Tag: H&M

OM Podcast #1: Sustainability and Supply Chains

 

Welcome to our newest Operations Management text feature–bimonthly podcasts on topics we think you and your OM students will find interesting.

 

Jay and I will be creating 8-9 minute podcasts–posted on this blog. They will be tied to specific chapters in the text. Assignable auto-graded exercises using this podcast (in the form of multiple choice questions) are available in our MyLab OM.  To learn more about these assignments in MyLab, contact your Pearson rep at  https://www.pearson.com/us/contact-us/find-your-rep.html

Today’s topic relates to Supplement 5, Sustainability in the Supply Chain. In it, we talk about new government regulations, the clothing industry, Apple, and greenhouse gasses. Let us know what you think. The next podcast will be released in two weeks on the topic of Blockchains.

OM in the News: Sprawling Supply Chains and Sustainability

Companies are rushing to more closely track materials across their sprawling supply chains ahead of expected new human rights and environmental laws, reports The Wall Street Journal (Jan. 24, 2023). Businesses, including consumer-goods company Unilever, clothing retailer H&M, and Renfro (which supplies socks to Ralph Lauren), say they are turning to technologies to help gather data on their supply chains and track materials.

Last year, H&M began rolling out a traceability platform for its recycled polyester and man-made cellulosic fibers, such as viscose, that can contribute to deforestation. It uses blockchain technology (see Chapter 11) to track and verify the use of sustainable fibers in garments. H&M has more than 600 commercial product suppliers who make their products in over 1,500 factories in Europe, Asia and Africa. The company says: “The closer we get to our 2030 goal for all our materials to be either recycled or sourced in a more sustainable way, the more traceability we gain.”

A host of supply-chain regulations went into effect in recent years and more are on the way, exposing companies to potential penalties and public criticism if found to be negligent. Many businesses, especially small and midsize ones, have a limited view of their supply chains and are struggling to broaden their oversight.

New European Union rules require larger companies operating there to identify, prevent and remedy risks to human rights and the environment in their supply chains, such as minimum age requirements, worker safety, pollution and biodiversity loss. There are a host of other regulatory developments threatening to affect companies’ supply chains. These include modern slavery laws in the U.S., such as the 2021 Uyghur Forced Labor Prevention Act.

Unilever has a sprawling global supply chain, with around 54,000 suppliers in 150 countries. The company tracks commodities such as palm oil and soy with satellites, geographical data and photos. But software that simply manages supply-chain data isn’t a silver bullet as it is difficult for companies to self-police the information they get from their suppliers. One startup, Wiliot, provides tiny tracking tags the size of postage stamps that can follow goods as they move, helping companies ensure materials aren’t coming from areas at risk of deforestation.

Classroom discussion questions:

  1. What other regulations in the US and the EU govern industry sustainability standards? (Hint: see Supp. 5 in your Heizer/Render/Munson text)
  2. Why are supply chains so difficult to manage with respect to human rights and the environment?

OM in the News: Clothes and EU Recycling Regulations

The EU imports 3/4 of its textiles. Above, garment workers cut fabric to make shirts at a textile factory in India

Clothing companies will start selling more garments made from a single material this coming decade, a major shift in response to a European Union plan to require apparel to be longer lasting and recyclable.

Clothes often contain a mix of fibers, including organics, such as cotton grown on farms, and synthetics, such as polyester refined usually from petroleum. Garments with multiple materials—such as a T-shirt made from 99% cotton and 1% spandex—are difficult to recycle because separating the fibers is tricky.

Currently, less than 1% of the world’s textile waste is recycled into new clothes, with the bulk ending up in trash heaps, writes The Wall Street Journal (Sept. 7, 2022). The EU wants to change this. But the relatively short time frame promises to challenge the big players in fast-fashion, which may have to retool their design processes and rethink their sourcing, a topic we note in Supplement 5.

The EU recently published a plan that aims to put “fast fashion out of fashion” by 2030, referring to the trend of people buying clothes and throwing them out in less than a year. Clothing should be “long-lived and recyclable, to a great extent made of recycled fibers,” the EU said. Sustainability experts say that single-fiber, or monofiber, clothes present one of the best solutions.

The plan will affect not only Europe’s homegrown brands, but also American Nike and Levi Strauss and Japan’s Uniqlo or China’s Shein. EU nations have already agreed to collect discarded textiles separately from other waste by 2025.

German sportswear maker Adidas, for example, launched a line of single-fiber clothes last year including shoes, coats, T-shirts and pants under its “Made to be Remade” label. “These products are created with just one material and once they reach the end of their useful life, they can be cleaned, shredded and recycled for use in new products,” said the firm. Swedish fashion retailer H&M is stepping up repair services and offering rental and secondhand clothing as part of its push to cut waste and its associated greenhouse-gas emissions.

Classroom discussion questions:

  1. Are you concerned/aware of this issue?
  2. How does the proposed change impact the 10 operations decisions discussed in Table 1.2 of your Heizer/Render/Munson text?

OM in the News: The Fashion Industry Goes Green

In a factory the size of an airport terminal, laser cutters zip across long sheets of cotton, slicing out sleeves for Zara jackets. Until last year, the scraps that spill out into wire baskets were repurposed into stuffing for furniture or hauled off to a landfill near the plant in northern Spain. Now they’re chemically reduced to cellulose, which is mixed with wood fibers and spun into a textile called Refibra that’s used in more than a dozen items such as T-shirts, trousers, and tops.

The initiative by Inditex, the company that owns Zara and 7 other brands, highlights a shift in an industry known for churning out super cheap stuff that fills closets for just a few months before being tossed into the used-clothing bin. Gap promises that by 2021 it will take cotton only from organic farms or other producers it deems sustainable. “One of the biggest challenges is how to continue to provide fashion for a growing population while improving the impact on the environment,” says H&M’s CEO.

The $3 trillion fashion industry consumes vast amounts of cotton, water, and power to make 100 billion accessories and garments annually—3/5 of which are thrown away within a year, writes Businessweek (May 7, 2018). And less than 1% of that is recycled into new clothes. “The equivalent of a dump truck filled with textiles gets landfilled or incinerated every single second,”  says one researcher. To tap into this trend, H&M is seeking to make all its products from recycled and sustainable materials by 2030, up from 35% today.

Inditex last winter started disassembling old clothing to spin into yarns for fashions it markets as “garments with a past.” “We’re trying to find a more sustainable version of all materials,” says an Index exec. Today’s recycled jeans, he says, are typically only about 15% repurposed cotton, because the fiber “gets worn down and we have to mix with new.”

Classroom discussion questions:

  1. Why does this industry consume so many resources?
  2. What are the driving forces for change?

OM in the News: Even Faster Fashion Scares Zara and H&M

Zara and H&M are the world’s two largest fashion retailers. Not by coincidence, they’re also the pioneers of fast fashion. Zara is able to take a coat from design to the sales floor in 25 days, and it can replenish items even more quickly. In the past couple of decades, the two companies have steadily trounced much of their competition, outdoing them on price and speed to claim an ever-larger share of shoppers’ spending. But both are being beat at their own game by even faster competitors.

“British fashion retailers ASOS and Boohoo are now able to conceive, design, produce, and have clothing ready for shoppers on the sales floor quicker than Zara and H&M,” reports QuartzMedia.com (April 6, 2017). ASOS expects sales to grow 30-35% this year. Boohoo predicts sales growth of around 50% for the year.

H&M is aware it’s falling behind, announcing plans recently to invest in and rethink its supply chain. Most of its manufacturing takes place in Asia in order to keep prices down, but it’s considering moving more production closer to Europe, to countries such as Turkey, which would let it get items to stores more quickly. That proximity is key to the speed of its faster rivals. Even Japanese retailer Uniqlo, which emphasizes that it isn’t driven by trends, has acknowledged that it needs to speed up.

Classroom discussion questions:

  1. How are supply chains at the heart of this issue?
  2. Why is speed of new product development so important in this industry?