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Why Inditex, H&M, Unilever Topped Gartner List of Ideal Supply Chains

Fast-fashion’s takeover has been no secret, and it’s for their effective supply chain functions that leaders like Inditex and H&M topped research firm Gartner’s list of Europe’s top 15 supply chain organizations.

Despite a slew of economic challenges in Europe over the last year, some companies held their footing, performing well in the face of adversities.

Five European companies made the Gartner Supply Chain Top 25 for 2015, two of which—Inditex and H&M—were among the top five. Unilever took the top spot on Gartner’s 2015 Europe Top 15 list, and Inditex and H&M came in second and third respectively. Beauty brand L’Oreal ranked fifth.

The average three-year growth for those in the top 15 was down to 2.4%, less than half of 2014’s 5.3%, but the companies still reported net income nearly double the global average.

“Highly capable and effective supply chain functions are increasingly looked upon as a key differentiator for leading companies,” the report noted. “Engaged in almost every aspect of a company’s business, the supply chain organization is able to contribute to value creation through cost-reduction initiatives and service enhancements.”

Inditex has made Gartner’s list for the past four years, H&M for the last three.

Spain’s leading retail group and parent company of Zara jumped six spots to land itself at No. 5 on the top 25 list and retained its No. 2 spot on the European list. Seemingly “impervious” to the challenging global economic conditions, as Gartner put it, Inditex saw 17 percent growth in net income, opened new stores in 54 countries and expanded its e-commerce offerings.

“The secret of this retailer’s unwavering success is its innovative, yet simple, vertically integrated business model leveraged across its eight brands, including Zara, Massimo Dutti, Bershka and Stradivarius,” the report noted. “Inditex places the customer at the center of its decision-making process, and achieves excellent flexibility and speed of bringing product to market through ownership and in-house execution—from store, through design, to manufacturing, and culminating in logistics delivery to the store in as little as two weeks.”

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Adding RFID to all garments in its Zara stores has also allowed for up to 90 percent faster and more accurate inventory counts, sales-triggered stock replenishments and better multi-channel service for today’s all-connected consumers.

H&M, too, has been little fazed by external market conditions. The Swedish clothier posted a 26.6% increase in net income, the highest among both the global and European top ranked companies.

“This global-leading retailer operates more than 3,500 stores in 55 countries, with plans to add more sales space both to its brick-and-mortar networks as well as its rapidly growing online presence,” according to the report. “H&M pursues an outsourced model, ranging from its lease of properties, rather than outright ownership, to its exclusive use of third-party manufacturing and 3PL-managed distribution centers. This enables the retailer to establish, scale, or exit supplier relationships or presence in a sales market quickly.”

Sustainability across the supply chains is also a top priority for both retailers.

So how can other companies land themselves on this list of best-in-class supply chains? Gartner calls out five ways:

  1. Identify how companies within and outside your sector achieved supply chain excellence and promoted “outside-in” thinking.
  2. Adopt collaborative business processes and tools with suppliers, business partners and customers in the extended value network and support growth and cost-efficiency.
  3. Explore and adopt digital business capabilities in areas best suited to your business model and supply chain maturity level.
  4. Pull sustainability into day-to-day doings and integrate it into long-term business strategies.
  5. Support the global supply chain community by sharing your best practices and voting to highlight other’s innovative practices.

“Overall, not only for European companies, supply chains need to further have a balanced focus on growth, cost and sustainability,” Gartner noted. “They need to focus on understanding the customer, tailoring multiple models to meet needs, collaborating and leveraging existing and emerging technologies to become orchestrators of the entire value network and true partners with the business.”