H & M Outsourcing Case Study

1 Introduction

Much is made in today’s business of outsourcing. The word ”outsourcing” alone gives us the impression of what is being outsourced. Within this rapidly changing economy, to en-hance their competitiveness, organizations are turning to outsourcing and this trend has gradually shaped the success of many start-ups and created business opportunities for young entrepreneurs. In this report, theories and features of outsourcing along with its risks, challenges and restrictions will be analyzed in order to bring out a better under-standing on the subject of outsourcing and its role in supply chain management.

2 Theory and features of outsourcing

Definitions on outsourcing are abundant. However, combining different sources, the con-cept of outsourcing is explained in more details below. Moreover, reasons for outsourcing will also

H&M has its own in this case.

Firstly, H&M outsource production to global suppliers to reduce cost in manufacturing. Low wages countries are full of low cost labour and low cost input, thus helping H&M achieve its high levels of cost effectiveness, which in turn comes out as cheaper product price range. Outsourcing, in this case, helps H&M save the resources building initial plant, purchasing equipment, etc.

Secondly, flexibility is another benefit outsourcing brings to H&M. The ability to modify production pattern plays an important role in H&M’s profit margin since the characteristics of fashion industry keeps changing to fit customers’’ change in taste. While other competi-tors struggle in providing shorter lead-time, H&M can deliver finished products to its out-lets as low as 20 days. Therefore, outsourcing the production activities is a brilliant idea.

Lastly, thanks to outsourcing, H&M can utilize its resources on its core competency in designing, which in turn will assist the company in adding more value to customers.

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