Uniqlo, Zara, and H&M have grown into global SPA brands by optimizing the production-to-sale process through supply chain management (SCM). Their unique SCM strategies allow them to reduce costs, respond quickly to the latest trends, and remain competitive in the global marketplace.
The total sales of the “Big 3” SPA brands, including Uniqlo, ZARA, and H&M, are growing every year. As leaders in fast fashion, these companies have become popular with younger generations by offering affordable, on-trend clothing that is easily accessible in their stores. But what makes Uniqlo, Zara, and H&M such influential clothing brands in the world?
The secret to the success of the SPA Big 3 is supply chain management (SCM). Uniqlo, Zara, and H&M are known for their excellent supply chain management systems. What is “supply chain management”? Every manufacturing company is in the process of purchasing raw materials, distributing finished products, and developing new products based on consumer feedback. The concept of “supply chain management” recognizes the entire flow of logistics from production to sales as one value chain and optimizes the entire process. Minimizing inefficiencies in this process is becoming a key strategy for global companies to achieve long-term success. As markets have become globalized, global marketing and region-specific strategies have become essential. Delivering high-quality products at low prices and at the right time for customers is seen as the key to success.
The fashion market is changing more rapidly these days, and consumers are demanding more options than ever before. In this volatile market, companies have come to recognize the importance of supply chain management to maximize productivity and reduce costs in order to stay competitive. Uniqlo, Zara, and H&M, among others, have excelled in this area of supply chain management.
Supply chain management encompasses a company’s management activities in purchasing, production, and logistics to make a profit based on forecasting the demand for a good or service. If a product doesn’t sell, a company must bear the cost of inventory management for the surplus product. Conversely, if the company is unable to supply as many products as customers want, it will incur the opportunity cost of not selling, resulting in losses. The “local optimization” method of operating a company that only considers immediate sales profits is not suitable for the growth of a company. The key to supply chain management that can lead to the long-term development of a company is to promote “global optimization” from the stage of raw material supply to manufacturing, distribution, and sales. The ability to integrate and coordinate the entire process has become a major factor in determining success in the global market.
Uniqlo, Zara, and H&M all have their own supply chain management policies. First of all, Uniqlo’s supply chain management system is aimed at mass production of small items. Uniqlo utilizes the strategy of supplying large batches of products at once to reduce transportation costs and sell products that are less subject to fads. This strategy maximizes the cost savings of large-scale production and provides the basis for offering quality products at low prices to consumers. This strategy makes up for the losses incurred from large inventory management costs through the continuous sale of basic items. In addition, rather than trying to quickly capture the market, Uniqlo focuses on developing quality products that can be used across generations through sufficient product development time. This contributes greatly to building consumer trust.
Zara’s supply chain management system, on the other hand, is based on a diversified, low-volume production policy. Zara is known for its ability to quickly produce and deliver trendy apparel to its stores. Sales information from each store is quickly utilized to analyze which products are selling well in which stores using data warehouse (DW) techniques, graph mining, and hub modeling. The results are then used to replenish the right styles of products in the fastest possible time to keep a wide variety of products in stock. Zara’s supply chain management approach is in line with their business strategy of targeting a fashion-conscious customer base. Zara’s strategy of bringing new designs to market quickly and replenishing rapidly depleting inventory is optimized to meet the immediate needs of consumers.
Uniqlo’s and Zara’s SCM policies can be thought of as a counterpart to Apple’s relationship with a small number of flagship products sold in large quantities and Samsung’s relationship with a diverse product line. H&M uses a mix of Uniqlo and Zara’s SCM models. The strategy is to cover both timeless and trendy items. H&M launches its main collections in spring and fall each year, with a dichotomy between traditional items that have a long shelf life and trendy items that have a short shelf life. In addition, the company’s 30 production plants around the world are located at the center of its distribution network to reduce the time it takes for products to reach the market.
Through the use of SCM, the SPA Big Three are able to integrate and manage all stages of production and sales to reduce inefficient utilization of resources. They also manage information on each store, corporation, logistics system, inventory management, purchasing status, suppliers, etc. at once to increase visibility and improve overall productivity. This integrated and efficient system helps brands maintain a strong competitive edge in the global marketplace.
Furthermore, these companies are not just managing their supply chains, they are also embracing digital transformation to enhance their technological capabilities. For example, they are using artificial intelligence (AI) for demand forecasting modeling, blockchain for transparent distribution chain management, and logistics automation systems to maximize supply chain efficiency. This is an important factor in helping us to be more flexible in a rapidly changing market. With new technologies emerging every day and consumer demands becoming more diverse, the future is uncertain. Companies are optimizing their entire supply chains, not just looking to improve store margins. Supply chain optimization has become indispensable to respond quickly to market changes.
