H&M looks to North African production to help easy supply chain woes

H&M, the global fashion retailer, is to move some of its production capacity to Morocco and Egypt as seeks to bring its supply chains closer to target markets. 

This is according to reports by international news agencies, as well as media reports emanating from North Africa. 

H&M has been losing money in recent years, partly because it has relied on Asian manufacturing hubs in countries such as China and Bangladesh, a model that extended delivery times and reduced its ability to respond quickly to changing consumer demand. 

A report by news agency Bloomberg says there has been inventory build-up, which exposed structural weaknesses in H&M’s business model. The company has struggled to keep pace with rapid changes in the global fashion industry, particularly with the acceleration of digitalisation and the rise of more agile competitors like Shein and Zara. 

Bloomberg quoted H&M Chief Executive Daniel Ervér as pointing to early signs of improvement, as the company has worked to reduce inventory levels and improve supply chain efficiency. It has succeeded in lowering the inventory-to-sales ratio to its lowest level in a decade, in an effort to restore financial balance. 

North Africa’s close proximity to Europe 

Moroccan-based news platform Assahifa says H&M believes Morocco, with its close proximity to Europe, is an ideal location, as it will reduce shipping and distribution times, allowing the company to respond more effectively to shifting fashion trends. 

“Morocco, for its part, has increasingly positioned itself as a key platform in the textile industry. Several major international brands have established operations in the country, including Inditex, which remains one of the most prominent players in Morocco’s textile sector,” Assahifa reports. 

In January, Reuters news agency quoted Adam Karlsson, head of finance at H&M, as saying: “For many reasons we need to create a more regionalised supply chain, both for geopolitical reasons, learning through Covid that we need to create more resilience in our supply chain, and also to support responsiveness and the customer offer.”