MO358 Strategic Supply Chain Management

Global Sourcing-
Benefits and challenges for H&M

Northumbria University, UK

Abstract
Global sourcing is a technique of strategic sourcing in the global strategy, which is an effective approach as a part of organization’s procurement section. The objective of global sourcing is to develop global efficiencies in the delivery of a product or service for the firms achieving a sustainable competitive advantage and this is an important weapon have been focused in the 21st Century. The well-known organization, Hennes and Mauritz (H&M) is one of the largest international fashion retail and production house with the great deal of businesses all over the world. In the today’s competitive market and
This study is to find out the importance and influence of global sourcing for H&M in terms of benefits, challenges and success requirement.

CHAPTER 2
Benefits of global sourcing
2.1 Cost Reduction

“Cost is one of the key factors determining H&M more successful in the fast changing market.” stated by the interviewee, this is the most common reason that driven the firm starting sourcing internationally. Especially in the Apparel and Textile, which is the typical industry involving highly labour-intensive production. The labor and production cost account for a large part of the total expenses. As a matter of fact, according to the study of international journal of purchasing- “International purchasing: Benefits, requirement and challenges” by Laura M. Birou and Stanley E. Fawcett was presented at the 1993 National Association of Purchasing Management that concluded that overwhelming firms began sourcing internationally is to obtain lower priced sources. Currently, the production source of H&M is mainly relying on the developing countries over the world such as China, Turkey, India, Indonesia, Cambodia, Romania and Bangladesh, and the interviewee commented that the advantage of production in the developing countries is to reduce the labor cost, so that enhancing H&M at the competitive position in the Fast Fashion Industry by maximizing the margin of profit to the business.
2.2 Better Quality
In 1993, Laura M. Birou and Stanley E. Fawcett reported that Quality was