Zara, a European clothing company, started in Spain in 1975 (Ferdows, Lewis, & Machucha, 2004). The company was spawned out of necessity when a clothing supplier found itself with a cancelled contract and all of its funds tied up in the inventory created to fulfill that contract; in order to work to prevent the company from going under, the goods were sold through a storefront, spawning the creation of one of the largest luxury shopping clothing chains in Europe (Ferdows, Lewis, & Machucha, 2004). With over 650 stores in fifty countries, the company is most prominent in Europe and the U.S. (Ferdows, Lewis, & Machucha, 2004; Zara.com, 2014). The company considers it to be a success primarily as a result of the manner in which their supply chain is setup. In order to better understand the company and its success, investigation into the reasons for the success of the supply chain will be undertaken, looking at the advantages that the company has over its competition as a result of its supply chain and the frequency of replenishment; in addition, information regarding the company’s infrastructure and how it may be applied to its success will be presented.
A supply chain strategy is the process by which a company is able to take the steps necessary in order to determine the most effective means of getting their product from their manufacturers or suppliers to their customers, dealing with all the steps in between the two (Gilmore, 2013). In order to develop a successful supply chain strategy, the organization must be able to understand and apply the basics of competitive strategy and supply chain strategy and the interrelationship between the two (Cetinkaya, n.d.). In addition, the company must have all of the ingredients necessary for a sustainable supply chain, develop the supply chain appropriately using a balanced scorecard technique and be able to understand why such a practice is necessary (Cetinkaya, n.d.). Zara’s supply chain is successful as a result of a host of different practices, the primary of which is due to the fact that they own their own factories; all aspects of the clothing creation process, from design to manufacture to shipping to stores are controlled directly by the company itself (Ferdows, Lewis, & Machucha, 2004). The needs of the system are determined, now, as a result of the demand on the part of consumers, allowing the company to effectively determine the items that will be the most beneficial if created by the organization, allowing them to boost their overall profits and sales with minimal outside assistance needed (Ferdows, Lewis, & Machucha, 2004).
In having this type of responsive supply chain, Zara works to ensure that they are able to make changes to the supply quickly and easily, meeting the needs of customers far before their competitors would be able to by resupplying weekly. Furthermore, in working to ensure that the stores are resupplied several times a week as opposed to the less frequent resupplies accomplished by their competition, Zara works to ensure that they are able to change gears immediately if a product is not selling, reducing their potential losses while at the same time providing customers exactly with what they desire based on current weekly trends (Ferdows, Lewis, & Machucha, 2004). While this type of supply chain practice works to increase shipping it decreases merchandise loss and shows the customers that they are valued by allowing them to see an immediate response based on their preferences (Ferdows, Lewis, & Machucha, 2004). This works to improve customer satisfaction and customer responsiveness to the brand, ultimately bringing in a greater profit for the stores.
In order to be able to operate the production, distribution, and fast fashion retail network efficiently, Zara needed an effective information infrastructure, one which let them know in real time the items that were selling the most, the likes and dislikes of the customers, and the necessary product information to continue to exceed customer expectations, tracking the styles that sell most and those that are not desired in equal measure. This infrastructure requires a highly intuitive computer network, accurate tracking programs, and real time access to data. Frequency of replenishment improves customer satisfaction as they are less likely to experience a product being out of stock, increasing their satisfaction with the brand. In working to ensure that their stores had this necessary information, Zara was able to take a business mistake and turn it into one of the most successful fashion shops in the world.
- Cetinkaya, B. Developing a Sustainable Supply Chain Strategy. Springer Publications. Retrieved 3 November 2014, from http://www.springer.com/…/9783642120220…
- Ferdows, K., Lewis, M., & Machuca, J. (2004). Rapid-Fire Fulfillment. Harvard Business Review. Retrieved 3 November 2014, from http://hbr.org/2004/11/rapid-fire-fulfillment/ar/1
- Gillmore, D. (2013). Just What is a Supply Chain Strategy?. Scdigest.com. Retrieved 3 November 2014, from http://www.scdigest.com/assets/FirstThoughts/13-10-04.php?cid=7463
- Zara.com. (2014). ZARA UNITED STATES – Official Website. Retrieved 3 November 2014, from http://www.zara.com/us/