zara logistics case study

ZARA Logistics System & Transportation Strategy

Want to know more about ZARA logistics system? This ZARA transportation strategy case study analyzes the issue and contains recommendations for ZARA supply chain.

Executive Summary

Introduction, zara logistics system & practices.

• Evaluation of Web-Based Processes
• SCM Implementation Plan
• Recommendations

Works Cited

ZARA has been known as the most successful retailer of fashionable clothes at moderate prices. Its unique strategies of vertically integrated system of supply chain allow to produce cheap but fashionable garment within a short period.

In contrast to other retail manufacturers, their logistics system is much more effective because it meets the changing consumer demands. In addition, the company attains much importance to the development of sophisticated IT systems ensuring effective communication and information flow throughout the chains of the network.

Despite the successful growth and increased competitive advantage, ZARA supply chain management still has a number of limitations. These drawbacks are specifically connected with vertical orientations, geographically oriented demands, and high-level transportation costs. A careful re-organization of company managerial systems can be the best solution for effective handling of logistics and data exchange, as well as for increasing the company’s sustainability.

Specifically, the creation of the second center can solve several problems on the spot – eliminate problems with transportation, improve customer demand, and reduce the risk of overproduction. Finally, the integration of the web-based supply management to the North American region can also be advantageous for the company’s profitability and performance. The transportation system, distribution lines, and modes of productions will be greatly optimized.

Purpose of the Paper

The primary goal of the project is to provide an analysis of ZARA’s logistics process to identify the weaknesses and suggest corresponding improvements. The report, therefore, will provide information about the past and current practices of the company’s supply chain management to highlight the differences and track the existing inconsistencies.

A careful analysis of inbound and outbound logistics, as well as understanding the role of the information flow within the organization will also contribute to providing viable solutions and recommendations to the company’s strategies in the field of supply chain management.

Background Information about ZARA

ZARA is a Spanish fashion clothing and accessories chain of stores that was originally based in Arteixo, Galicia. It was organized as the joint venture of the Inditex group and as a new holding company in 1975 (About ZARA, n. p.). Since 1976, the Spanish network of stores has been expanded in a great number of cities all over the world. Its main concept consists in spreading a single fashion culture outside the national frontiers.

In addition, the venture owns such famous brands as Pull and Bear, Stradivarius, Massimo Dutti, and Bershka (About ZARA, n. p). ZARA has introduced the new trend of distributing fast fashion production to the developing countries. This unconventional strategy is also emphasized by a zero advertising policy to invest more moneys in creating new stores in different countries.

ZARA Supply Chain: the History

The company was founded by Ortega Gaona who has introduced an alternative outlook on the concept of clothes that should be consumed quickly rather than held in cupboard. The company has become the leading brand of the Inditex group due to its exclusive strategies and marketing concepts.

In 1975, ZARA began selling the clothes in the native city (Dutta 2). Later, the popularity of brand was spread to other cities and neighboring countries. The major marketing concept, therefore, consisted in distributing democratized fashion to masses. Because the marketing strategy was successful, the network of chains appeared in such leading cities as New York, London, Rome, and Paris.

The main scope of the company’s supply chain management lies in distributing a cheap but fashionable garment within 2 weeks. In order to meet the deadlines, garment is produced in limited supplies, which also enhances the concept of exclusivity. Hence, the retail concept is based on rapid replenishment and regular creation of small amounts of new accessories and clothes.

Judging from this philosophy, the speed of manufacture is extremely high and, therefore, the effectiveness of the product distribution largely depends on the constant information exchange throughout each stage of the company’s supply chain (Ferdows et al. n. p.). ZARA’s managers realize that performance measures, office layouts, and operational procedures can be carried out properly in case the information transparency and quick data transmission is ensured.

Flow and Cycle Diagram Identifying the Flow of Materials, Money, and Product

The network’s supply management concept is closely connected with time-based competition allowing to source products at the international level. These factors contribute greatly to trades off that have been introduced in order to develop strong relationships with supply chain managers all over the world. In this respect, Zara also supports this concept, as presented in the flow diagram below:

Regarding the diagram, the process of supply starts with cross-functional teams cooperating with the company’s design department located in La Coruna. The team’s perception of the leading fashion trends is further directed by regular inflows of EPOS information from ZARA’s stores from all over the world (Dutta 3). Further, the marketing specialists proceed to consult the supplies concerning the prices, costs, and margins (Dutta 3).

In order to define the volume of the production and establish deadlines, a global sourcing policy provides a wide variety of fabric supplied from different countries. Such an approach significantly reduces the risk of delays because if one supplier is unavailable, there are many other fabric producers to rely on.

Hence, about 40 % of garments are imported whereas the rest is produced in Spain (Dutta 5). Further, the finished products are price-tagged and labeled in La Coruna, the company’s distribution center. The entire production cycle lasts two weeks to gain a time-based competitive advantage and surpass its North American and European rivals.

ZARA Transportation Strategy: Past Key Decisions

For the purpose of controlling the marketing costs, Zara prefers creating prime retail locations to spending money on advertising and attracting the buyers to their stores. As a result, the company spends about 0.3 % only for advertising campaigns instead of 3.5 % spent by its competitors (Dutta 6). Importantly, the company prioritizes the importance of choosing highly notable locations, which makes advertising unimportant.

Unlike other leading retailers located in North America and Europe, Zara’s managers do not outsource their production completely. On the contrary, they locate about 80 % of production in Europe, near the headquarters in Spain to take closer control of the facilities (Dutta 4). Such an approach provides a greater extent of flexibility and minimizes the risk of failure. In addition, the production of limited quantities also enhances the effectiveness of risk management, as well as speed up the supply chain process.

The inventory management is sufficiently ensured by effective IT solutions. At this point, the information and communication networks that the company uses produce cost advantages to operations and allow to follow the fundamental principle of reacting quickly to the shifts in demand.

In addition, success and flexibility allows the company’s managers to define quickly the deadlines of production due to short lead-time, variety of fashion trends, and limited supplies (Ferdows et al. n. p.). In whole, ZARA’s inventory model is based on three main pillars: inventory in store, warehouse inventory, and demand forecast that is closely controlled by the creative departments.

Transportation

Because ZARA is more inclined to use high technologies for transporting and distributing products, the matter of transportation is indispensible for carrying out two-week shipments to stores (Stewart 10). The fabrics and other materials are also quickly distributed because the supplying centers are located near the headquarters.

ZARA Supply Chain: Problems & Weaknesses

Despite the incredible results that ZARA retailer has achieved, it can face a number of challenges that can create serious problems. These limitations can be connected with just-in-time management, transportation system, excess emphasis on technologies, and inappropriate management of human resources (Gallagher 4).

In addition, the transportation process and shipment of materials within the regions can also undergo unforeseen complications in the form of natural disasters, whether, terrorism, political disturbances, or labor strife (Gallagher 6). The disconnection between the center and creative department can significantly halt the information exchange within the network throughout the globe.

Aside from the operation vulnerabilities, the challenges can also be connected with financial problems. In particular, due to the fact that the low-cost regions are supported either by dollar or by Euro, the currency fluctuations can negatively influence the cost management at ZARA.

Such a situation can lead to increase in profit margins and transportation costs. It should be stressed that a twice-weekly model of delivery is directly associated with the transportation costs and, therefore, the circumstance can become the key to ZARA’s failure to control costs (Gallagher 7).

Because the time is one of the core advantages of the company, it should take possible challenges into deeper consideration. The evaluation of rivals’ strategies is also crucial for predicting their further steps because more and more companies have been emulating the vertically integrated supply chain system introduced by ZARA.

Finally, apart from strict monitoring of consumer demands, the company’s managers should also take a closer look at the economic conditions (Dutta 3). Specific, the recession periods can make consumer buy less and shift a share of wallet to lower-cost offerings (Gallagher 6). In order to eliminate the emerged threats, the firm should conduct an in-depth analysis of future marketing opportunities.

ZARA Supply Chain: Evaluation of Web-Based Processes

Existing web-based supply chain systems and processes related to electronic data interchange.

As it has been presented above, ZARA has successfully implemented a quick response program ensuring effective production and distribution of products. Hence, excess inventory and overproduction have been incorporated into the idea of customized retailing through a vertically integrated channel (Cheng and Choi 13).

In order to monitor all stages of supply, effective informational technologies and web-based supply chains should be introduced (See Appendix 1). In order to ensure quick information flow, Electronic Data Interchange (EDI) is crucial for Quick Response program being a fundament technology for processing the received data between the distributors and manufactures (Leeman 142). More importantly, the technology has been the core factor enabling technology for replenishment and efficient coordination of a supply chain process.

Provided by ERP system, this mechanism is indispensable to handling distribution and logistics processes. In addition, the information flow process is significantly enhanced through the introduction of intranet communication. The company’s intranet is necessary for a holistic evaluation of the incoming suggestions concerning the product design and price (Leeman 143). As a result, the firm designs about 10 thousand items annually.

Assistance of Web-Based Technologies in Integration and Collaboration Processes

Effective information exchange is the main condition for implementing collaborative and integrative practices. In contrast to the traditional ordering process, ZARA retailers provide the producers with all necessary information that is impossible to handle manually (Schneider 240). Second, using intranet networks enables constant flow of information and allows ZARA to eliminate the threat of overproduction.

Importantly, the integration between business activities contributes to developing information distribution leading to a tangible increase in performance and productivity. Due to the fact that the primary goal of an ERP system consists in integrating information and activities from diverse functional departments of a company, the introduction of workflow information systems can improve the data exchange and provide transparency and accuracy of communication (Dutta 7).

At this point, vertically integrated types of supply chain management require technologies that can embrace information from operational applications. In order to meet the challenges of remote data processing, the company can introduce technological systems combining the analysis of both external and internal data.

ZARA Logistics: Recommendations & Implementation Plan

Strategies for four key decision areas of supply chain.

The introduction of another distribution center can eliminate possible risks that a vertical integration system of supply presents. In order to sustain a competitive advantage and growth, ZARA should seek alternative opportunities for the global expansion in the apparel market.

In this respect, the company should develop another distribution center in the United States to diminish the logistics level and deliver fashionable clothes in a timely manner. At this point, it is possible to develop smaller distribution centers located in Brazil, Argentina, or Mexico, which enhances the possibility of meeting the demands of the American customers.

The production process can be significantly fostered through investment in Internet retailing directed toward the American market. Online marketing strategy can advance the expansion process to the U. S. market. In addition, the company should also introduce specialize products with regard to various geographic locations.

Inventory system can be improved in case Electronic Data Exchange systems are introduced as powerful tools for integrating and collaborating the internal and external data obtained from stores, designers, and marketing specialists.

The existence of several retail centers can decrease the transportation costs because air shipments are much more expensive due to the rise of prices on fuel.

Functional Decisions Based on the Established Strategies

The presented strategies do not provide tangible shifts to the vertically integrated systems of the company’s supply chain. ZARA’s managers, therefore, only need to develop the second retailing center with similar structure. The existence of additional retailing department can deprive the headquarters of certain responsibilities and provide greater control of other regions.

The integration of IT systems will eliminate the problems of coordination between the two newly introduced centers. In addition, the re-organization process will touch on the design sphere because the American department will be specifically oriented on web-based supply chain process. Hence, part of responsibilities will be imposed on this department and, as result, there will be designers oriented on different geographical regions.

Rationale for the Identified Strategies

The development of the second retail center in the American region can enable the international company to foster the policy of global expansion. What is more important, the company can create a solid platform for controlling the financial and economic conditions in the world.

As per the production process strategies, U. S. consumers are most likely to buy goods without going outside because they feel more comfortable while having more time to select a product. Further, culturally and socially oriented policy of manufacturing can have a potent impact on the increase in consumer demand. Finally, the transportation and inventory can also be improved with the integration of effective ERP systems enhanced by Electronic Data Exchange systems.

Recommendations for ZARA Supply Chain

Excessive emphasis on vertical integration system can create a threat to the effectiveness of global expansion of the world-known retailer. In this respect, ZARA should develop several other creative departments that would control certain regions.

The re-organization, therefore, can greatly increase the customer demands because the department will be specifically oriented on a particular cultural group. Hence, the centers can be coordinated by means of EDI mechanisms integrated by ERP systems that provide greater control and increase the production volumes all over the world. In whole, such a strategy enhances ZARA’s competitive advantage.

“ About ZARA ”. ZARA. 2011. Web.

Cheng, T. C. Edwin, and Tsan-Ming Choi. Innovative Quick Response Programs in Logistics and Supply Management . UK: Springer, 2010. Print.

Dutta, Devangsgu. Retail: The Speed of Fashion . 2002. Web.

Ferdows, Kasra, Michael A. Levis, and Jose A. D. Machura. “ Zara’s Secret for Fast Fashion ”. HBS Working Knowledge. 2002. Web.

Gallagher, John. “ ZARA Case: Fast Fashion from Savvy Systems ”. Gallaugher.com. 2008. Web.

Leeman, Joris. Supply Chain Man agement. US: Books on Demand, 2010. Print.

Schneider, Gary. Electronic Commerce. New York. Cengage Learning, 2010, Print.

Stewart, Thomas A. “Bound To Fail, Or Set Up To Succeed?.” Harvard Business Review Nov. 2004: 10.

Appendix 1: Vertical Supply Chain

• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2024, March 26). ZARA Logistics System & Transportation Strategy. https://ivypanda.com/essays/zara-analysis-of-logistics-systems-report/

"ZARA Logistics System & Transportation Strategy." IvyPanda , 26 Mar. 2024, ivypanda.com/essays/zara-analysis-of-logistics-systems-report/.

IvyPanda . (2024) 'ZARA Logistics System & Transportation Strategy'. 26 March.

IvyPanda . 2024. "ZARA Logistics System & Transportation Strategy." March 26, 2024. https://ivypanda.com/essays/zara-analysis-of-logistics-systems-report/.

1. IvyPanda . "ZARA Logistics System & Transportation Strategy." March 26, 2024. https://ivypanda.com/essays/zara-analysis-of-logistics-systems-report/.

Bibliography

IvyPanda . "ZARA Logistics System & Transportation Strategy." March 26, 2024. https://ivypanda.com/essays/zara-analysis-of-logistics-systems-report/.

• Zara apparel fashion Store
• Zara Business External Factors
• Case: Operations at Zara
• Key Elements of Zara Company’s Business Model
• Zara Supply Chain Management
• Zara Company's Competitive Edge and Entry into Japan
• Zara Value Chain Improving Responsibility
• Zara Company's Business Model
• Pricing Strategies of Zara
• Zara Company's Supply Chain Strategies
• Service Operations Analysis of Toyota Motor Corporation
• Company Analysis: AGL Energy’s Risk Management with Reference to ISO 31000
• Internal Analysis of the Kraft Foods Group
• SWOT Analysis of Amazon
• Saudi Arabia Public Transport Company

• Skip to primary navigation
• Skip to main content
• Skip to primary sidebar
• Skip to footer

Supply Chain Management Design & Simulation Online

Zara Clothing Company Supply Chain

January 4, 2020 By mhugos

CASE STUDY CONCEPT: The Zara supply chain drives its successful business model. Run simulations of the Zara supply chain to see how it works, and how to improve it.

Zara changes its clothing designs every two weeks on average, while competitors change their designs every two or three months. It carries about 11,000 distinct items per year in thousands of stores worldwide compared to competitors that carry 2,000 to 4,000 items per year in their stores. Zara’s highly responsive supply chain is central to its business success. The heart of the Zara supply chain is a huge, highly automated distribution center (DC) called “The Cube”. The screenshot below shows a closeup satellite view of this facility.

The company was founded in Spain in 1974 by Amancio Ortega and his wife Rosalía Mera. It is the flagship business unit of a holding company called Inditex Corporation with headquarters in Arteixo, Galicia, a city in northwestern Spain near where Mr. Ortega was born. In 2020 Zara was ranked as the 41st most valuable brand in the world by Forbes (see bibliography below).

NOTE: This is an advanced case . Work through the three challenges of the beginning case, “ Cincinnati Seasonings ” before taking on the challenges in this case.

[ Instructors, students and professionals can request a  free SCM Globe trial demo ]

Company Business Model

Agents for the company are always scouting out new fashion trends at clubs and social gatherings. When they see inspiring examples they quickly send design sketches to the garment designers at the Cube. New items can be designed and out to the stores in 4 – 6 weeks, and existing items can be modified in 2 weeks.

The company’s core market is women 24 – 35 years old. They reach this market by locating their stores in town centers and places with high concentrations of women in this age range. Short production runs create scarcity of given designs and that generates a sense of urgency and reason to buy while supplies last. As a consequence, Zara does not have lots of excess inventory, nor does it need to do big mark-downs on its clothing items.

Zara has 12 inventory turns per year compared to 3 – 4 per year for competitors. Stores place orders twice a week and this drives factory scheduling. Such short term focused order cycles make forecasts very accurate, much more accurate than competitors who may order every two weeks or every month.

Clothing items are priced based on market demand, not on cost of manufacture. The short lead times for delivery of unique fashion items combined with short production runs enable Zara to offer customers more styles and choices, and yet still create a sense of urgency to buy because items often sell out quickly. And that particular item or style may not be available again after it sells out. Zara sells 85 percent of its items at full price compared to the industry average of selling only 60 percent of items at full price. Annually there is 10 percent of inventory unsold compared to industry averages of 17 – 20 percent.

In Spain customers visit Zara stores 17 times per year on average compared to 3 times per year for competitors. Because their clothing designs change often, it is harder for people to see them clearly online. So they are encouraged to come into the stores instead and try on the unique fashions that Zara offers (screenshot below shows people at a Zara store in Madrid, Spain).

Zara spends its money on opening and growing its stores instead of spending a lot on ad campaigns. Estimates vary on the number of Zara stores worldwide. An article in the New York Times Magazine (November 2012, “ How Zara Grew into the World’s Largest Fashion Retailer “), placed the store count at around 5,900. An article in Forbes simply states there are “more nearly 3,000 stores” (2020, “ The World’s Most Valuable Brands – #41 Zara “). Annual sales for 2019 were estimated by Forbes to be $21.9 billion . The holding company, Inditex SA, is a public company and Inditex provides annual statements , but it does not break out Zara sales from sales of the other brands owned by Inditex (Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe). Zara uses a flexible business model where its stores can be owned, franchised, or co-owned with partners. So it is not always possible to find exact numbers for Zara’s business operations and finances.

Manufacturing and Supply Chain Operations Make Zara Unique

Zara buys large quantities of only a few types of fabric (just four or five types, but they can change from year to year), and does the garment design and related cutting and dyeing in-house. This way fabric manufacturers can make quick deliveries of bulk quantities of fabric directly to the Zara DC – the Cube. The company purchases raw fabric from suppliers in Italy, Spain, Portugal and Greece. And those suppliers deliver within 5 days of orders being placed. Inbound logistics from suppliers are mostly by truck.

The Cube is 464,500 square meters (5 million square feet), and highly automated with underground monorail links to 11 Zara-owned clothing factories within a 16 km (10 mile ) radius of the Cube. All raw materials pass through the Cube on their way to the clothing factories, and all finished goods also pass through on their way out to the stores. The diagram below illustrates Zara’s supply chain model.

Zara’s factories can quickly increase and decrease production rates, so there is less inventory in the supply chain and less need to finance that inventory with working capital. They do only 50 – 60 percent of their manufacturing in advance versus the 80 – 90 percent done by competitors. Zara does not need to place big bets on yearly fashion trends. They can make many smaller bets on short term trends that are easier to call correctly.

The Zara factories are connected to the Cube by underground tunnels with high speed monorails (about 200 kilometers or 124 miles of rails) to move cut fabric to these factories for dyeing and assembly into clothing items. The monorail system then returns finished products to the Cube for shipment to stores. Here are some facts about the company’s manufacturing operations:

• Zara competes on flexibility and agility instead of low cost and cheap labor. They employ about 3,000 workers in manufacturing operations in Spain at an average cost of 11.00 euros per hour compared to average labor cost in Asia of about 0.80 euros per hour.
• Zara factories in Spain use flexible manufacturing systems for quick change over operations.
• 50% of all items are manufactured in Spain
• 26% in the rest of Europe
• 24% in Asia and Africa

The screenshot below illustrates how the Zara supply chain is organized. Manufacturing is centered in northwestern Spain where company headquarters and the Cube are located. But for their main distribution and logistics hub they chose a more centrally located facility. That facility is located in Zaragoza in a large logistics hub developed by the Spanish government. Raw material is sent by suppliers to Zara’s manufacturing center. Then finished garments leave the Cube and are transported to the Zara logistics hub in Zaragoza. And from there they are delivered to stores around the world by truck and by plane.

[ Instructors, students and professionals can request a  free SCM Globe trial demo — NOTE: This is an advanced case . Work through the three online challenges of the beginning case, “ Cincinnati Seasonings ” before working with this case. ]

Zara can deliver garments to stores worldwide in just a few days: China – 48 hrs; Europe – 24 hrs; Japan – 72 hrs; United States – 48 hrs. It uses trucks to deliver to stores in Europe and uses air freight to ship clothes to other markets. Zara can afford this increased shipping cost because it does not need to do much discounting of clothes and it also does not spend much money on advertising.

Zara’s Supply Chain is Lean and Agile

Stores take deliveries twice per week, and they can get ordered inventory often within two days after placing their orders. Items are shipped and arrive at stores already on hangers and with tags and prices on them. So items come off delivery trucks and go directly onto the sales floor. This makes it possible for store managers to order and receive the products customers want when they want them, week by week.

Zara stores respond practically in real-time as styles and customer preferences evolve. It is a great business model for success in the high-change and hard to predict fashion industry. It means about half of the clothing the company sells, which includes most of its high margin and unique fashion items (but not its lower margin basic items), is manufactured based on highly accurate, short-term (2 – 6 week) demand forecasts. Because this business model tracks so closely to real customer demand from one month to the next, it frees the company to a large degree from getting caught in cyclical market ups and downs that ensnare its competitors (those cycles are driven by boom-to-bust gyrations generated by the bullwhip effect ). Turbulence in the global economy since 2008 has hurt sales at many competing fashion retailers, but Zara has seen steady, profitable growth during this time.

[ Editor’s Note: During 2020 Inditex, owner of Zara and other fashion brands closed more than 1,000 stores worldwide in response to the Covid pandemic and increased its focus on online sales. Then in 2021 store business rebounded and surpassed pre-pandemic levels .  Can you think of some ways these changes in Zara’s business model affected Zara’s supply chain? ]

A fast-moving and finely tuned supply chain like Zara’s requires constant attention to keep it running smoothly. Supply chain planners and managers are always watching customer demand and making adjustments to manufacturing and supply chain operations. The screenshot below shows the result of one simulation using the supply chain model outlined above. Continuous adjustments need to be made to factory production rates, vehicles, delivery routes, and schedules to keep this supply chain working well.

Zara is a clothing and fashion retailer that uses its supply chain to significantly change the way it operates in a very traditional industry. No other competitor can copy its business model until it first copies its supply chain. And since supply chains are composed of people, process, and technology, even the latest and greatest technology is not a competitive advantage all by itself. People must be well trained, and processes must be put in place that enable people to apply their training and their technology to best effect.

Buying technology similar to that used by Zara is easy. But for the technology to be used effectively, competitors must learn about the mental models and the operating procedures used by Zara. Good mental models enable people to understand the potentials and see the opportunities that a real-time supply chain offers. Effective operating procedures enable people to act on what they see and capitalize on the competitive advantages their technology gives them.

Zara has spent more than 30 years building its unique real-time supply chain and training its people. So competitors have a lot of learning to do to create the mental models, and roll out the operating procedures needed to do what Zara does so well.

[ See our blog article “ Five New Supply Chain Technologies and How to Use Them ” for more about new technologies and how they can be used to improve supply chain operations and create competitive advantages for companies .]

YOUR FIRST SUPPLY CHAIN CHALLENGE  

Get this supply chain to run for 15+ days and keep inventory and operating costs as low as you can.  

Imagine you are in charge of Zara’s supply chain operations. This case study and supply chain simulation will give you an appreciation of what that job is like. In this exercise your mental model of Zara’s supply chain will expand and your understanding of how this supply chain works will deepen. You will see the continuous adjustments that need to be made to keep the supply chain working and to keep operating expenses and inventory levels under control.

Load a copy of the Zara supply chain model from the online library into your account. Then start running simulations to see how the supply chain works. Start by doing whatever seems necessary to keep the supply chain running without stock-outs or over-stocks for 15 days. When you run the first simulation you will see a problem occurs on day 5. As with all cases, there are many possible ways to respond to this problem. And depending on how you respond, other problems will appear as you work toward getting your supply chain to run for 15 days. Do whatever seems necessary to get the supply chain to run for 15 days. Then refine your solutions to get the supply chain to run at lower costs in transportation, facility operations and on-hand inventory across the supply chain.

Its agile and responsive supply chain enables Zara to work on a short sales and operations planning (S&OP) cycle. Let’s assume Zara works on a 15 day cycle where its competitors work on 30-day or even 60-day planning cycles. So you are creating a 15-day supply plan to meet the 15-day demand plan which is already entered into the model in the form of product demand at the different stores. To get this supply chain to meet demand and run for 15+ days you need to make adjustments to elements of your supply plan:

• Store delivery amounts and frequencies
• Delivery amounts and frequencies on air freight routes
• Product manufacturing rates at Zara clothing factories
• Movement of products between Zara Cube, Zara factories, and Logistics Hub in Zaragoza
• Supplier delivery amounts and frequencies for delivering bulk fabric to the Cube

The screenshot below shows a closeup of the Zara Logistics Hub in Zaragoza, Spain. Product deliveries are made to stores by airplane and truck from this facility every day.

When you have questions about how to work with this case, the answer is always to ask yourself, “What would I do if this were the real world and I was the person in charge?” Model and simulate different ideas. Make reasonable assumptions and estimates. Then add/change/delete products, facilities, vehicles and routes as called for in your supply chain model to reflect your ideas. When you run simulations you will see how well different ideas work. Go with the ideas that work best to find the solutions you need.

Look in the online guide for useful tips and techniques that will help as you work with this case. Here are some places to look:

• Analyzing Simulation Data
• Tips for Building Supply Chain Models
• Cutting Inventory and Operating Costs

ZARA SUPPLY CHAIN REPORTING TEMPLATE: Import your simulation data into this template to create 15-DAY P&L REPORTS and key performance indicators.  Zara’s agile supply chain enables it to use shorter planning cycles (15-days instead of 30-days). The reporting template is designed for use with the supply chain model in the online library titled “Zara Clothing Company Ver4”.  If you add more products, facilities, or vehicles to the model you will need to expand the spreadsheet to accommodate those additions. A sample P&L report created from simulation data is shown below: D ownload a copy of the Zara Clothing Company P&L Reporting Template here

[ If you are using SCM Globe Professional version, these reports can be generated automatically by clicking on the “ Generate P&L Report ” button on the Simulate Screen ]

CREATE AN EXECUTIVE BRIEFING — a 3 to 5 page report or a short deck of presentation slides. Use screenshots and data produced by simulations to illustrate what you learned about how the Zara supply chain operates. Explain what were the main problems you encountered in getting your simulation to run for 15+ days. Show what you did to address those problems. Present the three or four main things you learned about this supply chain. Explain why these things make this supply chain such a competitive advantage for Zara.

SAVE BACKUP COPIES  of your supply chain model from time to time as you make changes.  Click “Save” button  next to your model in  Account Management  screen. There is no “undo”, but if a change doesn’t work out, you can  restore from a saved copy . And sometimes supply chain model files (json files) become damaged and they no longer work, so you want backup copies of your supply chain to restore from when that happens.

NOTE : An earlier bug that displayed some routes times and distances as ONE-WAY has been fixed. All routes now show  ROUND-TRIP times and distances. Simulations use ROUND-TRIP times and distances.

YOUR SECOND CHALLENGE  

Expand this supply chain to support more stores, and keep inventory and operating costs under control.

Do some research on store rental costs, labor rates, transportation costs and product demand in different markets, then use your research to update and expand your model of Zara’s supply chain:

• Go to websites of commercial real estate brokers in cities of interest and see what you can find out about rents (for cities in North America start with www.cityfeet.com and for cities in other parts of the world start with www.knightfrank.com ).
• Research salary levels and median incomes in different cities. New stores open in cities with median incomes high enough to be profitable markets for Zara. Store rent and operating costs will also be set by market rates in those cities.
• Go to 3PL and logistics services company websites to find out about transportation costs. Assume air freight rates from Zaragoza remain the same to any city, but truck transportation costs will be different in different cities.
• Consider subdividing the two high level product categories (Zara Basics Pack, Zara Fashion Pack) into lower level product categories to get more insight and into how this supply chain operates. What are some lower level product categories that make up the Fashion Pack, or the Basics Pack?
• Do searches to find fashion industry demand forecasts for clothing in different cities around the world. Use that research to set the product demand levels in the new stores. You can also update product demand levels at existing stores based on this research.
• You can measure the carbon footprint of different supply chain designs. There are default estimates of carbon generation already entered for facilities and vehicles, and the simulations use this to calculate the supply chain carbon footprint. You can enter your own estimates for carbon generation for the facilities and vehicles if you wish.

Do the best you can with the time available! — Do internet searches on relevant key words and phrases. See what comes up, and select sources that seem the most trustworthy and accurate (that’s what we did for this case study; our assumptions and sources are listed below). If you can’t find the exact numbers you are looking for, then estimate numbers you need based on other numbers you find in your research (please read “ All Supply Chain Models are Approximations “). Do not spend more than your allocated time doing research. As the saying goes, “Good is good enough.” Document your sources; make your best estimates; and move on.

Update and expand the Zara supply chain model using your research data.   Update product prices and demand at the existing stores based on your research. Also experiment with adding new stores in other cities in Europe, Asia, North America, South America or Africa (represent all stores in a single city with just one or two stores and keep the total number of facilities in your model to between 15 – 20).

For added realism see how stores in New York and Shanghai are located in the existing supply chain model in the SCM Globe library. Stores can be on actual Zara store locations or can be placed in the middle of a cluster of actual Zara stores. Enter the collective demand, costs and on-hand inventory for all actual stores represented by a single store in your model.

Note in the existing model how flights from the logistics hub in Spain land at nearby airports for stores in New York and Shanghai, then delivery trucks move garments from those airports to the stores as shown in the screenshot above. Use this same approach as you expand into other countries outside of Europe. Add new vehicles and create delivery routes for them to deliver products to the new stores. This adds an extra layer of realism and shows how dependent this supply chain is on tight scheduling and just-in-time (JIT) delivery of products.

Adjust your supply chain model to support these new stores and still run for 15+ days . Once you get it running for 15+ days, then make adjustments to your model to lower transportation and operating costs and on-hand inventory amounts.

CREATE A FINAL PRESENTATION showing your expanded supply chain model and describing the supply chain challenges you encountered. Explain why successful solutions to those challenges provides such a competitive advantage for Zara.

• Explain the supply chain principles and best practices you used to solve the challenges you encountered. What were your biggest challenges and how did you solve them?
• Identify places in your expanded supply chain model (facilities, vehicles and routes) where you used new technology such as that explained in the blog article “ Five New Supply Chain Technologies and How to Use Them “. How do these technologies produce the performance capabilities you show  in your simulation results?
• Show how a supply chain with these capabilities makes it possible for Zara to use its fast fashion business model. If Zara competitors were to emulate Zara’s business model, what supply chain capabilities would they need?
• What can you do to lower the carbon footprint of your supply chain?
• Use screenshots and data from your simulations to illustrate your report.

NOTE: This is an ADVANCED LEVEL case study – work through a beginning level case such as Cincinnati Seasonings before attempting to work with this case.

Working on this case will be challenging… but the skills and insights you develop here will be the same skills and insights you use to manage a real supply chain like Zara’s.

FIND USEFUL IDEAS in the Online Guide to help you expand and improve your Zara supply chain model. There is a lot going on in this case so check out these ideas:

• See techniques for expanding this supply chain model in “ Tips for Building Supply Chain Models ”
• Reduce on-hand inventory and calculate optimum delivery amounts and schedules in “ Cutting Inventory and Operating Costs “
• Make sure you are familiar with the techniques presented in “ Analyzing Simulation Data “
• Consider using the S&OP process as a framework to organize your work , S&OP is explained in a case called “ Java Furniture Company ” — scroll down to the heading “ Sales & Operations Planning (S&OP) is a Best Practice “
• If you use same size shipping containers for all your products, the beta test reporting template can help identify opportunities to improve performance, see “ Supply Chain Optimizing & Reporting Template “
• Look through the Table of Contents of the Online Guide to find other useful information

ZARA SUPPLY CHAIN REPORTING TEMPLATE: Import your simulation data into this template to create 15-DAY P&L REPORTS and key performance indicators.  D ownload a copy of the Zara Clothing Company P&L Reporting Template here

To share your changes and improvements to this model (json file) with other SCM Globe users see “ Download and Share Supply Chain Models ”

Assumptions and Simplifications Used in this Model

Because Zara operations and financial reporting is combined with the other retail brands owned by Inditex, specific details of the Zara business model and supply chain can be difficult to verify. Yet the supply chain model presented here is still a useful picture of the Zara supply chain and illustrates its operations and its capabilities (see more about this in “ Supply Chain Modeling and Simulation Logic “). This case study and supply chain model is based on data from articles listed in the bibliography below. The assumptions and specifications listed here are built into the model, and you can easily change them as better data becomes available . New products, facilities, vehicles and routes can also be added to this model to further explore how Zara’s supply chain operates.

• Zara finished goods garments are combined into two categories of products, Zara Fashion Pack represents in-house manufactured high fashion items, Zara Basics Pack represents basic items contract manufactured by others
• Zara Fashion Pack = 100 garments; price of 5,000 euros; weight of 40 Kg; volume of 1 cubic meter;
• Zara Basics Pack = 200 garments; price of 3,000 euros; weight of 60 Kg; volume of 0.5 cubic meters
• The Cube employs 3,000 people at average rate of 8 euros per hour = 64 euros per day
• Automated warehouse in Zaragoza employs 800 people at avg of 64 euros per day and other facility operating costs for utilities, insurance, etc. cost additional 15,000 euros daily
• Raw fabric costs per case: Fabric 1 = 1 cubic meter; price of 1,000 euros; Fabric 2 = 0.5 cubic meter; price of 800 euros; Fabric 3 = 0.6 cubic meter, price of 1,200 euros
• Zara factories need mix of raw fabrics to create their finished goods; see the definition of these facilities to see individual requirements and production
• The Cube has 1.6 million cubic meters of product storage space
• 150 million items pass through Cube annually or 411,000 per day
• 11 actual Zara factories are represented by 5 factories in the model
• Monorail shipping containers are 50 cubic meters in volume, can carry 10,000 kilograms of weight, and travel at average speed including loading and unloading of 60 kilometers per hour
• Zara stores in a single city are represented by a single store that combines the demand of all stores in that city – not all cities are included and more cities can be added to this model
• Vehicle operating costs per km are set to be just half the normal cost for trucks and airplanes. This more accurately models the process where Zara pays for one-way shipping containers to move products from one facility to another without paying the full round-trip cost (carbon per km was also adjusted to half of normal for the same reason). This compensates for the model logic which calculates vehicle costs based on the round trip distance instead of the one-way distance.
• Full operating cost per km is used for the monorail vehicles that move products between the Cube DC and the Zara garment factories because Zara owns those vehicles and pays for full round-trip costs.
• All specifications for Products, Facilities, Vehicles and Routes in this supply chain model can be edited and changed if you have better data
• New products, facilities, vehicles and routes can be added to this model and you can simulate the results as you expand your model

Bibliography: 

A web search on “Zara supply chain” will yield many results; this case study is based on information from some of those results listed below:

The World’s Most Valuable Brands – #41 Zara   A ranking and brief profile of the 100 most valuable and recognized brand name companies – Forbes, 2020

We went inside one of the sprawling factories where Zara makes its clothes https://www.businessinsider.nl/how-zara-makes-its-clothes-2018-10?international=true&r=US – By Mary Hanbury, Business Insider, 2018

Zara Uses Supply Chain to Win Again In face of flat or declining retail industry sales, Zara stands out – By Kevin O’Marah – Forbes, 9 Mar 2016

Zara’s Fast Fashion Edge Speed and responsiveness to customer demand drives Zara’s business model – By Susan Berfield and Manuel Baigorri – Bloomberg Business, 14 Nov 2013

How Zara Grew Into the World’s Largest Fashion Retailer History and business model of Zara – By Suzy Hansen, The New York Times Magazine, 9 Nov 2012

Logistics Clustering for Competitive Advantage Zara’s global logistics hub outside Spanish city of Zaragoza  –  By Yossi Sheffi, Dir MIT Center for Transportation & Logistics, CSCMPs Supply Chain Quarterly, Quarter 3 2012

Polka Dots Are In? Polka Dots It Is! How Zara gets fresh styles to stores insanely fast—within weeks. – By Seth Stevenson – Slate.com, 21 Jun 2012

We found the following slide presentations were also informative:

Register on  SCM Globe  to gain access  to this and  other supply chain simulations . Click the blue “ Register ” button on the app login page , and buy an account with a credit card (unless you have an account already). Scan the “ Getting Started ” section, and you are ready to start. Go to the SCM Globe library and click the “Import” button next to this or any other supply chain model.

How Zara’s strategy made her the queen of fast fashion

Table of contents, here’s what you’ll learn from zara's strategy study:.

• How to come up with disruptive ideas for your industry.
• How finding the right people is more important than developing the best strategy.
• How best to address the sustainability question.

Zara is a privately held multinational clothing retail chain with a focus on fast fashion. It was founded by Amancio Ortega in 1975 and it’s the largest company of the Inditex group.

Amancio Ortega was Inditex’s Chairman until 2011 and Zara’s CEO until 2005. The current CEO of Zara is Óscar García Maceiras and Marta Ortega Pérez, daughter of the founder, is the current Chairwoman of Inditex.

Zara's market share and key statistics:

• Brand value of $25,4 billion in 2022
• Net sales of $19,6 billion in 2021
• 1,939 stores worldwide in 2021
• Over 4 billion annual visits to its website
• Inditex employee count of 165,042 in 2021

{{cta('ba277e9c-bdee-47b7-859b-a090f03f4b33')}}

Humble beginnings: How did Zara start?

Most people date Zara’s birth to 1975, when Amancio Ortega and Rosalia Mera, his then-wife, opened the first shop. But, it’s impossible to study the company’s first steps, its initial competitive advantage, and strategic approach by starting at that point in time.

When the first Zara shop opened, Amancio Ortega already had 22 years of industry experience, ten years as a clever and hard-working employee, and 12 years as a business owner. Rosalia Mera also had 20 years of industry experience.

As an employee , Ortega worked in the clothing industry, first as a gofer and then as a delivery boy. He quickly demonstrated great talent for recognizing fabrics, understanding and serving customers, and making sound business suggestions. Soon, he decided to use his insights to develop his own business instead of his boss’s.

As a business owner , he started  GOA Confecciones  in 1963, along with his siblings, his wife, and a close friend. They started with a humble workshop making women’s quilted dressing gowns, following a trend at the time Amancio had noticed. Within ten years, that workshop had grown to support a workforce of 500 people.

And then, the couple opened the first Zara shop.

Zara’s competitive positioning strategy in its first year

The opening of the first Zara shop in 1975 wasn’t just a new store to sell clothes. It was the final big move of a carefully planned vertical integration strategy.

To understand how the  strategy was formulated , we need to understand Amancio’s first steps. His first business, GOA Confecciones, was a manufacturing business. He was supplying small stores and businesses with his products, and he wasn’t in contact with the end customer.

That brought two challenges:

• A lack of insight into market trends and no direct consumer feedback about preferences.
• Very low-profit margins compared to the 70-80% profit margin of retailers.

Amancio developed several ideas to improve distribution and get a direct relationship with the final purchaser. And he was always updating his factories with the latest technological advancements to offer the highest quality of products at the lowest possible price. But he was missing one essential part to reap the benefits of his distribution practices:  a store .

So, in 1972 he opened one under the brand name  Sprint . An experiment that quickly proved unsuccessful and, seven years later, was shut down. Although it’s unknown the extent to which Amancio put his ideas to the test, Sprint was a private masterclass in the retail world that gave Amancio insights that would later turn Zara into a global success.

Despite Sprint’s failure, Amancio didn’t abandon the idea of opening his own store mainly because he believed that his advanced production model was vulnerable and the rise of a competitor who could replicate and improve his system was imminent.

Adding a store to his vertical integration strategy would have a twofold effect:

• The store would operate as a direct feedback source. The company would be able to test design ideas before going into mass production while simultaneously getting an accurate pulse of the needs, tastes, and fancies of the customers. The store would simultaneously reduce risk and increase opportunity spotting.
• The company would have reduced operating costs as a retailer. Since the group would control all aspects of the process (from manufacturing to distribution to selling), it would solve key retail challenges with stocking. The savings would then be passed on to the customer. The store would have an operational competitive advantage and become a potential cash cow for the company.

The idea was to claim his spot in prime commercial areas (a core and persistent strategic move for Zara) and target the rising middle class. The market conditions were tough, though, with many family-owned businesses losing their customer base, giant players owning a huge market share, and Benetton’s franchising shops stealing great shop locations and competent potential managers.

So the first Zara store had these defining characteristics that made it the successful final piece of Amancio’s strategy:

• It was located near the factory = delivery of products was optimized
• It was in the city’s commercial heart = more expensive, but with access to affluence
• It was located in the city where Ortegas had the most customer experience = knowing thy customer
• It was visibly attractive = expensive, but a great marketing trick

Amancio’s team lacked experience and expertise in one key factor:  display window designing . The display window was a massive differentiator and had to be bold and attractive. So, Amancio hired Jordi Bernadó, a designer with innovative ideas whose work transformed display windows and the sales process.

The Zara shop was a success, laying the foundations for the international expansion of the Inditex group.

Key Takeaway #1: Challenge your industry’s conventional wisdom to create a disruptive strategy

Disrupting an industry isn’t an easy task nor a frequent occurrence.

To do it successfully, you need to:

• Understand the prominent business mode of your industry and the forces that contributed to its development.
• Challenge the assumptions behind it and design a radically different business model.
• Develop ample space for experimentation and failures.

The odds of instantly conquering the industry might be low (otherwise, someone would have already done it), but you’ll end up with out-of-the-box ideas and a higher sensitivity to potential disruptors in your competitive arena.

Recommended reading:   How To Write A Strategic Plan + Example

How Zara’s supply chain strategy is at the core of its business strategy

According to many analysts, the Zara supply chain strategy is its most important innovative component.

Amancio Ortega and other senior members of the group disagree. Nevertheless, the Inditex  logistics strategy  is extraordinarily efficient and plays a crucial role in sustaining its competitive advantage. Most companies in the clothing retail industry take an average of 4-8 weeks between inception and putting the product on the shelf. The group achieves the same in an average of two weeks. That’s nothing short of extraordinary.

Let’s see how Zara developed its logistics and business strategy.

Innovative logistics: how Zara’s supply chain evolved

The logistics methods developed by companies are highly dependent on external factors.

Take, for example, infrastructure. In the early days of Zara, when it was expanding through Spain, the company considered using trains as a transportation system. However, the schedule couldn’t keep up with Zara’s needs, which had the goal of distributing products twice a week to its shops. So transportation by road was the only way.

However, when efficiency is a high priority, it shapes logistics processes more than anything else.

And for Zara, efficient logistics was – and still is – of the highest priority.

Initially, leadership tried outsourcing logistics, but the experiment failed and the company assigned a member of the house with a thorough knowledge of the company's operating philosophy to take charge of the project. The tactic of entrusting important big projects to employees imbued with the company’s philosophy became a defining characteristic.

So, one of Zara’s early strategic decisions was that each shop would make orders twice a week. Since the first store was opened, the company has had the shortest stock rotation times in the industry. That’s what drove the development of its logistics methods. The whole strategy behind Zara relied on quick production and distribution. And the proximity of manufacturing and distribution was essential for the model to work. So Zara had these two centers in the same place.

Even when the brand was expanding around the world, its logistics center remained in Arteixo, Spain, despite being a less-than-ideal location for international distribution. At some point, the growth of the brand, and Inditex as a whole, outpaced Arteixo’s capacity, and the decentralization question came up.

The debate was tough among leadership, but the arguments were strong. Decentralization was necessary because of:

• Safety and security.  If there was a fire or any other crippling disaster there (especially on a distribution day), then the company would face serious troubles on multiple fronts.
• Arteixo’s limitations.  The company’s center in Arteixo was reaching its capacity limits.

So the company decided to decentralize the manufacturing and distribution of its brands.

Initially, the group made the decision to place differentiated logistics centers where the management of its chain of stores was based, i.e. Bershka would have a different logistics center than Pull&Bear, although they were both part of the Inditex Group. That idea emerged after Massimo Dutti and Stradivarius became part of Inditex. Those brands already had that geographical structure, and since the group integrated them successfully into its strategy and logistics model, it made sense to follow the same pattern with its other brands.

Besides, the proximity of the distribution centers to the headquarters of each brand allowed them to consolidate them based on the growth strategy and purpose of each brand (more on this later).

But just a few years after that, the group decided to build another production center for Zara that forced specialization between the two Zara centers. The specialization was based on location, i.e. each center would manufacture products that would stock the shelves of stores in specific locations.

Zara’s  supply chain strategy  is so successful because it’s constantly evolving as the group adapts to external circumstances and its internal needs. And just like its iconic fashion, the company always stays ahead of the logistics curve.

Zara’s business strategy transcends its logistics innovations

Zara’s business strategy relies on four key pillars:

• Flexibility of supply
• Instant absorption of market demand
• Response speed
• Technological innovation

Zara is the only brand in the Inditex group that is concerned with manufacturing. It’s the first brand in the clothing sector with a complete vertical organization. And the production model requires the adoption or development of the latest technological innovations.

This requirement is counterintuitive in the clothing sector.

Most people believe that making big investments in a market as mature as clothing is a bad idea. But the Zara production model is very capital and labor intensive. The technological edge derived from that investment gave the company, in the early days, the capability to manufacture over 50% of its own products while maintaining an extremely high stock rotation frequency.

Zara might be one of the best logistics companies in the world, but that particular excellence is a supporting factor, or at least a highly contributing factor, to its successful business strategy.

Zara’s business strategy is so much more than its supply chain strategy.

The company created the “fast fashion” term and industry. When other companies were manufacturing their collections once per season, Zara was adapting its collection to suit what people asked for on a weekly basis. The idea was to offer fashionable items at a fair price and faster than everybody else.

Part of its cost-cutting strategic priority was its marketing strategy. Zara didn’t – and still doesn’t – advertise like the rest of the clothing industry. Its marketing strategy starts with choosing the location of the stores and ends with advertising that the sales period has started. In the early years of the brand’s expansion, Amancio would visit potential store locations himself and choose the site to build the Zara shop.

The price was never an issue. If the location was in a commercial center, Zara would build its store there no matter how high the cost was because the company expected to recoup it quickly with increased sales.

Zara’s marketing is its own stores.

The strategy of Zara and her Inditex sisters

Despite Zara’s success (or because of it), Amancio Ortega created – or bought – multiple other brands that he included in the Inditex group, each one with a specific purpose.

• Zara  was targeting middle-class women. ‍
• Pull&Bear  was targeting young people under twenty-five years old with casual clothing. ‍
• Bershka  was targeting rebel teens, especially girls, with hip-hop-style clothing. ‍
• Massimo Dutti  was targeting both sexes with more affluence. ‍
• Stradivarius  was competing with Bershka, giving Inditex two major brands in the teenage market. ‍
• Oysho  was concentrating on women's lingerie. ‍
• Zara Home manufactures home textiles and decor.

Pull&Bear  was initially targeting young males between the ages of 14 and 28. Later it extended to young females of the same age and focused on selling leisure and sports clothing. It has the slowest stock turnaround time in the group.

Bershka’s  target group was girls between 13 and 23 years of age with highly individualized tastes. Prices were low, but the quality average. Almost a fiasco in the beginning, it underwent a successful strategic turnaround becoming today one of the biggest growth opportunities for the group. And out of all the Inditex chains, Bershka has the most creative designs.

Massimo Dutti  was the first retail brand Amancio bought and didn’t create himself. Its strategy is very different from Zara, producing high-quality products and selling them at a high price. It’s an extension of the group’s offer to the higher end of the price spectrum in the fashion industry. It’s also the only Inditex chain brand that advertises regularly.

Stradivarius  was the second acquired brand, with the purchase being a defensive move. The chain shares the same target group with Bershka, making it, to this day, a direct competitor.

Oysho  started as an underwear and lingerie company. Its product lines evolved to include comfortable night and homewear along with swimwear and a very young children’s line. The brand’s strategy was aggressive from its conception, opening 286 stores in its first six years of existence.

Zara Home  is the youngest brand in the Group and the only one outside the clothing sector, though still in the fashion industry. It was launched with the least confidence and with immense prior research. An experiment to extend the Zara brand beyond clothing, it was based on the conservative view that Zara could extend its product categories only to textile items for the home. But it turned out that customers were more accepting of Zara Home selling a wide variety of domestic items. So the brand made a successful strategic pivot.

Key Takeaway #2: The right people are more important than the best strategy

It might not be obvious in the story, but a key reason for Zara's and Inditex’s success has been the people behind them.

For example, a vast number of people in various positions from inside the group claim that Inditex cannot be understood without Amancio Ortega. Additionally, major projects like the development of Zara’s logistics systems and the group's international expansion had such a success precisely because of the people in charge of them.

Zara’s radically different model was a breakthrough because:

• Its leadership had a clear vision and a real strategy to execute it.
• People with a deep understanding of the company’s philosophy led Its largest projects.

Sustainability: Zara’s strategy to make fast fashion sustainable

Building a sustainable business in the fast fashion industry is a tough nut to crack.

To achieve it, Inditex has made sustainability a cornerstone of its business model. Its strategy revolves around the values of  collaboration ,  transparency,  and  innovation . The group’s ambition is to make a positive impact with a vision of prosperity for the planet and its people by transforming its value chain and industry.

Inditex’s sustainability commitments and strategy to achieve them

Inditex has developed a sustainability roadmap that extends up to 2040 with ambitious goals. Specifically, it has committed to

• 100% consumption of renewable energy in all of its facilities by 2022 (report pending).
• 100% of its cotton to originate from more sustainable sources by 2023.
• 100% of its man-made cellulosic fibers to originate from more sustainable sources by 2023.
• Zero waste from its facilities by 2023.
• 100% elimination of single-use plastic for customers by 2023.
• 100% collection of packaging material for recycling or reuse by 2023.
• 100% of its polyester to originate from more sustainable sources by 2025.
• 100% of its linen to originate from sustainable sources by 2025.
• 25% reduction of water consumption in its supply chain by 2025.
• Net zero emissions by 2040.

The group’s commitments extend beyond environmental issues to how its  manufacturing and supplying partners conduct their business . To bring its strategy to fruition, it has set up a new governance and management structure.

The Board of Directors is responsible for approving Inditex’s sustainability strategy. The  Sustainability Committee  oversees and controls all the proposals around the social, environmental, health, and safety impact of the group’s products, while the  Ethics Committee  makes sure operations are compliant with the rules of conduct. There is also a  Social Advisory Board  that includes external independent experts that advises Inditex on sustainability issues.

Finally, Javier Losada, previously the group’s Chief Sustainability Officer and now promoted to Chief Operations Officer, will be leading the sustainability transformation of the group. Javier Losada first joined Inditex back in 1993 and ascended its rank to reach the C-suite.

Inditex is dedicated to its commitment to reducing its environmental impact and seems to be headed in the right direction. The only question is whether it’s fast enough.

Key Takeaway #3: Integrating sustainability with business strategy is a present-day necessity

Governments and international bodies around the world are implementing more stringent environmental regulations, forcing companies to commit to ambitious goals and developing a realistic strategy to achieve them.

The companies that are impacted the least are those that always had sustainability as a  high priority .

From the companies that require significant changes in their operations to comply with the new regulations, only those who  integrate  sustainability into their business strategy and model will succeed.

Why is Zara so successful?

Zara is the biggest Spanish clothing retailer in the world based on sales value. Its success is due to its fast fashion strategy that is based on a strong supply chain and quick market feedback loops.

Zara's customer-centric approach places a strong emphasis on understanding and responding to customer needs and preferences. This is reflected in the company's product design, marketing, and customer service strategies.

Zara made fashionable clothes accessible to the middle class.

Zara’s vision guides its future

Zara's vision, as part of the Inditex Group, is to create a sustainable fashion industry by promoting responsible consumption and production, respecting the environment and people, and contributing to the communities in which it operates.

The company aims to offer the latest fashion trends to its customers at accessible prices while continuously innovating and improving its operations and processes.

Growth by numbers (Inditex)

We've detected unusual activity from your computer network

To continue, please click the box below to let us know you're not a robot.

Why did this happen?

Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy .

For inquiries related to this message please contact our support team and provide the reference ID below.

HANDICRAFT SHOWS IN UNITED STATES & CANADA | APRIL 2024

Coronavirus first quarter regional report march 2024 | april 2024, globalization needs reinvigoration part 12 | april 2024, progress report on the paris climate agreement part 23 | april 2024, discover la galerie dior | april 2024, everything you want to know about electrical vehicle & autonomous driving, political elections around the world in 2024 | april 2024, book report – the ultimate sneaker book | april 2024, the rise & fall of american department stores part 1 | april..., library of mistakes | april 2024, market report short read part 2 | april 2024, trend report spring/summer 2025 | april 2024, 2021 october – case study how zara wades through the pandemic.

2021 OCTOBER CASE STUDY HOW ZARA WADES THROUGH THE PANDEMIC

Written by andrew sia, introduction.

Zara is the crown jewel of the Inditex Group and it is known for its fast supply chain, from design approval to market takes only three weeks, and the production takes place on the Iberian Peninsula. With its 700 designers that work only in their headquarters at Arteixo in the region of Galacia. It is churning out 65,000 new styles a year, delivering the latest garments to its network of stores at least twice a week.

What went through with Inditex during the pandemic

At the beginning of the coronavirus, and it was on March 9, 2020, the company stopped all the new stock buying but honoring all those existing orders. A week later, it wrote off €287 million in inventory and suspended dividends. For the three months until the end of April, the company made its first loss of €409 million since it became the public listed company.

In mid-April, Inditex began to fulfil online orders from its shops, while the shops were remaining closed. Combining its tracking system and the fast supply chain, it was able to operate the business through online.  

Inditex is known for its operating of 6,700 stores across the world but during the coronavirus period, almost all of the physical stores were closed. During that time, like everyone else, Inditex was depending solely on the selling through online. The company is handling one billion clothing items each year and they are using the RFID, better known as radio-frequency identification, to read the tiny circuits and antennas hidden in the security tags fastened to the clothing in the factory floors in the Inditex factories.

Inditex turns its stores into mini-distribution hubs by merging its online with bricks and mortar presence. This operation reduces the inventories, allows the stores to fulfill online orders in a very cost-effective manner. With its store network of over 6,000 which is equivalent to 6,000 regional warehouses that can ship out orders very efficiently.

This kind of operating system is extended to its sister brands—Massimo Dutti, Pull& Bear and Stradivarius and the rollout was completed in 2019, made it appeared that it was just in time for the pandemic.

Inditex took up online in 2010 and in 2019 online represented only 14% business of its €28 billion in total sales. But in 2020, this online portion jumped to 32% and it used the backrooms in its stores to pack and dispatch €1.2 billion orders taken from mobiles and computers.

By the end of 2020, Inditex’s online revenues soared 77%, more than three times than the peers whose overall increase were 22% in the global online clothing and footwear market.

Inditex has successfully integrated its online sales with its store sales. Last year its online sales reached €6.6 billion and became the world leader in online fashion.    

It is using the “pull” system rather than the “push” system, it is all about to produce what sells rather than to sell what one makes. It is said that everyday there are 20 million people viewing Inditex products online on its app or social media.

Customers still prefer to visit the prime locations of the Zara shops and that is the heart of Inditex for what it is all about. Its founder Amancio used to say that the shop windows are the best place for advertising, and its prime shops have this advantage.

Following is what Inditex’s chief executive, Pablo Isla, told us, “ The essence of Inditex’s strategy is the same as ever: flexibility in our business model—the integration of logistics, manufacture and design; production close to hand; and a capacity to react from time to time. Now with the integration between the digital and physical on top of all these, year 2020 was the key year in the strategic transformation of the company from every point of view”.

In recent years, Inditex and the other fast fashion companies are facing criticisms from the environmental activists, and one of the key areas for sustainability is the fast fashion clothes might have just been wearing twice. This is more of the behavior of those followers of fast fashion which is something that is hard to address to.

Like all the brands, Inditex can emphasize about their sustainability in areas like—using less water for dyeing, stop using single-use plastic, apply biodegradable yarns to increase the sustainability.

Lately, the labor activists are showing concerns about where the manufacturing are taking place. At this moment the French prosecutors opened a probe into Zara and three other fashion brands over the alleged use of forced labor by Muslim minority Uyghurs in Xinjiang province in China for the cotton production from there. With this Inditex dare not to make any statement but remain silent. Most of the fashion brands have observed for what happened with H&M over there and they faced the pressure from Chinese government and its consumers. We have to know that Inditex has 320 stores there.

Going forward Inditex is still planning for significant investments, such as spending €1.7 billion on stores and €1 billion on technology over three years. The group’s 15% revenue is still coming from Spain, but the country’s economy is suffering continuously from the pandemic and the growth will have to come from other markets.

During this time many rivals of Inditex closed their stores and more online only retailers come with lower prices and a wider range of products. One of the rivals—Shein from China who comes with a wider range of products and sell at very low prices. Shein can turn products around in shorter time, between product design and delivery than Zara’s own supply chain.

My personal opinion about the business model of Inditex

I feel that it is time I should express my opinion about Inditex and I would like to share my analysis as the following:

Inditex has several brands and the most distinguished ones are Zara, Massimo Dutti, Pull&Bear, and Stradivarius who have all been in business for more than twenty years. Many of these brands are serving a group of customers who are relatively more mature and affluent, and they are more conscious about sustainability, ethical credentials and hopefully that they can afford products at higher price with more value to offer.

With the new players out there, the extensive use of social media and online market with business model that does not hold stock of their own. Their business reacts to “read and response” which is nothing wrong but can only be faster and sharper. This group of fashion retailers we can call them “faster fashion”.

We have also seen those online retailers, such Asos and Boohoo, who are venturing into bricks and mortar. Both announced partnership with Nordstrom in the US and Alshaya in the Middle East. The idea is all very good, but in actual practice they may face problems that they would need to deal with. The relationship between the online and offline is separated with a very thin line in the eyes of the consumers. Especially during this time at the pandemic, the changing rooms in the stores are not fully operated and the return of goods can end up in chaos. Or if the customers have access to the changing room where they would try out the garments but would do their purchase from home without standing in queue in the stores. Then there is always the issue for the return of goods. We have noticed customers who bought online but return to stores. I am not really convinced that this arrangement between the two business entities can work seamlessly.

We are not going to speak about the second-hand clothes and rentals, I do not like to compare the business models here.

I am coming to my closing that Inditex has a business model which is already very admirable. I am very surprised to find them coming out from the pandemic during its first year 2020 reacting stronger and better. They seemed to have been able to make the very good use of their physical stores and turn them into shipping for their online orders. It is complicate to work and they seemed to have function in the way they like which is very important.

If Inditex can go leaner, and start to look seriously in sustainability and communicate with the customers with the bar code or QR code and make them feel connected. It is important to tell the customers that we are in this together and sustainability is a joint effort.

I particularly like their “pull” system and it all about to make what it sells rather than to sell what it makes. This is something that all the retailers should keep in their doctrine.

Lastly, sell the products a notch higher and forget the promotion unless it is the sharing of a totally new experience that you would like to share with your customers. After all we come to this world to enjoy and the spoil ourselves whenever we can. We are not here to take advantage. But remember to share what we have in excess as the others who are less fortunate than us can use.       

Founder of Inditex - Amancio Ortega

Here is the background about Inditex’s founder Amancio Ortega who is 85 years old and still owns almost 60% of the stock. He is one of the richest man in the world with net assets estimated at close to $70 billion. He is holding most of it through his personal investment vehicle, Pontegadea, and this company is specialized in prime real estate across the world. He stepped down as the chairperson of Inditex in 2011.

Inditex chief executive, Pablo Isla, has been in charge for more than 15 years and he is in daily contact with the founder.

2021 OCTOBER – GLOBAL FASHION & EXHIBITION – INTRODUCING INTERFILIÈRE SHANGHAI

2021 october – book report why french women wear vintage, you may also like, handicraft shows in united states & canada |..., coronavirus first quarter regional report march 2024 |..., progress report on the paris climate agreement part..., everything you want to know about electrical vehicle..., political elections around the world in 2024 |..., book report – the ultimate sneaker book |..., the rise & fall of american department stores....

Ask a question from expert

Logistics Management of Zara: A Case Study

Added on   2023-05-28

About This Document

The report provides an overview of the company's background, strategic goals, and logistics management strategies . The report highlights the factors behind Zara's logistics management success, including just-in-time production, inventory management , centralized logistics, robust distribution network, and information systems . The report also emphasizes the importance of maintaining a sustainable competitive advantage in the industry.

   Added on  2023-05-28

End of preview

Want to access all the pages? Upload your documents or become a member.

Management of Supply Chain and Logistics - A Case Study of Zara lg ...

Logistics management report- zara lg ..., zara: supply chain management and logistics strategies lg ..., managing strategic resources and operations - zara lg ..., mgt704 - logistics management assignment lg ..., logistics and supply chain management for zara: a comparative analysis with dell and myers lg ....

MBA Knowledge Base

Business • Management • Technology

Home » Management Case Studies » Case Study: Zara’s Supply Chain Success Story

Case Study: Zara’s Supply Chain Success Story

Zara is a Spanish fashion clothing manufacturer and retailer, formed in the 1970’s It is known that only two weeks are required for Zara to complete the development and shipment of a new product to its stores , which outweighs the average of fashion industry of six months, thanks to the collaborative relationship with customers and suppliers. Zara mainly targets on young and urban female customers and acceptable prices are offered. There are always new products in Zara stores. Even though usually Zara stores are spacious but the stock is displayed in limited quantity. This kind of strategy gives customers a sense of originality and exclusivity. Most of the stores display clothes only when they have a full set of major sizes, so customers would not be upset to find out that the needed size is not available. As shoppers enter the stores, reaction between Zara and customers starts with creating a sense of “buy now since you won’t see it next time” because of the rapid turnover environment. Customer relationship between Zara and shoppers is then strengthened by, instead of offering VIP services and discounts, showing a sense of scarcity by displaying unfilled shelves, limited offer notes on certain items and deliberate undersupply impression to encourage customers to run to the counter.

Such a retail concept depends on the regular creation and rapid replenishment of small batches of new goods. Zara’s designers create approximately 40,000 new designs annually, from which 10,000 are selected for production. Some of the goods are high fashion looks-alike, but much cheaper and lower quality and that in many cases allow Zara to beat high fashion designers in sales and profit amounts.

Zara is not a world leader in cloth designs, but it is a high sensitive and flexible fashion trend follower. Zara has design staffs that glen fashion inspiration by interaction with potential customers from competitors’ stores, clubs, fashion shows, university campuses and any other events or venues related to the lifestyles of the target customers. Zara’s networked business designs enable the frequent digital communication from stores to designers, and centralized distribution allow the within-15-day deliveries to ensure the satisfaction of consumers, comparing with the average length of 9 months for the competitors.

Zara’s Supply Chain

Zara’s single, centralized design and production center is attached to Inditex (Zara’s parent company). Inditex Chief Executive Jose Maria Castellano says, “This business is all about reducing response time. In fashion, stock is like food, it goes bad quick.” To maintain a healthy reaction with customers, keeping up with fashion has become one of the main strategies of Zara.

In the first half of the 1990s, Zara’s supply chain consisted of problems of inconsistency, imbalances and market saturation for three of the store chains of Zara, plus the inefficient launch of fashion position had created difficulties in joining the U.S. garments market. It has suffered from a significant financial loss in 2001 and a dramatic decrements in the share price. In May of the following year, the chairman, who failed to reposition to a more fashionable assortment due to a major fashion missing, had withdrawn from his long-term CEO position. The supply chain was restructured in 1990s by lowering the levels of inventories and reducing the number of suppliers. 50% of the production was then shifted back to the domestic manufacturing facilities to compress cycle times, seasonal collections were cut down in order to allow reorders of well selling products in a season’s 3rd month.

Market-driven supply chain (linking customer value to supply chain strategy ) was then applied instead of the traditional supply chain which only designed to optimize the internal operations. The company uses “value net” business design to support the networked operation in order to allow connect customers with the company and its key suppliers. Zara’s “value net” includes: digital customer input provided by Zara stores , Zara designers’ sketch pads of the required styles, globally sourced textiles , hi-tech cutting plant and local workshops sewing/assembly, single distribution system. Based on the “value net”, customer value management is a key issue to obtain a regular group of buyers. Opportunities from current and potential customers can be created by understanding the customers’ hobbies, purchase frequency, behaviors and needs. Further actions hence can be taken including contacts of multi-channel customers and campaigns promotional targeting , offers designed to attract and serve different customers according on their potential and existing values. The current shoppers are frequent and loyal customers who visit 17 times on average to a Zara store per year. Their interest is retained by regularly updating and varying of stocks on shelves.

The design and production center consists of three halls – men’s, women’s, children’s. Unlike most of the companies, especially after Global Finance Crisis has started, which try to reduce labor costs, Zara makes a point of running three parallel, but operationally distinct, product families. Separate sales, production planning , design staffs are responsible for each clothing (men, women, children) line. Any Zara store may receive three different calls from centralized headquarter in one week from a market specialist in each channel, a factory making shirts may deal simultaneously with two Zara managers, one for men’s shirts and another for children’s shirts. Even though it’s more expensive to operate three different and separate channels, the information stream from management to each separate channel is direct, fast and not disturbed by problems of other channels which makes the overall supply chain more responsive. This sort of physical and organisational proximity of all three channels allows increasing productivity , the speed of new customer desired designs and the whole design process and the quality of that process. Zara’s drafting machines can produce a corresponding style or modification to specific requests within 2 to 4 weeks after a requirement is placed and samples would be released shortly throughout varies of medias and further manufacturing may be proceeded upon to the market reactions.

This “fast fashion” system depends on a constant exchange of information throughout every part of Zara’s supply chain – from customers to store managers, from store managers to market specialists and designers, from designers to production staff, from buyers to subcontractors, from warehouse managers to distributors. Zara’s organisation, performance measures, operational procedures are designed to make information transfer easy.

Efficient communication between the company and suppliers is essential in order to reduce production cost and quality maintenance. Comparing with Zara’s competitor United Colors of Benetton which uses Asian resources, about 40% of Zara’s merchandise are internally manufactured, 66% of raw materials are imported from Europe and north Africa, and only a small amount of basic items (items with the broadest and least transient appeal) are outsourced from Asia. The global sourced strategy provides a large range of possible selection of fashion fabrics and reduces the dependence on any particular suppliers. More than half of the material is purchased in gray color and is dyed in one of Inditex’s facilities. Only one week is required for this process to complete which shows the benefit of proximity and domestic control.

Domestic production incurs extra cost of approximately 20% comparing if the garments were produced in Asia, yet Zara does not really suffer from it due to the efficient operation with the Europe manufacturer. The suppliers provide Zara flexibility to postpone the printing and dyeing procedures to adapt product lines according to updated market fashion trend. Holding inventories costs are reduced as well because orders do not have to be placed for a season in advance and kept in the storerooms before the periodic shipment arrives and Zara is able to react and respond quickly to changes of customer demands which also reduces the risk when final demand gets amplified as they are fulfilled quickly by transferring new designs to the supply line.

One of the biggest advantages of Zara’s supply chain strategy is being able to react quickly to all fashion trends and supply customers latest fashion outfits as soon as in few weeks’ time. Secondly, Zara never makes its production in big quantities, so if the style does not sell as good as expected, Zara does not lose much as there is not much stock to be discounted. Thirdly, though Zara’s supply chain has higher cost but it allows the advantage of low inventory and higher profit margins. The positive effects associated with the vertically integrated, shortened supply chain are obvious: Zara’s advertising fee is only 0.3% of its revenue whereas the other similar fashion retailers normally spend 3% for advertisements and marketing purposes. The short cycle time requires less working intensive of new merchandise and allows Zara committing to the bulk of production line for a season later than the peers. The high frequent of shifts of displayed merchandise (about three quarters of them are changed every 3 weeks) allows regular customer-visit rates to be maintained. The biggest disadvantage of Zara’s supply chain is that since Zara owned all the channels of supply chain , it becomes difficult to expand to far location as it is very expensive to distribute such products.

Related Posts:

• Case Study: Inventory Management Practices at Walmart
• Case Study of Papa John's: Quality as a Core Business Strategy
• Case Study: Zara's Entry into Indian Retail Fashion Market
• Case Study: An Assessment of Wal-Mart's Global Expansion Strategy
• Case Study of Walmart: Procurement and Distribution
• Case Study of Avon: From Direct Selling to Direct Marketing
• Case Study: Zara's Operational Model
• Case Study of Zara: Sustainability in Fast Fashion Industry
• Case Study of Zara: A Better Fashion Business Model
• Case Study of Kishore Biyani: India's Retail King

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Fashion at the Speed of Light: Delving into Zara Supply Chain Strategy

Fashion at the Speed of Light: Delving into Zara Supply Chain Strategy – DFreight

The fashion industry is fast-paced and ever-evolving, so supply chain strategies need to keep up with the times to keep up with the competition. Zara, one of the top players in the fashion market, is continuously looking for new ways to enhance their supply chain to provide fast and easy access to fashionable products to their customers.  Digital freight forwarder  DFreight can assist with this process, providing quick, accurate, and dependable solutions to the fashion sector. With dynamic and ever-changing case-by-case services, DFreight is the right partner to help fashion brands remain competitive in an ever-increasing international market.

Read this article to learn more about how ZARA is leveraging supply chain strategies to remain the fashion industry leader.

Table of Contents

Zara’s Rise as a Fast Fashion Powerhouse

Zara , a Spanish fashion powerhouse, has revolutionized the fashion industry. With its fast fashion business model, Zara has become one of the world’s most powerful brands, providing customers with a wide selection of fashionable products at reasonable prices. Zara’s stores still offer seasonal pieces, but the company now provides online shopping for the international market.

With its innovative marketing, production, and logistics system, Zara is able to quickly refresh collections with new products and move merchandise from production to store shelves in record time. It has also focused on creating unique collaborations with designers and artists to appeal to a broader base of shoppers. Thanks to its combination of style, speed, and  innovation , Zara has become one of the most talked-about names in fashion.

Understanding Zara’s Fast Fashion Model

Zara has revolutionized the fashion industry by successfully implementing its fast fashion model, allowing customers to stay on the cutting edge of fashion trends without requiring a hefty investment.

The Concept of Fast Fashion and its Significance

Fast fashion is the process of rapidly producing fashionable items to meet current trends and demands while delivering them quickly and cost-effectively. This allows customers to stay on the cutting edge of fashion at a fraction of the cost.

Zara’s Unique Approach to Fast Fashion and its Benefits

Zara has taken the concept of fast fashion to a new level by having two to three collections a season, enabling it to have the latest styles on the market faster than any other company. In addition, its supply chain strategy enables faster market speed, allowing them to bring items from design to stores in as little as four weeks. Furthermore, it allows for a high level of customization and leveraging of economies of scale, resulting in increased profitability.

How Zara’s Supply Chain Strategy Enables Rapid Production and Distribution

Zara’s supply chain strategy gives them greater control over its production process, allowing for faster speed to market that brings items from design to stores in as little as four weeks. Additionally, it allows for a high level of customization and leveraging of economies of scale, resulting in increased profitability.

In the previous blogs, we looked into the supply chains of famous and leading companies, which you can read about each of them in the section below.

The Role of Vertical Integration in Zara Supply Chain strategy

Zara’s vertically integrated business model has enabled the successful international fashion retailer to gain a competitive edge in the industry by reducing inventory costs, increasing production speed, and continuously offering customers the latest trends.

Exploring Zara’s Vertically Integrated B usiness Model

Zara’s vertically integrated business model is based on owning and controlling each element of the supply chain from production to the finished product. This includes producing raw materials, manufacturing, warehousing, distribution, advertising, retailing, and logistics. By taking control of the entire supply chain, Zara is able to reduce inventory costs, speed up the production process, and provide customers with constantly updated fashion trends that are on-trend with current styles.

The Advantages of Owning the Entire Supply Chain Process

With Zara’s vertically integrated business model, they are able to reap many advantages, including reduction of inventory costs, increased speed of production, and the ability to bring customers the latest trends, as well as price flexibility. With complete control of its supply chain, Zara is able to produce new styles faster than their competitors can and offer them at competitive prices. Furthermore, Zara is able to adjust production levels to better meet customer demand, thus saving money on inventory costs.

How Vertical Integration Contributes to Zara’s Speed and Flexibility

Vertical integration has enabled Zara to have a speed-to-market strategy, offering customers twice-weekly drops of new store items. Zara can provide customers with a constant flow of current fashion trends without worrying about inventory costs or long production times. Furthermore, vertical integration allows Zara to be flexible in their production – quickly adjust their factory output to meet customer demand. This combination of speed and flexibility will enable Zara to remain competitive in the ever-changing fashion industry.

Just-in-Time Manufacturing: Zara’s Agile Supply Chain

Just-in-time manufacturing is an efficient and cost-effective way of managing a supply chain. Zara’s supply chain incorporates this approach, allowing them to quickly produce and deliver small batches of clothes that respond to changing fashion trends and customer needs. While this approach provides many benefits, there can also be challenges associated with it.

An Explanation of the Just-in-Time M anufacturing Concept

Just-in-time (JIT) manufacturing is an efficient and cost-effective way of managing a supply chain. It is a management system involving the close coordination of procurement and production processes to produce the correct item, at the right quantity, at the right time, and in the right place to meet customer demand. This approach is based on the Japanese lean manufacturing concept of creating value with less waste by making needed items only when they are required and no more. The idea is to reduce inventory, streamline production, and improve resource utilization.

How Zara’s Supply Chain Incorporates Just-in-Time Manufacturing

Zara’s supply chain incorporates just-in-time manufacturing principles to improve efficiency. Zara is able to get clothes designed, manufactured, and delivered to stores within just two weeks. They use a network of manufacturers worldwide to produce and deliver the small batches that Zara orders quickly. This gives Zara an advantage over competitors with longer lead times, allowing them to respond rapidly to changing fashion trends and customer needs.

The Benefits and Challenges Associated with this Approach

Just-in-time manufacturing provides many benefits, such as reducing inventory costs and space requirements, streamlining production, and delivering a product that is exactly what customers want. However, it can also come with challenges, such as increased pressure on suppliers to meet tight production timelines and the need for strong communication between different parts of the supply chain to coordinate effectively. Additionally, there is always the risk that unexpected events, such as natural disasters or pandemics, could disrupt the supply chain .

Dynamic Inventory Management: The Secret Weapon

Dynamic inventory management helps retailers stay updated with the latest fashion trends, allowing them to maintain relevancy and profitability in the dynamic fashion industry.

Zara’s Dynamic Inventory Management System

Zara’s dynamic inventory management system is considered pioneering in the fashion industry. It allows Zara to respond quickly to the ever-changing fashion trends and demands of consumers. The quick turnaround helps Zara maintain relevance and profitability in the dynamic industry. The system provides real-time data and consumer behavior insights, enabling Zara to replicate and update consumer preferences. This allows Zara to keep up with the latest fashion trends and choose the right quantities and items to stock in their stores.

The Use of Real-Time Data and Consumer Insights

Real-time data and insights from consumers can be used to make informed decisions about product inventories. Retailers can plan ahead and optimize merchandise stocking by understanding consumer behavior, such as preferred trends, sizes, and colors. Utilizing this information also helps retailers identify potential risks regarding inventory. This helps retailers minimize wasted stock risk and decrease inventory costs.

Strategies for Efficiently Managing Inventory While Minimizing Waste

To successfully manage inventory, retailers need to adopt strategies that help minimize waste. One such strategy is to practice continuous inventory review. This ensures timely identification of slow or discontinued items that do not meet consumer demand or have become outdated. Another effective strategy is to focus on cyclicality. This involves forecasting demand for seasonal items and stocking them based on past sales data. This helps optimize stocking decisions and minimize the risk of wasting time or money on overstocking or understocking items.

Efficient Distribution Network: From Factory to Store

Zara has implemented advanced logistics and transportation strategies to optimize the speed and accuracy of product distribution for their customers worldwide. This allows them to ensure the timely arrival of products and keep up with ever-changing fashion trends. Through careful inventory management , shipments, and pacing, Zara can ensure that their customers get their orders quickly and accurately.

Additionally, they have gone to great lengths to reduce costs, driving their profitability. Through direct connection with suppliers and providing detailed logistics planning and oversight of the entire distribution process, they have been successful in achieving their goal of a reliable and efficiently managed worldwide supply chain network.

Sustainability in Zara’s Supply Chain Strategy

Zara has demonstrated its commitment to sustainability by implementing initiatives and strategies to reduce their environmental impact while offering fashionable and affordable products.

Zara’s Initiatives towards Sustainability and Ethical Sourcing

Zara is one of the largest fashion retailers in the world, and they have implemented a range of initiatives to promote sustainability and ethical sourcing in their supply chain strategy. These include utilizing organic fabrics and natural fibers, limiting the impact of harmful chemicals, and increasing the monitoring of ethical standards within the supply chain. With each new product release, they strive to reduce their environmental impact while still being able to offer their consumers fashionable and affordable products.

Balancing Fast Fashion with Environmental and Social Responsibility

Zara balances the need for fast fashion with environmental and social responsibility. They have put strategies in place to reduce the amount of water used in manufacturing processes while encouraging people to reduce their consumption of fast fashion by creating pieces that can withstand multiple trends, seasons, and occasions. Additionally, Zara incorporates fair wages and safer working conditions as a standard in their production process.

The Challenges and Future Prospects of Sustainable Fashion

While there has been a lot of progress towards green and sustainable fashion over the past few years, there are still many challenges ahead. Suppliers need help to keep up as the demand for ethical and sustainable products grows. Moreover, the production process from raw materials to finished products is complex. It often involves a long supply chain, which can be daunting to track and monitor for sustainable practices. Looking towards the future, companies are turning towards more transparent and efficient supply chains, as well as renewable materials and innovative technologies to reduce their environmental impact.

Implications for other Fashion Brands and the Industry as a Whole

For other fashion brands to remain competitive, they must take Zara’s lead and develop effective supply chain strategies. This involves creating a production system responsive to trends, investing heavily in research and design teams to create unique products, and utilizing agile forecasting. It’s important to note, however, that both Zara’s success and the strategies of other fashion brands may also be shaped by the emergence of technologies in the fashion supply chain—such as predictive analytics, robotics , blockchain , and artificial intelligence like chat GPT . As these technologies grow in sophistication, it will be essential for fashion brands to keep up with the changing landscape and adjust their supply chain strategies to remain competitive.

The Future Direction of Supply Chain Strategies in the Fashion Industry

Looking to the future, it’s clear that supply chain strategies in the fashion industry will need to keep pace with consumers’ rapidly changing consumer preferences. The challenge for fashion brands will be maintaining agility and flexibility while mitigating cost and risk. Zara’s success offers key lessons for the industry, and for fashion brands to succeed, they must learn from Zara’s example and leverage the same strategies to remain competitive.

Zara’s supply chain strategy is a valuable case study for businesses across industries. We have summarized the key takeaways and lessons that can be learned from Zara’s success, including the importance of agility, responsiveness, and customer-centricity in supply chain management. By understanding and applying these lessons, other companies can adapt and thrive in today’s rapidly changing business landscape.

What is Zara’s supply chain strategy?

Zara’s supply chain strategy is based on a vertical integration business model, where the company controls the entire production process, from design and manufacturing to distribution and retail. By having control over every aspect of the supply chain, Zara is able to quickly analyze trends, come out with new styles and get them into stores faster, enabling it to stay ahead in the fashion industry.

What makes Zara’s supply chain unique?

Zara’s supply chain is unique because it is built on a short, agile production cycle that allows them to keep up with fast fashion trends and respond quickly to changing market needs. From design to delivery, the process takes only a few weeks, enabling Zara to introduce new styles for its customers continuously.

How does Zara use technology to remain competitive?

Zara uses several innovative technological solutions to remain competitive. These include a barcode system for tracking and monitoring in-store inventory, RFID technology to track products in warehouses and stores, and AI-driven algorithms for forecasting sales and optimizing production. Zara has also implemented a cloud-based platform, allowing it to collaborate with its global suppliers easily.

How does Zara’s supply chain enable it to offer lower prices?

Zara’s vertical integration model and agile production cycle allow them to save time and money, which they can pass on to their customers. Additionally, due to the reduced lead times in their supply chain, Zara can minimize the costs associated with inventory and warehousing, resulting in lower customer prices.

Air transportation is a convenient and fast way to move cargo and is suitable for small and large companies as well as individuals. You Might Also Like

Commodities

Most Popular

• Starting a Business The tools and resources you need to get your new business idea off the ground.
• Payments Everything you need to start accepting payments for your business.
• Funding & Capital Resources to help you fund your small business.
• Small Business Stories Celebrating the stories and successes of real small business owners.

How to start a business from scratch: 19 steps to help you succeed

The 10-part business plan & downloadable template

• Running a Business The tools and resources you need to run your business successfully.
• Accounting Accounting and bookkeeping basics you need to run and grow your business.
• Cash Flow Tax and bookkeeping basics you need to run and grow your business.
• Payroll Payroll essentials you need to run your business.
• Taxes Tax basics you need to stay compliant and run your business.
• Employees Everything you need to know about managing and retaining employees.

Cash flow guide: Definition, types, how to analyze

Financial statements: What business owners should know

• Growing a Business The tools and resources you need to take your business to the next level.
• Sales & Marketing Spread the word: What you need to know about marketing your small business.
• Funding How to find funding and capital for your new or growing business.
• Midsize Businesses The tools and resources you need to manage your mid-sized business.
• Self-Employed The tools and resources you need to run your own business with confidence.
• E-Commerce How to start and run a successful e-commerce business.

Small business grants: 20+ grants and resources to fund your future without debt

How to choose the best payment method for small businesses

• News Browse the latest news, press releases, and reports from QuickBooks.
• Small Business Data The latest research and insights for Small Businesses from QuickBooks.
• Success in Every Season Everything you need to thrive during your business's busiest seasons.
• Multimedia Hub Listen to the Mind the Business podcast by QuickBooks and iHeart. Browse videos, data, interactive resources, and free tools.
• Guide to Pride Browse the Pride toolkit for everything you need to celebrate and make an impact.

Jobs report: Are small business wages keeping up with inflation?

Melissa Skaggs shares the buzz around The Hive

• All Tools Free accounting tools and templates to speed up and simplify your workflow.
• Employee Cost Calculator Calculate the actual cost of a new hire or existing employee.
• Equity & Investment Calculator Find out much investment capital you should accept.
• Paycheck Calculator Accurately estimate pay for all your employees.

Zara supply chain analysis - the secret behind Zara's retail success

It's not unusual to pass a Zara  store and do a double-take - didn't you just see that on the catwalk? As a brand, their speed and responsiveness to the latest fashion trends are key to Zara’s competitive advantage. Owned by the distribution group Inditex, we had a look at what makes Zara so fast that the New York Times called it "mind-spinningly supersonic ".

Want to manage your supply chain as efficiently as Zara? Try QuickBooks Commerce's inventory management system today!

Amancio Ortega founded Zara in 1975 as an attempt to better understand world markets for his fashion merchandise. From that first store in Spain, Zara has since expanded to more than 2,200 stores in 96 countries around the world.

In 2012,  Inditex , Ortega’s parent company made up of Zara and other retail concepts and suppliers, reported total sales of US$20.7 billion, with Zara representing a powerful 66 percent, or US$13.6 billion, of that total.

What’s the secret to Zara’s competitive advantage? Their  supply chain .

Zara produces around 450 million items a year. How can it stay so efficient with the sheer volume that passes through its supply chain? Regular, small-batch deliveries happen with clockwork precision twice a week to all of their stores around the world.

Ensuring all this runs smoothly is what Zara does best - controlling more of its manufacturing and supply chain than most of its competitive counterparts.

Synergy between Zara’s business strategy and operational processes

Zara’s overarching strategy is achieving growth through diversification with vertical integrations. It adapts couture designs, manufactures, distributes, and retails clothes within two weeks of the original design first appearing on catwalks. This is in stark contrast to the average six months it takes to produces items in the fashion industry.

The company owns its supply chain and competes on its speed to market, literally embodying the idea of 'fast fashion'.

Just in Time production

The retail giant delivers fashionable and trendy numbers catered for different tastes through a controlled and integrated process –  Just in Time production .

Zara’s success relies on keeping a significant amount of its production in-house and making sure that its own factories reserve 85 percent of their capacity for in-season adjustments. In-house production allows the organization to be flexible in the amount, frequency, and variety of new products to be launched.

The company often relies heavily on sophisticated fabric sourcing, cutting, and sewing facilities nearer to its design headquarters in Spain.

The wages of these European workers are higher than those of their developing-world counterparts, but the turnaround time is miraculous.

Just in Time inventory management (JIT): All you need to know

Zara also commits six months in advance to only 15 to 25 percent of a season’s line. And it only locks in 50 to 60 percent of its line by the start of the season, meaning that up to 50 percent of its clothes are designed and manufactured smack in the middle of the season.

If a certain style or design becomes the new must-have on the street, Zara gets to work. Designers churn out the new styles and they're fast-tracked to stores while the trend is still going strong.

Store managers communicate customer feedback on what shoppers like, what they dislike, and what they’re looking for. That  demand forecasting  data is instantly funneled back to Zara’s designers, who begin sketching on the spot.

Zara also has extra capacity on hand to respond to demand as it develops and changes. For example, it operates typically 4.5 days per week around the clock on full capacity, leaving some flexibility for extra shifts and temporary labor to be added when needed.

This then translates to frequent shipments and higher numbers of customer visits to the stores, creating an environment of shortage and opportunity.

Zara’s business strategy allows the company to sell more items at full price because of the sense of scarcity and exclusiveness the company exudes. Zara’s total cost is minimized because merchandise that is marked down is reduced dramatically as compared to competitors.

Zara makes 85 percent of the full price on its clothes, while the industry average is 60 to 70 percent. Unsold items account for less than 10 percent of its stock, compared with an industry average of 17 to 20 percent.

This is also the reason why Zara can afford the extra labor and  shipping costs  needed to accommodate and satisfy  changes in customer demand .

Lean inventory management

You'll be hard pressed to find any excess inventory or  deadstock  in a Zara warehouse. Throughout the supply chain, lean is the word, all the way from raw materials to the finished garments on the shelves.

Inventory optimization models  are put in place to help the company to determine the quantity that should be delivered to every single one of its retail stores via shipments that go out twice every week. The stock delivered is strictly limited, ensuring that each store only receives just want they need. This goes towards the brand image of being exclusive while avoiding the build up of unpopular stock.

This quick in-season turnaround, from production facilities located close to Zara’s distribution headquarters in Spain, allows Zara to ship more often and in smaller batches. If the design Zara hastily creates in an attempt to chase the latest trend does not sell well, little harm is done.

The batch is small, so there’s not a ton of unsold inventory to get rid of. And because the failed experiment is over quickly, there’s still time to try a different style, and then a different one after that.

Centralized order fulfillment

Zara sticks to a deep, predictable and fast rhythm, based around rapid deliveries to stores.

Each Zara outlet sends in two orders per week on specific days. Trucks leave at specific times and shipments arrive in stores at specific times. Garments are already labeled and priced upon arriving at their destination, meaning they’re immediately ready to be sold.

As a result of this clearly defined rhythm, every staff member involved in the supply chain – from design to procurement, production, distribution, and retail – knows the timeline and how their activities impact other functions. That certainly also extends to Zara customers, who know when to visit stores for fresh new garments.

Zara’s reliance on  centralized order fulfillmen t  is what enables the company to maintain incredibly efficient workflows – from initial design right through to delivery to stores and customers. The company’s approach is just another example of why streamlined operations and supply chain management are critical to profitability and achieving scale.

Automation is a game-changer in supply chain management.

Solid distribution network

Zara’s strong distribution network enables the company to deliver goods to its European stores within 24 hours, and to its American and Asian outlets in less than 40 hours.

Fast fashion success

Zara’s success story shows the strength of its operations. Its cross-functional operations strategy, coupled with its vertically integrated supply chain, enables mass production under push control, leading to  well-managed inventories , lower markdowns, higher profitability, and value creation for shareholders in the short and long term.

Zara is all about staying on top of the hottest trends, and exuding an exclusive feel, but its supply chain is the real star of the show. These rockstar-level logistics take it from being just another fashion retailer to an industry example of fast fashion done right.

Want to manage your inventory as effortlessly as Zara but for a fraction of the cost?

Save time and money by signing up for a free trial of QuickBooks Commerce today

Get the latest to your inbox

Relevant resources to help start, run, and grow your business.

By clicking “Submit,” you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement .

Thanks for subscribing.

Fresh business resources are headed your way!

This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.

We provide third-party links as a convenience and for informational purposes only. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.

Looking for something else?

From big jobs to small tasks, we've got your business covered.

Firm of the Future

Topical articles and news from top pros and Intuit product experts.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.

• Canada (English)
• Canada (French)
• United Kingdom
• Other Countries

Call Sales: 1-877-683-3280

© 2024 Intuit Inc. All rights reserved.

Intuit, QuickBooks, QB, TurboTax, Credit Karma, and Mailchimp are registered trademarks of Intuit Inc.

By accessing and using this page you agree to the Website Terms of Service .

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

Rapid-Fire Fulfillment

• Kasra Ferdows,
• Michael A. Lewis,
• Jose A.D. Machuca

Spanish clothier Zara turns the rules of supply chain management on their head. The result? A superresponsive network and profit margins that are the envy of the industry.

Reprint: R0411G

Would you send a half-empty truck across Europe or pay to airfreight coats to Japan twice a week? Would you move unsold items out of your shop after only two weeks? Would you run your factories just during the day shift? Is this any way to run an efficient supply chain?

For Spanish clothier Zara it is. Not that any one of these tactics is especially effective in itself. Rather, they stem from a holistic approach to supply chain management that optimizes the entire chain instead of focusing on individual parts. In the process, Zara defies most of the current conventional wisdom about how supply chains should be run.

Unlike so many of its peers, which rush to outsource, Zara keeps almost half of its production in-house. Far from pushing its factories to maximize output, the company focuses capital on building extra capacity. Rather than chase economies of scale, Zara manufactures and distributes products in small batches. Instead of outside partners, the company manages all design, warehousing, distribution, and logistics functions itself.

The result is a superresponsive supply chain exquisitely tailored to Zara’s business model. Zara can design, produce, and deliver a new garment to its 600-plus stores worldwide in a mere 15 days. So in Zara’s shops, customers can always find new products—but in limited supply. Customers think, “This green shirt fits me, and there is one on the rack. If I don’t buy it now, I’ll lose my chance.” That urgency translates into high profit margins and steady 20% yearly growth in a tough economic climate.

Some of Zara’s specific practices may be directly applicable only in industries where product life cycles are very short. But Zara’s simple philosophy of reaping bottom-line profits through end-to-end control of the supply chain can be applied to any industry.

When a German wholesaler suddenly canceled a big lingerie order in 1975, Amancio Ortega thought his fledgling clothing company might go bankrupt. All his capital was tied up in the order. There were no other buyers. In desperation, he opened a shop near his factory in La Coruña, in the far northwest corner of Spain, and sold the goods himself. He called the shop Zara.

• KF Kasra Ferdows ( [email protected] ) is the Heisley Family Professor of Global Manufacturing at Georgetown University’s McDonough School of Business in Washington DC.
• ML Michael A. Lewis is a professor of operations and supply management at the University of Bath School of Management in the UK.
• JM Jose A.D. Machuca is a professor of operations management at the University of Seville in Spain.

Partner Center

Zara logistics case study

Recommended

More related content, what's hot, what's hot ( 20 ), similar to zara logistics case study, similar to zara logistics case study ( 7 ), more from athanasios (sakis) karagiannis, more from athanasios (sakis) karagiannis ( 9 ).

• 1. ΘΕΜΑ ΕΡΓΑΣΙΑΣ: “Μελέτη Περίπτωσης: Zara Company” ΜΑΘΗΜΑ: ΔΙΟΙΚΗΣΗ ΕΦΟΔΙΑΣΤΙΚΗΣ ΑΛΥΣΙΔΑΣ ΥΠΕΥΘΥΝΟΣ ΔΙΔΑΣΚΩΝ: ΔΡ. ΜΙΧΑΗΛ ΒΙΔΑΛΗΣ ΣΥΜΜΕΤΕΧΟΝΤΕΣ ΦΟΙΤΗΤΕΣ: ΑΝΑΓΝΩΣΤΟΠΟΥΛΟΣ ΠΑΝΑΓΙΩΤΗΣ Α.Μ.: 213 2013 020 ΚΑΡΑΓΙΑΝΝΗΣ ΑΘΑΝΑΣΙΟΣ Α.Μ.: 213 2013 026 ΠΕΤΡΟΠΟΥΛΟΥ ΚΑΤΕΡΙΝΑΑ.Μ.: 213 2013 001 ΑΚΑΔΗΜΑΙΚΟ ΕΤΟΣ: 2013-14 ΧΙΟΣ, 2/4/2014
• 2.  Είναι μία εταιρία Ισπανικής προέλευσης που ανήκει στον όμιλο Inditex  Ο ιδιοκτήτης της είναι ο Amancio Ortega Gaona ο οποίος ξεκίνησε ως πωλητής υφασμάτων το 1963 στη La Coruna
• 3.  Το 1975 άνοιξε το πρώτο κατάστημα Zara  Το 1984 συνεργάζεται με τον Jose Maria Castellano έναν ειδικό στο πληροφοριακά συστήματα  Το 1985 ιδρύεται ο όμιλος Inditex  Το 1988 ιδρύεται η Zara B.V. στην Ολλανδία.  Το 1989 εγκαινιάζονται καταστήματα στη Νέα Υόρκη και στο Παρίσι  Το 1990 κατασκευάζεται νέα αποθήκη (130.000 τ.μ.) παράλληλα γίνεται κοινοπραξία με την Toyota για την κατασκευή του συστήματος JIT  Το 1991 ίδρυση της Zara Beijing για τον εφοδιασμό της νοτιοανατολικής Ασίας  Το 2010 ο αριθμός των καταστημάτων Ζara υπολογίζονται περίπου στα 1700.
• 4. To "ZARA concept" αναπτύχθηκε με σκοπό να παρέχει στους πελάτες του το αίσθημα της αξίας ικανοποιώντας τις ανάγκες των πελατών του. Ο Jose Maria Catellano συνήθιζε να λέει: «Η επιχείρηση το μόνο που έχει να κάνει είναι να μειώσει το χρόνο απόκρισης. Στη μόδα το απόθεμα είναι σαν το φαγητό. Χαλάει πολύ γρήγορα.» πρώην προϊστάμενος της ZARA
• 5. Brand perception  Η γρήγορη ανταπόκριση στα ρούχα τους έχει κάνει fashionable  Θεωρείται καινοτόμα εταιρία Quality control  Η ZARA παράγει όλα τα προϊόντα της εσωτερικά( in- house), έχει ένα πολύ καλύτερο έλεγχο και τα προβλήματα μπορούν να λύνονται κατευθείαν.
• 6. Η μελέτη της εταιρίας Zara βασίστηκε στο παραπάνω σχήμα και έγινε ανάλυση των επιμέρους στοιχείων του.
• 7.  Σχεδιασμένη πάνω σε ένα ευέλικτο και γρήγορο business model  Η Zara έχει στρατηγικά χτίσει το ανταγωνιστικό της πλεονέκτημα στην πλήρη ενημέρωση και έχει καταφέρει να χτίσει με επιτυχία αυτό που καλείται fast-fashion  Υιοθετεί γρήγορα τις αλλαγές, φέρνει νέα προϊόντα στα καταστήματα σε σύντομο χρονικό διάστημα, με το χαμηλότερο κόστος
• 8.  Η επικοινωνία και ο τρόπος χρήσης της τεχνολογίας για να ελέγξει σχεδόν κάθε εργασία της σχεδίασης παραγωγής και διανομής, είναι βασισμένη στη γρήγορη στρατηγική ενημέρωση όλων των τμημάτων.  Αποτελεσματική αλυσίδα εφοδιασμού- παραγωγής (βάζει τα προϊόντα σε καταστήματα λιανικής πώλησης σε 15 ημέρες)  Οφέλη της αποτελεσματικότητας της εταιρίας Zara είναι ότι ο μέσος όρος της μείωσης των τιμών των προϊόντων είναι πολύ μικρός (μειώνει μόνο 15% των προϊόντων- παραδοσιακοί λιανοπωλητές μείωση 50 % των προϊόντων)
• 9. Traditional Retailer Fast Fashion Retailer Designer Designer Push/Pull Model Retail Store Consumers Retailer Observes and collects environmental and consumer data Retail Store Designer Consumers
• 10.  Τα σχέδια παραμένουν σε κάθε κατάστημα 3 με 4 εβδομάδες έτσι οι πελάτες θα επισκεφθούν τα καταστήματα της ZARA πιο συχνά. (Αυτό το ανταγωνιστικό της πλεονέκτημα είναι δύσκολο να το αντιγράψουν οι ανταγωνιστές της, αυτό δεν είναι ένα μόνο πληροφοριακό σύστημα αλλά ένας συνδυασμός τεχνολογίας και ικανού προσωπικού.  Θεμελιώδη μέρος της επιτυχίας της ZARA είναι η γρήγορη ανταπόκριση  Συνδυασμός της άρτιας στρατηγικής που ακολουθεί το operations management, το HR, το marketing και η financial structures.
• 11.  Εστιάζει αποκλειστικά στα business-models της παραγωγής και logistic  Tο marketing cost βασίζεται περισσότερο στο να έχει ένα προνομιακό σημείο λιανικής πώλησης, ξοδεύει ένα 0.3 % των πωλήσεων της σε διαφήμιση σε σχέση με τους ανταγωνιστές της όπου ο μέσος όρος φθάνει το 3.5%.  Αυτό δεν είναι μόνο μια στρατηγική απόφαση να μειώσει το κόστος, αλλά και να διατηρηθεί η συνέπεια με τη συνολική στρατηγική τους για γρήγορη μόδα (STRATEGY FIT).
• 12.  Τα πιο high fashion ρούχα φτιάχνονται από την ZARA στα κεντρικά εργοστάσια στην Ισπανία, ενώ τα low-cost basic ρούχα δίνονται σε outsourcing στην Ασία.  Στρατηγική παραγωγής χαμηλού όγκου ανά σχέδιο και αλλάζοντας προϊόντα γρήγορα μέσα στα καταστήματα της μπορεί να μειώσει και να κάνει εκπτώσεις στις τιμές των ρούχων
• 13.  Το 50% των προϊόντων της παράγονται στην Ισπανία από 20 εργοστάσια, 70% των προϊόντων παράγεται στην Ευρώπη (συγκέντρωση πολλών παραγωγικών μονάδων κοντά στην έδρα, ελέγχει την παραγωγή και αντιδρά άμεσα (quick response)  Κάθετη ενσωμάτωση των διαδικασιών της εφοδιαστικής αλυσίδας (έχει πλήρη έλεγχο του προϊόντος σχεδίασης, παραγωγής και πώλησης μέσω της κάθετης ολοκλήρωσης της εφοδιαστικής της αλυσίδας (vertical SC channel integration).  Επενδύει στην τεχνολογία η οποία ενισχύει την απόδοση  Όλα τα καταστήματα είναι συνδεδεμένα με τη μητρική εταιρία, το οποίο επιτρέπει στα στελέχη του καταστήματος να βεβαιώνονται ότι οι σχεδιαστές έχουν πρόσβαση στην πληροφόρηση σε πραγματικό χρόνο για να αποφασίσουν μαζί με την εμπορική ομάδα σχετικά με τα υφάσματα, το κόψιμο και την τιμή ενός προϊόντος  Ιδιαίτερη προσοχή στην ομαδική εργασία. Προσπαθεί να σπάσει την εταιρική δομή και εμφανίζεται περισσότερο ως μια σοσιαλιστική επιχείρηση. Κάθε άτομο είναι ίσο στα μάτια της επιχείρησης και αυτό βοηθά την εργασία και την ανταλλαγή πληροφοριών να είναι πολύ πιο αποτελεσματικές.  Ενισχύει την εταιρική κουλτούρα.
• 15.  Παραδοσιακές εφοδιαστικές αλυσίδες εκτελούν τις διαδικασίες την μια πίσω από την άλλη, ενώ η Zara τις εκτελεί ταυτόχρονα, και έτσι βελτιώνει την ανταποκρισιμότητα και αποδοτικότητα της.  Στην βελτίωση και στην μεγαλύτερη αποδοτικότητα της εφοδιαστικής αλυσίδας συνέβαλε η συνεργασία της Zara (από το καλοκαίρι του 2005) με το MIT Sloan school of Management και το UCLA Anderson School of Management  Μηδενικά αποθέματα - Μειώνοντας το ρίσκο (JIT)
• 16.  Παράγει μικρές ποσότητες σε πολλούς κωδικούς.  Η μέγιστη προσοχή της είναι η βελτιστοποίηση της εφοδιαστικής αλυσίδα και όχι η μεγιστοποίηση της παραγωγής της, 4 ή 8 μήνες πριν την περίοδο των πωλήσεων.  Ταυτόχρονα συλλέγει μέσω εξελιγμένων συστημάτων αλλά και ικανού ανθρώπινου δυναμικού, πληροφορίες για τις καινούργιες τάσεις της μόδας.  Αυτό του επιτρέπει να λαμβάνει το 35% των πρώτων υλών , το 45% της εξωτερικής παραγωγής και το 85% της εσωτερικής παραγωγής μέσα στην περίοδο πωλήσεων σε σχέση με τους ανταγωνιστές του οι οποίο μπορούν να κάνουν ελάχιστες αλλαγές σε αυτή την περίοδο.
• 17. ZAR A Διαφορές Στην Εφοδιαστική Αλυσίδα Zara
• 18. Εγκαταστάσεις  Distribution Centers  Στο Distribution center του Arteixo χρησιμοποιεί ένα σύστημα mobile tracking system έτσι ώστε να κατανεμηθούν γρήγορα τα εμπορεύματα ( πρώτα γίνεται ο διαχωρισμός ανά χώρα και μετά ανά κατάστημα ) και ο έλεγχος όλη αυτής της διαδικασίας γίνεται από μερικούς μόνο εργάτες.  Το Distribution Center στην πόλη Σαραγόσα ( 275km Β.Α. της Μαδρίτης ), έχει άμεση πρόσβαση στο οδικό και σιδηροδρομικό δίκτυο. Το κόστος όλου αυτού του εγχειρήματος ανήλθε στα € 88 εκατομμύρια και δημιουργήθηκε για τη καλύτερη και γρηγορότερη εξυπηρέτηση των καταστημάτων της. ΤΟΠΟΘΕΣΙΑ ΤΟΥ ΚΕΝΤΡΟΥ ΔΙΑΝΟΜΗΣ ΕΠΙΦΑΝΕΙΑ GALICIA (ARTEIXO) 400000 m^2 LEON 40000 m^2 MADRID 160000 m^2 ZARAGOZA 120000 m^2
• 19.  Satellite Centers Επίσης η εταιρεία Zara από την άλλη πλευρά του Ατλαντικού έχει μικρά Satellite Centers τα οποία είναι εγκαταστημένα στην Αργεντινή, τη Βραζιλία και το Μεξικό.  Factories Τέλος έχει στη κατοχή της 20 ιδιόκτητα εργοστάσια εκ των οποίων τα 18 βρίσκονται γύρω από το Distribution Center της πόλης Arteixo. Είναι πλήρως αυτοματοποιημένα με εξειδίκευση ανά τύπο ενδύματος.
• 20.  Ακολουθεί τη φιλοσοφία μηδενικών αποθεμάτων, η διανομή σε μικρές αποστάσεις στόχευε περισσότερο στην κατασκευή προϊόντων προς πώληση παρά στη συγκέντρωση αποθεμάτων.  Η ευέλικτη υπεργολαβία στοχεύει σε μικρότερους όγκους και πιο συχνές παραδόσεις.  Βασικό κλειδί για την επίτευξη μηδενικών αποθεμάτων ήταν η επιτυχής εφαρμογή του JIT γνωστό από την εταιρία Toyota.  Ανάπτυξη της JIT απευθείας από τον τελικό πελάτη- καταναλωτή στον σχεδιαστή και στην παραγωγή. Οι απαιτήσεις των πελατών της τραβάνε (pull) το σύστημα και όχι ο σχεδιασμός με push.
• 21.  Παράλληλα με την συγκέντρωση πολλών παραγωγικών μονάδων κοντά στην έδρα της ελέγχει την παραγωγή και αντιδρά άμεσα (quick response) στις νέες επιταγές της μόδας  Μικρότερος χρόνο απόκρισης = Περισσότερα μοδάτα ρούχα  Μικρότερες ποσότητες= Συνεχής τροφοδότηση  Περισσότερο στυλ = Περισσότερες επιλογές και πιθανότητες επιτυχίας
• 22. Η τεχνολογία πληροφοριών και επικοινωνιών βρίσκεται στο επίκεντρο των εργασιών της εταιρείας Zara. Η ταχύτητα του Zara οφείλεται στα παρακάτω 4 βήματα όπου επιτυγχάνεται μέσω της πληροφορίας και της τεχνολογίας: 1. Συλλογή πληροφοριών (ERP) σχετικά με τις ανάγκες των καταναλωτών 2. Άμεση απόφαση 3. Έλεγχος των αποθεμάτων 4. Διαχείριση Διανομής
• 23.  Το Ζάρα χρησιμοποιεί μια εφοδιαστική αλυσίδα που αποτελείται από 4 αποθήκες οι οποίες βρίσκονται στην Ισπανία. Αυτές δέχονται αποστολές από ρούχα τελικής μορφής από εσωτερικούς και εξωτερικούς προμηθευτές .  Απευθείας ανατροφοδότηση αποθεμάτων για κάθε κατάστημα του Ζάρα σε όλο τον κόσμο 2 φορές την εβδομάδα στις κανονικές περιόδους και 3 φορές σε περιόδους υψηλών πωλήσεων.  Κάθε διανομή περιέχει πάντα νέας μόδας μοντέλα, έτσι ώστε τα καταστήματα να ανανεώνουν συνεχώς τις προσφορές τους. Δίκτυο Διανομής του Zara
• 24.  Στο κέντρο διανομής, τα προϊόντα επιθεωρούνται και γρήγορα αποστέλλονται.  Η πολιτική που ακολουθείται είναι η εξής: Η πλειοψηφία των εμπορευμάτων μένουν μέσα στην αποθήκη μόνο για λίγες ώρες και κανένα από αυτά δεν μένει πάνω από 3 ημέρες.  Ακόμη για να αυξηθεί η ταχύτητα διανομής, οι αποστολές προγραμματίζονται με βάση τις ζώνες ώρας και αποστέλλονται μέσω γης και αέρα.  Το σύστημα logistics, βασίζεται σε λογισμικό σχεδιασμένο από ομάδες της εταιρείας. Αυτό λειτουργεί ως εξής: Ο χρόνος ανάμεσα στην εντολή για παραγγελία από το κέντρο διανομής μέχρι την μεταφορά των αγαθών στα καταστήματα είναι κατά μέσο όρο 24 ώρες για τα Ευρωπαϊκά καταστήματα με μέγιστο τις 48 ώρες για τα Αμερικάνικα και τα Ασιατικά.  Τα φορτηγά εξυπηρετούν προορισμούς κυρίως στην Ευρώπη, ενώ μισθώνονται πτήσης charter εμπορευμάτων ώστε να εξυπηρετούνται άλλες περιοχές.  Έχουν γίνει συνεργασίες με τις Air France, KLM Cargo και Emirates Air, ώστε οι πτήσεις να μπορούν να συντονίσουν προς τα έξω μεταφορές (Outbound shipment) όλων των προϊόντων της Inditex και στην επιστροφή να φέρνουν πρώτες ύλες και ημιτελή ρούχα από περιοχές εκτός της Ισπανίας.
• 25. Το Ζάρα επίσης ακολουθεί οικολογική πολιτική στις μεταφορές του αφού από το 2007 ακολουθεί οικολογική στρατηγική η οποία περιέχει τη χρήση ενέργειας από ανανεώσιμες πηγές ενέργειας στο σύστημα των κέντρων logistics του. Έχουν λοιπόν εισάγει το βιοντίζελ καύσιμο και χρησιμοποιούν 5% από αυτό το καύσιμο στα φορτηγά τους για μεταφορές πάνω από 200 εκατομμύρια προϊόντων ετησίως. Αυτό τους βοηθάει να μειώσουν τους ρύπους τους στην ατμόσφαιρα περισσότερο από 500 τόνους διοξειδίου του άνθρακα.
• 26. Το συμπέρασμα είναι ότι η εταιρία Zara μπορεί να ανταποκρίνεται γρήγορα στις αλλαγές. Έχει επιτυχημένα αναπτύξει ένα ανταγωνιστικό πλεονέκτημα μέσα από τη άρτια στρατηγική που ακολουθεί το operations management, το HR, το marketing και η financial structures. Η τελευταία και πιο σημαντική στρατηγική και το κλειδί στην επιτυχία είναι η διαδικασίες που ακολουθούνται για την ενημέρωση της συλλογικής κατάστασης της εταιρίας. Τα οφέλη της Zara από το φάσμα της παραγωγής και τις οικονομίες κλίμακας έχει ως αποτέλεσμα κάθε τμήμα της εταιρίας να εξοικονομεί κόστη οπουδήποτε αυτά είναι πιθανά. Επιπλέον, η Zara έχει ολοκληρωμένα τεχνολογικά συστήματα που την βοηθάει στη διαχείριση των πρωτογενών δεδομένων, καθώς και σε ηλεκτρονικές διαδικασίες. Ο συνδυασμός της εσωτερικής παραγωγής και των τοπικών πόρων έχει αποδειχθεί ότι είναι μια μεγάλη επιτυχία για την Zara.

Watch: Romark Logistics and Gather AI: A Case Study

A case study about the application of drones employing artificial intelligence to the warehouse operations of Romark Logistics .

Romark Logistics is a third-party logistics provider with a focus on serving the consumer goods, pharmaceutical and retail sectors. It places a heavy emphasis on technology, with significant investment in automation and robotics, according to chief information officer Joe Warakomski.

Even with its reliance on technology, Romark was facing labor shortages, Warakomski says. At the same time, it needed a system that would maintain high levels of inventory accuracy. Romark turned for help to Gather AI , a specialist in warehouse drones for inventory management, because of the latter’s similarly intensive focus on automation, he adds.

Sean Mitchell, vice president of customer success with Gather AI, noted that the company’s drones perform autonomous inventory data gathering. The units take images of product at every location, using artificial intelligence to read barcodes, then compare the information directly with the facility’s warehouse management software (WMS) system.

Introduction of the Gather AI drones into Romark’s warehouse happened in phases. “We started small but were thinking big,” Warakomski says. Following a successful pilot program, the provider was able to rapidly expand the drones’ coverage to some 64,000 pallet positions.

It’s always a challenge to bring new systems into an ongoing operation, which can’t afford to slow for an instant. “Gather worked around our schedule,” Warakomski says. “And the amount of technology needed was fairly low.”

Mitchell says Gather AI was able to get the drones up and running, and complete worker training on the units, in just three weeks.

Romark was skeptical at the outset about Gather AI’s ability to get the drones into place in such a short time. In the end, though, the company experienced “a 5x improvement in our inventory process” with 99.9% accuracy, Warakomski says.

RELATED CONTENT

RELATED VIDEOS

Related Directories

Tecsys, inc., watch: why tech is playing catchup with e-commerce customer expectations, subscribe to our daily newsletter.

Timely, incisive articles delivered directly to your inbox.

Popular Stories

Sustainable Supply Chains: Automating for Transparency and Compliance

5G Is Here — And With It, Greater Vulnerability to Cyberattack

United Air Calls Off May Investor Day After Safety Incidents

Charting a Sustainable Path: Retail Supply Chain Evolution in 2024

U.S. Treasury Secretary Mulls Possible Tariffs on Green Energy Exports from China

Digital edition.

2024 Supply Chain Management Resource Guide: There's Only One Way Off a Burning Platform

Case studies, recycled tagging fasteners: small changes make a big impact.

Enhancing High-Value Electronics Shipment Security with Tive's Real-Time Tracking

Moving Robots Site-to-Site

Jll finds perfect warehouse location, leading to $15m grant for startup, robots speed fulfillment to help apparel company scale for growth.