Sourcing and production

Materials used by HUGO BOSS need to meet the high standards of customers in terms of design, comfort, durability and fit. In addition to these quality features, social and environmental aspects play an essential role. The sourcing and production of high-quality products therefore directly contributes the Group’s vision of being the most desirable fashion and lifestyle brand in the premium sector. Group Strategy

In terms of value, as in the prior year, 17% of the total sourcing volume was produced in Group-owned production sites. The remaining 83% of the sourcing volume comprises products sourced from independent contract suppliers or sourced as merchandise (2018: 83%). The Group’s own production is also expected to help acquire important know-how in order to further develop production technologies and quality standards. The Group’s four own production facilities are located in Izmir (Turkey), Metzingen (Germany), Radom (Poland) and Morrovalle (Italy). In Izmir, the largest own production site by far, businesswear products, such as suits, jackets, shirts and coats, as well as womenswear are manufactured. The customized ”Made to Measure” suits as well as suits particularly made of vegan materials are manufactured at the Technical Center in Metzingen. The development and production of prototypes as well as samples are also carried out in the Technical Center. Business shoes are made in Radom and Morrovalle.

Within Eastern Europe, Turkey accounts for the largest part of the global sourcing and production volume at 23%. The Group’s own production site in Izmir accounts for 12% of the global sourcing and production volume. Within Asia, China is the most important sourcing market by far and accounts for 20% of the global sourcing and production volume.

HUGO BOSS attaches great importance to the careful selection of suppliers and strives to build long-term strategic partnerships. Not only economic criteria, but also adherence to the HUGO BOSS Social Standards, play an essential role. These are a mandatory component of the contractual agreement. Within the framework of strategic partnerships, HUGO BOSS invests in the knowledge of its partners and thus promotes the enhancement of quality, efficiency, technological progress and sustainable corporate management. HUGO BOSS also conducts regular social compliance training with its suppliers and supports them in implementing the Social Standards. Combined Non-Financial Statement, Respect for Human Rights

Product quality, a key criteria in the selection of suppliers, is comprehensively analyzed in advance within the framework of test orders. In fiscal year 2019, HUGO BOSS obtained finished goods from a total of 171 external suppliers (2018: 180) using 198 production facilities (2018: 210). The Group sourced raw materials from 309 external companies (2018: 312) using 325 production facilities (2018: 334). The number of supplier companies saw a further decline, as HUGO BOSS continues to focus on its strategically important partners. In order to minimize risks, the Group ensures that the sourcing volume is distributed as evenly as possible and strives to ensure that at least two different suppliers are available for the manufacture of a product in the medium term. The largest independent supplier accounted for only 8% of the total sourcing value in 2019 (2018: 9%). This relates to a long-term partnership for the sourcing of casualwear and athleisurewear products.

In 2019, HUGO BOSS also made further progress in the development of its own production site in Izmir to become a “smart factory”. For example, the Group is now using artificial intelligence to identify potential for improvement during the production process and to detect machine defects in a timely manner. When assigning a model to a specific production line, an algorithm also considers historical production data and the respective experience of the employees. Finally, artificial intelligence is used in the maintenance of machinery to predict a defect even before it occurs with the help of different data points.

The fabrics and trimmings sourced by HUGO BOSS are mainly outer materials and lining fabrics, buttons, yarns and zippers. Of the materials used by HUGO BOSS, cotton is by far the most extensively used. The majority of the fabrics purchased by the Group come from Europe – many from long-term partners from Italy. For products made under contract, HUGO BOSS provides suppliers with the fabrics, trimmings and the required patterns. In this way, the Group ensures that the manufactured products meet its quality standards. The suppliers, which are mainly based in Eastern Europe, primarily produce businesswear requiring high levels of production expertise and technical equipment. With the inclusion of the Group’s own production sites, the proportion of the sourcing volume accounted for by products made under contract was slightly below the prior year level at 36% (2018: 38%). The merchandise sourced by the Group is primarily composed of athleisure and casualwear products. The respective patterns are provided to the suppliers who are mainly based in Asia and Eastern Europe. The necessary outer materials and trimmings are sourced by the suppliers independently. Regular controls are intended to ensure compliance with the HUGO BOSS quality standards. At 64%, the proportion of merchandise in the sourcing volume is slightly above the prior year level (2018: 62%) and resulted from the higher share of casual and athleisurewear in the product mix compared with the prior year.

Standardized quality, processing and procedure manuals are provided to suppliers. This is to ensure that the supplier factories also comply with the HUGO BOSS quality standards. In addition, HUGO BOSS regularly conducts trainings in the production facilities on topics such as cutting technology or production management. Compliance with production standards is to be monitored by controls that are integrated into the production process, as well as regular samplings. The focus is on fit, workmanship and dimensional accuracy. Quality criteria are also included as an integral part of the semi-annual supplier assessments.