Zara’s Unique Supply Chain Management


Zara was founded in 1975 by Amancio Ortega Gaona in Spain. It started off as a small outlet for clothes from Ortega’s factory. It grew rapidly to become a brand shop from major companies like Industria de Deseno Textil and others. Through Zara, Ortega is credited with having democratized fashion in Spain by making them be more accessible to the mass. By 1984, Zara was established in all major towns of Spain, and in 1988, it opened its first store in Portugal which was outside Spain. In 1989, it went to New York and Paris in 1990.

Up to date, Zara is credited as being the most efficient fashion shop in the world. It has an integrated retail system that enables it to place garments in any store in the world within two to three weeks. It has a vertically integrated structure where design, production, distribution, and retailing are integrated making its service more efficient. The design shop has about 3,000 retail shops all over the world which are all well-coordinated and performs to the required standards. The chain is able to establish about 400 new stores every year. According to Avanzo and Lewinski (2003), this is a good example of an integrated management style that has propelled Zara above its competitors.

According to Bovet and Martha (2005), Zara has been able to propel to a great height in the fashion industry due to its supply chain strategy which emphasizes that the chain dictates industry standards from time to market, cost, order fulfillment, and customer satisfaction. Its operation is guided by these principles which lead to better-managed inventories, tight links between the forces of supply and demand, and reduced costs of operation.

Design

Zara has a communication system that helps keep the managers abreast of all that is happening in the fashion industry. According to Andrew, Sjoman, and Dessain (2004), managers communicated with their in-house designers of the customer’s preferences through handheld devices due to improved IT services in the chain. This ensures that in-house designers know what is happening and what the customers want. It keeps the designers aware of the changes and new technology in the market. It also keeps designers informed of the response of the customers to their designs and appropriately reacts to the changes required in the design.

This shows that Zara values the design part as the most important step in the whole process of taking their product to the consumer. The ability of the chain to enhance communication between the consumers and the designers helps them to manufacture a new fashion in two to three weeks. This is enabled by the fact that preliminary designs can be delivered to consumers and the customer’s reaction noted quickly and communicated to the designers for required changes.

Zara has established a dedicated team in Arteixo which keeps the chain on top with new designs in the market. It is able to spot emerging fashion trends in the industry and quickly react to the customer’s demand and introduce them to the market in the shortest time possible. Communication between the store’s manager and the designers helps in implementing the modification of any design before a sales batch is released. This makes sure that the chain releases only what is preferred by the customers.

Zara pegs its success in the retail chain in the way it organizes the production and selling of its merchandise. It has a strongly controlled demand-led strategy in that it attunes to design and production to the consumer demand. It has a consumer-led production style. The vertically integrated supply chain is vital in ensuring that its product hits the market immediately after it is produced and the comments of the consumers are immediately given back to the designers who make the necessary changes. Zara has kept to the policy of design to the shelf which makes sure it designs what is seen and bought on the shelf.

Production

The production process is a key step in the chain’s supply process. The production process is important in inventory control. The chain controls the production process to ensure that what is released in the market is what the customers want. They require their fabrics to be delivered in four colors only. The process of dying and printing is done at the end of the manufacturing process. This ensures that they are printed and dyed according to customers’ demands. It helps in reducing waste and also minimizes the stocking up of unsold inventories.

The chain has automated its production plants which make sure that its shelves do not run out of products. Automation of the production plants was is perhaps one of the factors that led to the rapid success of the chain. It has an efficient production system that links the design and supply chains.

Distribution Process

Zara has banked on one of the cornerstones of an efficient supply model in order to feed its retail outlets. It has shortened the supply chain in order to reduce cost and in the process enhance more profit. This enables the chain to introduce more than 11,000 new designs in the market every year far beyond the capacity of its competitors.

According to Capacino and Anderson (2005), Zara has a distribution model built on the demand chain. Its distribution process is guided by the customer’s demand due to the strong links it creates with the consumers on the ground and the designers. The fame of the store comes from its efficient distribution model which shortens the lead-time between the designing of the clothes and the placement of the clothes in the stores.

With a lead time of less than 3 to 4 weeks, the chain becomes the most efficient in the world in terms of distribution of its products to the consumers. Although it has many outlets in the world, Zara has kept its production stores in Europe from where it distributes are products to the rest of the world. It has amazed many how the chain is able to sell 85 percent of all its products at full price.

The supply process is enabled by airlifting of the finished clothes to the retail centers. This helps to shorten the time between production and availability of clothes in the stores. It is good to understand that due to limited stockpile over in the production plants, the outlet chains can easily run out of clothes supply with an inefficient supply mechanism. This is why the chain prefers to airlift the finished product to make sure that its shelves are always stocked.

Zara ensures that it has twice delivery per week from the factories. This limits the need for warehouse space and inventory. It also ensures that new styles hit the rack which reduces the risks of markdown sales and stock-outs.

The supply chain is such that Zara minimizes the number of products it outsources less and less of its clothes from other manufacturers. Many other fashion shops outsource for more than 90% of their stock in a bid to reduce production costs. On the other hand, Zara ensures that it covers about 40 percent of its stock from its own factories and outsources for the rest 60 percent of the stock from other manufacturers to have varieties in the stores.

References

Avanzo, R. & Lewinski, H. (2003): The link between supply chain and financial performance. Supply Chain Management Review. Stanford University.

Andrew, M., Sjoman, A. & Dessain, V. (2004): Zara: IT for Fast Fashion. A field case study, LACC Case.

Bovet, D. & Martha, J. (2005): Value Nets: Breaking the supply chain to unlock hidden profits. Harvard University Press.

Capacino, W. C. & Anderson, L. D. (2005): A Global study of supply chain leadership and its impact on business performance. Stanford University.

Zara SM. (2008): Directory Articles. Web.