 annual marketing budget
05 mission statement
21 Advertising activities
06 company history
22 Social media
08 Current ownership
23 crm activities
and revenue
24 new initiative
10 future growth plans
26 key objectives
12 swot analysis
29 long term benefits
16 perceptual map
30 technology
18 distribution channels
32 implementation
19 sales volume distribution
33 activity map
by channel
34 supply chain analysis 44 Initial factories 50 sustainability 52 financial plan 56 conclusion 58 Appendix
H&M is a leading international apparel company. The key goals of this company are to be economically, socially, and environmentally sustainable. To help H&M improve efforts towards these missions, we propose that H&M works with Microsoft to utilize the recently launched Microsoft HoloLens technology. In this back-end initiative, the HoloLens will be implemented in the H&M supply chain. In this book we have outlined what this technology is, why it is useful to H&M, and how this initiative will reduce costs and waste, and ultimately help improve sales and the brand image of H&M.
executive summary 04
mission statement
Our vision is that all our operations are run in a way that is economically, socially, and environmentally sustainable. This will mean our business is helping to meet the needs of both present and future generations. We believe that quality, affordable fashion can be made and sold in a way that’s also good for people and the environment. With this is mind, our concept is simply to offer quality fashion at the best price. We believe in a better fashion futureone that makes fair and sustainable fashion affordable and desirable for all.
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company history
Erling Persson first opened Hennes, a women’s clothing store, in Vasteras, Sweden in 1947. In 1952, he opened his first store in Stockholm, Sweden, the future home of the brand. Persson bought Mauritz Wildforss, a hunting and fishing equipment store in 1968. They renamed the company Hennes and Mauritz and began selling men’s and children’s clothing.
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In 1974, H&M went public when it was put on the Stockholm Stock Exchange. In 1976 their first store outside Scandinavia opened in London, England. In 197 7, H&M launched Impulss stores that target teenagers and they began to sell cosmetics. In 1998 they began to sell online. The first store opened in the United States on Fifth Avenue in New York City in 2000. They began their designer collaborations with Karl Lagerfeld in 2004 and since then we have seen names such as Stella McCartney, Lanvin, Versace, and most recently Alexander Wang. In 2007-2008 they broke into the Asian market with stores in Hong Kong, Shanghai, and Tokyo; the concept store for their COS brand also launched at this time. In 2009, H&M Home launched. In 2010, online shopping became available for the United Kingdom. In 2011, H&M headquarters instituted the incentive program which is a program that provides rewards and recognitions for all employees within the company. In 2013, the first store launched in the southern hemisphere is Chile and online shopping was made available to the united states. online shopping is made available to the United States.
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current ownership H&M is a public company and is traded on the Stockholm Stock Exchange. Shareholders make up the ownership of the company. Stefan Persson, Chairman of H&M, and his family own 70 percent of the total voting shares of the company. The rest are owned by various shareholders.
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Stated in H&M’s financial statement for 2014, the retailer’s total revenue was 151 billion sek 09
f u t u r e g row t h p l a n s
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As a company, H&M plans to increase the number of their stores by 10-15 percent annually. They have already planned to open 400 new locations in 2015. Most new locations set to open in 2015 will be in the Chinese and U.S. markets (“Expansion Strategy�). Before making a move into any new location, they make an assessment of the country or city and the market’s potential. They assess factors such as demographic structure, purchasing power, economic growth, infrastructure, and environmental sustainability to make sure the location is compatible with the company. H&M makes the conscious choice to lease property instead of buying it in order to make sure they stay in the most desirable locations. Leasing their space allows them to move if a location that the community is responding to becomes available. The stores are all run by H&M and franchising is not part of the growth plan. H&M is known for their efforts toward sustainability and they are constantly working to make present and future locations fully sustainable in the long term. In order to accomplish this goal, they take steps such as recycling waste, using energy and water efficient systems, and choosing environmentally responsible materials. H&M offers online shopping in 13 countries and has an application for a mobile device which makes it easier for the customer to shop and make purchases. To meet the rapid growth of the online market, H&M plans to deepen their consumer reach through the expansion of shopping via tablets and mobile devices.
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swot analysis
strengths
weaknesses 12
H&M is a fast fashion brand globally recognized for their low cost fashionable apparel. Their customers continue to shop with them because the low price points they offer are hard to beat, especially when purchasing trendy pieces intended to last only a season or two. Their affordable prices are definitely a quality that is working for them in today’s economy. People currently do not have high disposable incomes so they are looking for low cost items. If someone wants a new item, but does not have a lot of money to spend, H&M perfectly fills their need. The brand image of H&M is strong; customers immediately recognize their bright red logo. they also trust it and are more likely to make a purchase from a brand they trust than one that is not as recognizable. H&M has numerous points of accessibility; they have over 3,000 brick and mortars locations in addition to their online stores and mobile applications. They have done well to provide the consumer with the access they desire. They were the first company to initiate designer collaborations with fast fashion retailers. This was a brilliant move on their part as it gave their fashion forward customers access to high end designers at affordable prices. lastly, H&M has a high advantage against their competitors because of their ability to have quick turnover of their inventory. H&M has managed to reduce their lead times by 15 to 20 percent, allowing for merchandise to quickly reach consumers (Lu). Their quick speed to market is greatly attributed to strong relationships with their suppliers and manufacturing strategies.
H&M has such a large product assortment that a customer could range from a tween buying a trendy outfit to a young professional looking for inexpensive career wear. This can be a problem when trying to nail down a target consumer. H&M has so many products to offer it can overwhelm the customer. This can prove to be a problem if the customer is so overwhelmed that they decide to leave the store without making a purchase. In terms of sustainability of the actual clothes, They do offer their Conscious Collection made using sustainable materials and techniques. However, that only makes up a fraction of their products; they need to focus on changing the production of all their lines. 13
H&M is focused on sustainability with their Conscious Collection and their donation program in which customers get a percentage off their next purchase for donating used clothing. However, they have such a large product assortment there is still work to be done. There is definitely an opportunity to increase the sustainability within all of their lines not just their Conscious Collection. The Microsoft HoloLens is a virtual reality headset that allows the wearer to see holographic images while they wear the device. Through layered glass within the visor, the HoloLens works hand in hand with Windows 10 technology to allow the user to manipulate the world around them (“Microsoft HoloLens”). The HoloLens is a great solution towards operating a more sustainable company and will allow H&M representatives to communicate more easily with people all around the world. Furthermore, H&M is planning to open 500 more stores in 2015. There is a lot of opportunity for them to enter the South American market where they currently are not as saturated.
H&M’s biggest threat is consistently the other fast fashion competitors such as Zara, Forever 21, and TopShop. With other stores like TopShop doing designer collaborations as well, it is really important for H&M to remain at the forefront. They are all competing against each other with price, timing, and designs. In order to stay at the top, they need to keep innovating. The basis of a fast fashion store like H&M is to stay on trend and always offer the newest designs. It can be hard to keep up with all of it in a society that is evolving every second of every day. They need to make sure their process is streamlined and there are no hiccups. This is where the HoloLens can be a huge benefit. Another threat is that The nature of H&M’s business is to offer trendy clothing at low prices; This does not lead customers to view what they are buying as high quality. This may deter potential customers from shopping at the store.
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opportunities
threats 15
Perceptual map H&M’s top competitors include Forever 21, Zara, Topshop, Urban Outfitters, Uniqlo, Gap, American Apparel, Express and Charlotte Russe. H&M holds a very strong placement within the apparel market with their success as one of the top fast fashion retailers. Their pricing is low compared to their competitors with an average Swedish krona of 307, even though they have the highest number of doors available to their consumers with 3,500 retail locations. Their closest competitor, Zara, has a much higher average swedish krona of 633 and 2,000 retail locations. Compared to their competitors, H&M holds precedence of being the only retailer with low prices and extremely high accessibility.
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distribution
channels H&M has two channels of distribution: online and retail.They have 3,569 points of sales. The total revenue is 151 billion sek and of that, 142 billion sek is from brick and mortar sales and 9 billion sek is from online sales. H&M generally does not franchise with the exception of an agreement they entered with Kuwaiti company M. H. Alshaya to open four stores in the middle east, three in Dubai and one in Ibn Buttata..
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online
9 billion sek 142 billion sek brick and mortar 19
advertising budget
H&M does not disclose their marketing budget, but in 2012, an article from Women’s Wear Daily stated that “H&M’s marketing budget is about 3.5 percent of annual sales excluding VAT” (Socha). Based on that article’s information and H&M’s annual sales for 2013, it is estimated that H&M’s marketing budget is around 5.3 billion swedish krona. Compared to various companies within the fashion and retail industry, an average of 13.6 billion swedish krona is spent annually on advertising (Austin). In contrast to the rest of the industry, H&M spends 32.5 percent less than the average retailer. 20
advertising budget
H&M’s current advertisements include traditional platforms such as magazine ads, television commercials, billboards, public transportation ads, and shop windows, but also extend into technological advertisements such as internet and mobile banners, and social media. H&M is very well known for their advertisements using celebrity endorsements such as their advertisements with singer Lana Del Rey (Nudd) and athlete David Beckham (Socha).
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social media When looking at H&M’s activity on social media platforms, it is clear they are one of the most active companies compared to their top competitors Zara, Topshop, and Forever 21. H&M is active on Instagram, Twitter, Facebook, Youtube, and Googleplus. They have the second highest number of Instagram followers with 5.4 million behind Forever 21 which has 5.9 million and ahead of Topshop with 3.8 million and Zara with 2.8 million. Zara is leading Facebook likes with 24.1 million, but H&M is right behind them with 22.6 million. there a significant drop from H&M to Forever 21 which only has 11.1 million likes, and an even further decrease to Topshop with 4.2 million. H&M has significantly more twitter followers than their competition with 5 million compared to Forever 21 with 2 million, Topshop with 1.1 million, and Zara with 721k. They are also way above their competition with their Youtube and Googleplus accounts.
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Some of the advertising platforms of H&M blend into customer relationship management activities such as social media contests (Moth) and sms coupons and promotions (Johnson). H&M currently has an option to create a personal profile on their website that saves billing and shipping information as a way to increase their CRM activities. They also have an online magazine called H&M Life to connect with their core customer by providing articles that cover fashion, beauty, and culture.. Furthermore, H&M collaborates with designers aimed toward their core customer to create a yearly capsule collection. Other CRM activities that H&M currently uses are mailers, direct emails, an app, and a catalog.
crm activities 22
new initiative 24
k e y objectives Our initiative is derived from the newly introduced Microsoft Hololens and will be adopted by H&M to utilize within their supply chain. Microsoft found an area within the augmented reality industry that sets them apart from their competitors because the user isn’t cut off from the world around them. Though many companies have begun to produce virtual reality technologies, Microsoft’s product can be utilized to manipulate one’s surroundings rather than creating virtual alternatative surroundings. By introducing this technology into H&M’s production, this high-tech trend can be applied to the fashion industry while helping H&M decrease cost and waste. Their value of sustainability will be translated and implemented through the use of the Microsoft Hololens. Consumers have grown more aware of companies’ sustainable actions and people in general have grown to adopt innovative technology into their everyday lives. By pairing these two changes together, the Microsoft Hololens can be a new and exciting factor that puts H&M on the map of the most innovative companies.
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Instituting the Microsoft HoloLens into the design process will completely streamline the production process. Using these holographic glasses will allow three dimensional communication across the world. The fashion industry is one of the largest producers of waste globally and it is an issue that needs serious attention. The HoloLens will significantly cut down on waste because of the precise communication that is able to happen. Currently, a lot of issues encountered are miscommunication. clothes get dyed incorrectly, patterns are cut wrong, or the factory interprets instructions differently than is intended. One miscommunication issue can devolve into an extreme waste of resources; if a batch of clothes is dyed improperly immediately that is a huge waste of water, energy, and time but additionally we have to think about the outlying waste. The chemicals from the dying process are extremely detrimental to the environment. Then a member of the design team is forced to fly to the factory to make sure the problem is rectified which leads to the pollution from the airplane they had to take to get there. Individually it might seem minor but once all the factors are accounted for it starts to cause a real problem. The HoloLens stands to increase efficiency and sustainability and to strengthen communication within the supply chain. The factories will be able to have constant contact with the design team which will prevent unnecessary and time consuming mistakes. It will lead to less waste throughout the entire production process which is a positive step toward sustainable growth. The HoloLens stands to completely alter the way a company produces their products on the back end while taking steps to make a more environmentally conscious industry.
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lo n g t e r m b e n e f i t s Long term benefits of incorporating the Microsoft Hololens into the supply chain include cutting down on cost and waste, increased efficiency, increased sales, improved brand image and consumer loyalty. Cost and waste would decrease by allowing the design and product development teams to have a direct visual line to the factories which cuts cost of flying employees back and forth to factories as well as cost of shipping garments back and fourth, which is also saving fossil fuels. This also cuts down waste because corrections can be made before a large batch of the garments are dyed, cut, or sewn incorrectly. The supply chain will become more efficient due to the direct communication between the factories and teams at headquarters, instead of sending a package and waiting for it to be approved; the Hololens allows faster decision turn around due to the instant visual inspection. This will allow H&M to expand on their sustainable market, which will improve brand image and in turn raise consumer loyalty and increase sales.
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t e c h n o l o g y 30
The Microsoft Hololens is powered by Windows 10 technology that is the first holographic running computer system. Microsoft Hololens features see-through, holographic, high-definition lenses and spatial sound so you can see and hear holograms in the world around you. The lenses contain three layers of colored glass that allow light to bounce back and forth and create a hologram that only the wearer can see. The headset is completely wireless and contains cameras and sensors to track the user’s surrounding environment. Using Microsoft Kinect, the wearer’s movements and their surroundings can be captured by the device and relayed through the cameras and sensors. Any application via Windows 10 can be utilized through the device and able to be translated into holographic images. Microsoft will be the only supplier of the Hololens device and its accompanying technology. Third party vendors will not be utilized and they will be sold strictly at Microsoft’s retail and online platforms. The Microsoft Hololens is fairly simple in its required technology. The wearer only needs the device, accessibility to internet, and Windows 10 technology. In order for the Microsoft HoloLens to be successful for H&M, it first has to be released to the market. The device has been revealed to the public, yet it’s still currently unavailable for purchase. Representatives from H&M will first be trained on the Microsoft HoloLens by employees from Microsoft. Lead members of each participating department will be trained on the device in order for them to train other H&M employees that will use the HoloLens. H&M will be rolling out the HoloLens to 20 of their top factories for the initial trial of the HoloLens. They have a rating system of platinum, gold, silver, and other for each of their factories. We will be choosing factories rated at gold or platinum because these are the factories that do approximately 60% of their manufacturing. After the factories receive the technology the workers will be trained on how to use it. Once they begin using the technology there will be checkpoints where H&M checks to see how the HoloLens is affecting sales, waste, efficiency, and sustainability. H&M will then take the results back to Microsoft to discuss beneficial changes that could be made.
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i m p l e m e n tat io n Before the launch of the product, H&M representatives will spend the first two months being trained by Microsoft experts on the HoloLens. A total of nine H&M employees will initially be trained on the device to allocate enough assistance to train the factory employees. Following the initial training, three months will be allocated for the HoloLens to be shipped to the factories. The HoloLens will be shipped to Anata Garments Ltd in Bangladesh, Shanghai Dong Long Feather Manufacture Co., Ltd. and Dongguan Crystal Knitting & Garment Co. Ltd in Shanghai. For the remaining three months before the launch of the HoloLens, the trained H&M employees will educate the employees in each factory on how to use the device. The start of September will mark the launch of using the HoloLens within the factories following eight months of preparation. Postlaunch, H&M will begin to track the success of the device and review with Microsoft any necessary updates or changes. From October to June, H&M will begin the process of tracking the HoloLens’ influence in brand image and customer loyalty by measuring impact of increased communication and product quality. Through the implementation of the HoloLens into three suppliers, H&M representatives will begin to track waste and compare costs to the pre-launch of the product. Though it may be a few years before H&M will be able to see changes in projected savings, H&M can begin to measure efficiency within each of their participating suppliers. As mentioned before, if any updates in the device or Windows 10 are needed, H&M will utilize time during the post-launch months to review the HoloLens with Microsoft. Each aspect of data collected following the implementation of the HoloLens will exist to improve the efficiency and beginning to decrease waste production during the manufacturing process. In the end, the implementation of the HoloLens is to ensure that the consumer receives quality garments at affordable prices that are produced with sustainability in mind. 32
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H&M S u p p ly c h a i n a n a ly s i s 35
d e s i g n p ro c e s s H&M’s design department employs 160 in-house designers, 100 pattern makers, several design assistants and print designers. Based out of their Head Office in Stockholm, this diverse group works together to plan and execute the collections for each season. Representing people from various ages and backgrounds, they gather inspiration from all around the world and many different sources. These global influences are then filtered into designs at unbeatable prices. Head of Design, Margareta van den Bosch, works with her team to curate each collection over a year in advance. H&M is famous for offering chic, trendy styles with rapid turnarounds; the epitome of a successful fast fashion retailer. H&M’s design process is about finding the right balance between fashion, quality, and an affordable price. While involving an awareness of sustainability, H&M develops a strong consideration for both the environment and their consumer.
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H&M strives to have the best product offering for their consumers, meaning that each store needs to have varied products that cater to their specific market, inspiring their customers to both browse and shop the assortment. Each concept team consists of designers, buyers, assistants, and pattern developers who are striving to find the right mix for their consumers. With a flexible design schedule, room for current trends and allows for each store’s selection to feel updated. While many factors contribute to the final assortment of merchandise, upcoming trends and colors are taken into account as various elements of direction for selection of product.
p l a n n i n g & buying 37
p r o d u ct io n p ro c e s s H&M doesn’t own any of their factories; our products are shipped from over 900 independent suppliers in Asia and Europe (Lu). These suppliers manufacture the products and source any necessary fabrics and their components. It’s extremely important for the consumer to feel that products from H&M are designed, produced, and manufactured with sustainability in mind. We work hand in hand with long-term suppliers and invest resources into our sustainability within the supply chain. H&M contributes to over a million jobs within sourcing countries, but we also work closely with those specific factories to promote lasting improvement of their working conditions and its environmental impact. H&M’s production rate is elevated through relying heavily on outsourcing from design to production. Although their core operation relies on the cooperation of designers, creative directors, and pattern makers to stay on top of trends and production, they also use trend forecasting services to assist with inspiration. As a quick response retailer, H&M takes an innovative direction in regulating consumer interests through traditional analysis and experimental technologies.
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H&M manufactures 80% of their products ahead of time, leaving the remaining 20% of the product open to current market trends (Lu). H&M relies on their strong relationships with vendors to reduce lead times in order to offer affordable apparel. One of H&M’s strongest characteristics is its ability to efficiently communicate with their vendors. The fast fashion giant relies on a network of external suppliers to manage their production and buy their fabrics. With over 700 partner companies in more than 20 countries, H&M produces 60% of their merchandise in Asia and the remainder in Europe. H&M puts heavy importance on staying close and effectively engaged with their partners by placing 30 production oversight offices in strategic locations. These offices serve as a mediating function and allow for easier contact with their partner companies on the latest trends and internal company matters. This close relationship helps ensure accurate quality, pricing, and that the suppliers follow H&M’s code of conduct. Each of these 30 production offices plays a significant role in checking and testing garment samples.
M a n u fa c t u r i n g p ro c e s s
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T ec h n o lo gica l i n t e g r at i o n H&M relies on IT integration between their headquarters in Stockholm and their production offices across Asia and Europe. Communication between each department is electronic, especially in regards to the design and product development departments. This factor is really important for H&M because they don’t own their factories and don’t secure fabrics ahead of time. With efficiency in mind, this IT communication structure allows for orders to be placed with one of their partner companies in the region that already has the necessary fabrics. With each various stage within their supply chain, H&M has managed to reduce the average lead time of their garments by 15-20% through constant developments within the buying process. () Short lead times and flexibility have helped reduce the risk of buying the wrong item and allowing retail locations to be restocked at a quick pace.
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a u di t i n g
The sustainability team, comprised of over eighty members, directly monitors the suppliers to make sure they are constantly in compliance with the Code of Conduct through the Full Audit Program (FAP). The Full Audit Program is in place to help suppliers build strong management in order to avoid any mishaps from occurring. The FAP process requires that new partners must comply with the minimum code of requirements, H&M will then do a thorough audit. The audit process begins with an auditor visiting any potential factory prior to placing an order to approve or disapprove the factory. Over one hundred employees are in charge of monitoring their code of conduct. Once they have chosen a factory H&M will support it in order to improve their sustainability. Finally, there are follow up audits done by the production offices based in Europe and Asia.
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The minimum requirements for an audit are an absence of forced labor, a ban on child labor, no detectable breach of freedom of association, payment of at least the appropriate minimum wage, fundamental safety provisions, no use of banned chemicals as stated in H&M’s Chemical Restrictions, wastewater treatment, full transparency, and access to all relevant factory areas. Initial audits begin with a factory inspection, interviews with management as well as workers, examination of company records, payment records, and making sure the factory is in compliance with the FAP questionnaire they filled out. The questionnaire consists of over 90 questions and is the main tool during audits. An audit can take up to six days and the results are then discussed with the management. The factory then must show outline how they are going to make the necessary changes. Follow up audits are when they check to make sure the right corrections are in place. One full audit cycle is comprised of one head audit and three follow ups within a period of 18-24 months. H&M has a strong factory presence that does not just include the auditing process. They provide workshops and training for their suppliers and are in constant contact with them. The merchandising and quality departments are in contact with their suppliers which maintains a strong presence throughout the factories.
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initial factories 44
h & m s o u rci n g H&M offers transparency of their suppliers to their customers so consumers have the opportunity to know where their products are coming from. H&M has a social compliance agreement that all factories must sign in order to work with them to ensure ethical and sustainable operations in the factories. Each of the suppliers are rated under a grading system that implies the strength and longevity of H&M’s relationship with that supplier. For instance, platinum and gold suppliers are the preferred suppliers that produce about 60 percent of H&M’s products. They are the top partners in terms of performance “in all areas including sustainability.” These factories have long-standing partnerships with H&M and can make arrangements years ahead. A silver grade indicates long-term oriented relationships with ability to plan up to a year ahead and joint efforts and training by H&M and these suppliers to improve the performance of these factories. Furthermore, H&M’s factories are divided into two categories: manufacturing factories and processing factories. Manufacturing factories are merely “’cut and sew’ factories where the final manufacturing takes place” (H&M). Processing factoring are where prints, washes, and embroideries are created. We plan to try our initiative in one of each type of factories to determine how it can be utilized in each of the types of factories before spreading it throughout more of the company. Looking through the list of suppliers, we found that most of H&M’s production takes place in Southeast Asia, especially in Bangladesh and China.
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Shanghai Dong Long Feather Manufacture Co., Ltd. The third factory we’ve chosen for first-year implementation is Shanghai Dong Long Feather Manufacture Company Limited in Shanghai, China. This is another factory with a gold rating from H&M. This factory was established in 1992 and now has an annual sales volume of over $100 million US dollars and over 1,000 employees. This factory specializes in jackets, coats, pants, shirts, sportswear, and dressy attire. We decided to keep the first-year implementation factories limited to China and Bangladesh because those are the primary manufacturing locations for H&M and we hope the results of our initiative will be most easily visible through these locations.
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Dongguan Crystal Knitting & Garment Co. , Ltd Another factory with a gold rating by H&M is Dounguan Crystal Knitting & Garment Company Ltd. in Dongguan, China. This supply company, Crystal Group, was established in 1970 and is a leading international original design garment manufacturing company with 20 factory locations and an annual turnover of $1.6 billion US dollars. This particular factory of this supplier specializes in producing knits. Since we already have a woven factory for test implementation in Bangladesh, we decided it would be best to test our initiative at a knitwear manufacturer for our China location to see how the Microsoft Hololens yields results for different types of manufacturers.
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Ananta Apparels Limited
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One of H&M’s main suppliers with a “gold” rating in its many factories throughout Bangladesh is Ananta Apparels Limited. Ananta Apparels specializes in the manufacturing of woven products and produces 80 lines and 1.8 million pieces per month (Ananta Bd) (“Ananta Apparels, Bangladesh”). This supplier has in house pattern making, sample making and quality assurance teams at their factories. They’ve shown a 30 percent annual growth rate over the past few years and are one of our larger, more stable suppliers (Ananta Bd). We will be implementing the technology at one of their five factory subsidiaries, Ananta Casual Wear Limited in Gazipur, Bangladesh (Ananta Apparels Limited: Summary of Investment Information). This branch is a good place for the first run in implementing the Microsoft Hololens technology because we have a strong relationship with them, they’re in good standing with our social compliance agreement, the specialized employee work teams will make it easier to determine which employees would benefit from being trained on the new technology, and significant savings results will be visible in a relatively timely manner.
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S U STA I N A B I L I T Y One of H&M’s primary missions is to be as sustainable as possible. They are already leading in sustainability in many ways. First off, they have the Conscious line that focuses on using only sustainable materials. H&M also uses recycled materials including recycled cotton, recycled polyester and shopping bags made of recycled plastic. They have a garment collecting program donate customers’ old clothes to charitable causes. They are constantly working to reduce energy and water use by increasing electricity efficiency, sourcing energy from renewable sources like wind power, and promoting responsible water use from the production process to the use of the product in the end consumer’s home. H&M’s goal is to increase sustainability by five percent each year. Our initiative will help improve sustainability efforts for H&M at a faster rate by reducing the amount of fabric used in the sample making process and reducing the need for transportation of samples (H&M). refer to appendix a for more information.
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f i n a n ci a l p l a n
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budget, h&m (In SEK)
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Aside from the environmental benefits, the main goal for our strategic initiative is to save money for H&M. To determine the savings for this initiative we determined how much H&M would save by eliminating one sample from the toile process because that’s what we foresee the Microsoft HoloLens doing for the H&M supply chain. We chose three of H&M’s primary manufacturing factories where we plan to implement the HoloLens initially. Since one of the factories is in Bangladesh and two are in China, we determined the average price for creating a sample in those two countries is about 127.16 SEK (CNN Staff) (Sirkin). Then we estimated the total number of different styles created at H&M each year based on the number of styles created at Zara plus 30 percent (the number of styles for H&M was unavailable), since H&M’s men’s and children’s departments are more established than Zara’s, and came up with 15,600 styles (Levesque). Then we divided the number of styles by the number of factories H&M works with, about 800, to establish about how many styles are developed annually for H&M at each factory and concluded nine styles are created per factory (Petro). However, since we are implementing our initiative at some of H&M’s larger factories, we estimate these factories develop about 15 samples for H&M each year.
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The expenses for this initiative include the cost of the HoloLens, the cost of Windows 10 which is needed in order to use the HoloLens, development of the training collateral, training sessions, travel, shipment of the HoloLens, and employee payment for those orchestrating the training sessions. Although the price of the HoloLens has not yet been released, we expect the cost of the HoloLens to fall between that of the Google Glass at 12,715 SEK and the Oculus Rift at 2,543 SEK, so we gave the HoloLens an estimated cost of 7,629 SEK per pair (Oculus Rift: One Step Closer to Virtual Reality in E-Learning) (Kleinman). Windows 10 does not have a cost for the first year of use, but will be 847 SEK per factory for each following year (Windows 8.1). For initial training for this technology, two H&M employees would be trained by Microsoft employees and then would travel to factories to train the employees of the factories. We estimated this cost based on the cost of a round trip to our factory locations on British Airways and United Emirates Airways and the cost of hotel and food in the cities of the factories. The training collateral that will be used in the future will be a video that will be sent to factories. Although the initiative is costly for H&M at first, the expenses reduce by 28 percent after the first year and 18 percent after the second year. By the fifth year of implementation for this technology, the projected savings compared to H&M’s current supply chain arrangement, will be 5.4 million SEK. By year 10, savings will be 112.9 million SEK.
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c o n c l u s io n
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Teaming up with Microsoft to use their new HoloLens technology would benefit H&M in various ways. This strategy will save millions of SEK for H&M within the next five years and allot more funding to improve their sustainability in other areas of the company. With such significant strides towards full sustainability, one day the H&M Conscious line will no longer account for one part of the brand’s products, but rather all of them. The implementation of the HoloLens would further reduce the environmental impacts of this fastfashion domain and help H&M continue to lead the way toward a future in sustainable fashion..
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A P P E N DI X
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appendix a: One of H&M’s primary mission’s is to be as sustainable as possible. They are already leading in sustainability in many ways. First off, they have the Conscious line that focuses on using only sustainable materials. H&M also uses recycled materials including recycled cotton, recycled polyester and shopping bags made of recycled plastic. They have a garment collecting program donate customers’ old clothes to charitable causes. They are constantly working to reduce energy and water use by increasing electricity efficiency, sourcing energy from renewable sources like wind power, and promoting responsible water use from the production process to the use of the product in the end consumer’s home. H&M’s goal is to increase sustainability by five percent each year. Our initiative will help improve sustainability efforts for H&M at a faster rate by reducing the amount of fabric used in the sample making process and reducing the need for transportation of samples (H&M). H&M Sustainability Efforts CONSCIOUS LINE: H&M has their Conscious line signified by a green Conscious hangtag for consumers who wish to purchase sustainable products. This line focuses on the use of organic materials such as organic leather and organic cotton. REUSE: A Garment Collecting program allows customers to drop off old clothes to H&M stores for reuse. Last year they donated nearly 3.6 million garments to charitable causes. COTTON: 15.8 of cotton used in H&M apparel is from sustainable sources. The goal is is that 100 percent will be sustainable (organic cotton, recycled cotton, and cotton from the Better Cotton Initiative) by 2020.
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ENERGY: H&M is constantly working to reduce energy used by increasing energy efficiency and using energy form renewable sources. They’ve increase in-store electricity efficiency by 14 percent since 2007 and plan to increase the efficiency by 20 percent by 2020. Currently, 18 percent of H&M’s electricity comes from renewable sources such as wind power and solar panels. They ultimately intend to source 100 percent of their electricity renewable sources. PLASTIC: Last year, H&M used recycled polyester equivalent to 9.5 million plastic bottles. Their regular shopping bags are made of 100% recycled plastic. WATER: H&M promotes “responsible use of water along the product’s lifecycle”. This includes encouraging cotton farmers to water their crops in the most efficient way possible and providing care instruction on apparel to explain to customers how they can wash their clothes using less water and energy. CHEMICALS: Whenever possible, H&M replaces harmful chemicals with better alternatives. ENFORCEMENT: In order to enforce sustainability efforts especially when it comes to businesses H&M is working with, H&M chooses responsible partners and rewards those who are excelling in sustainability efforts.
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