A partnership approach
Long-term partnerships with our key suppliers provide mutual benefits. Together with our suppliers we can plan ahead and learn from each other, enabling us to develop and grow together. For our suppliers, being a good partner to H&M includes actively working towards full compliance with our Sustainability Commitment, replacing the Code of Conduct in February 2016 but keeping the same strict sustainability standards. Besides that, we have added an aspirational level of performance which means our suppliers should continuously strive beyond compliance to make improvements. Showing this commitment brings related benefits, such as long-term order planning and stable orders over time. All factories have a sustainability performance score which is clearly communicated to our suppliers.
Price setting and payments
We think an honest approach and mutual transparency are the basis for a good business partnership. Prices naturally play a part in our supplier selection process, alongside factors such as capacities, lead times, quality and compliance with our Sustainability Commitment.
To be able to negotiate prices with us, our suppliers need to have a clear picture of H&M’s expectations. In return, we make sure that our merchandisers have good knowledge of both reasonable market prices and our suppliers’ costs in order to agree a fair price. We follow the ethos of "negotiating, not bargaining". Payment procedures for our chosen suppliers are clearly agreed in advance and our policy is that we will pay all invoices on time.
Regardless of the price that might be offered, however, we would not consider a supplier that does not comply with the minimum requirements of our our Sustainability Commitment or our quality standards.
Communication is key
We have a direct relationship with our suppliers and meet with them on a regular basis. We evaluate our suppliers twice-a-year and discuss the results together. As part of our commitment to good communications, we strive to apply pre-order product planning, with early information about product specifications, wherever possible.
With our key suppliers we develop long-term capacity plans about six to 12 months in advance and aim to plan our purchasing process accordingly. These planning systems help suppliers to monitor their capacity, performance and adherence to our Sustainability Commitment.
As a fashion company in a fast-moving market, we need to meet our customers’ demands. This can sometimes mean late changes on product orders. Intensive capacity and pre-order planning alongside our suppliers, with clarity on volumes and lead times, can help to minimise this.
We want our suppliers to be good partners to H&M. We reward suppliers that show strong improvement, in terms of business performance and compliance with our Sustainability Commitment, with stable orders or higher order volumes. Our commitment to suppliers is clear – through working with H&M, we want them to grow and develop further.