Supplying Fast Fashion

According to the case of Benetton, Zara and H&M, we divide the discussion topics into 3 steps to achieve strategic fit which are understanding the customer and supply chain uncertainty, understanding the supply chain, and achieving strategic fit.

To begin with the first step, in terms of uncertainty, H&M and Zara tend to have uncertain demand because both of them provide wide ranges of product for customer in order to response to verities of customers’ demand, in contrast to Benetton that tend to less fashion, but higher quality and durability.

Zara and H&M they tend to focus on fast fashion’s design that can be identify as new products in the life-cycle position. In contrast to Benetton that can be identify as mature product since they concentrate less to fashion design. Therefore, Benetton have less supply uncertainty.  

	Benetton	H&M	Zara
Quantity of product needed	Large	Large	Small
Tolerate Time	High	Moderate	Low
Varity of product	Low	High	High
Service level	Moderate	Moderate	High
Price	High	Low	High
Desired rate of innovation	Low	Moderate	High

For the designed rate of innovation in the product, Zara and H&M are quite high since customers expect latest trend from both of them epically Zara, so Zara face uncertain demand, comparing to Benetton where customers already know what kind of Benetton style. The response time that customers are willing to tolerate seem to be high for Benetton in relation to the expectation of customer. 

Zara forced season-end markdown is relatively low which comply with low implied uncertainty demand since Zara less likely face oversupply of some product comparing between three of them. Benetton and H&M tend to rely on forecasting trend, standardise product and still stick with traditional industry practice, so Benetton face less uncertainty comparing to H&M and Zara where both of them provide seasonless cycle where it allows designers to learn from customers’ reactions to their new products and incorporate them quickly into more new products.

Lastly, There is a correlation between implied demand uncertainty and product margins since Zara and H&M have uncertain demand, so their product margins can be charge higher than Benetton which tends to have certain demand, but Benetton position as high quality product, so they can charge higher. As well as H&M that their business concept are fashion, price and quality, so they buying volumes are priority compare to delivery dates. Therefore H&M can offer lower price to customers than Zara because of their buying volume.

The second step is understanding the supply chain. Zara's and H&M's actions to best meet customers demands are launching new product continually and learn from customers' reaction. H&M hire high-fashion designer to design outstanding products which are reasonable price and quality. While Zara's strategy is designing around 40,000 items and selecting the most appropriate 10,000 items to be produced. In contrast, Benetton's customers needs are the good quality of clothing. Hence the company tends to provide less fashion but higher quality and durability.

In order to respond to wide ranges of quantities demanded,  Zara decides to react market demand, so it produces the less products, but it changes new products every 2 or 3 weeks to attract customers to revisit. In contrast, H&M provides various kind of products to consumers, the products designs are updated continually. In term of the Benetton reaction can limit the consumers demand by providing the high quality of products. 

To handle a large variety of products, Zara and H&M allow the designers to learn the customers' reaction on their products, and then produce new products quickly to respond  consumers' satisfaction in each areas especially Zara can react Asian people based on the factor of raw material and labour cost. On the other hand, Benetton produces global products with the same quality around the world.

Zara has its full ownership in design and retail sections while its supplier and distribution have high degree of ownership, and own 60 percent in manufacturing. For Benetton, it has 100 percent ownership in design and partial degree in production, handing out and retail without any possession in supplier section. Lastly, H&M, it possesses full scale in retail and relatively high degree in design.

From the table, Benetton could not meet a very higher service level than H&M, and Zara because they have their own full ownership, but another has partial ownership.

Last but not least, to achieve the strategic fit, Zara and H&M which have uncertain demand choose the high responsiveness supply chain while Benetton can apply the efficient supply chain to deal with the certain demand as the following graph.