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Operating more than 2,200 stores across 96 countries, Zara is one of the world’s leading fashion retailers. While the clothing giant’s success can be accredited to various factors — from its keen eye for emerging trends to its laser-sharp focus on customer experience — its highly responsive supply chain is what truly gives Zara its competitive edge.
Let’s dive into a couple of the key features of Zara’s supply chain and lay out some of the lessons other companies can learn from its success.
Known for staying ahead of the trends, Zara changes its apparel designs every two weeks on average; most of its competitors do so every 10–14 weeks. To maintain this lightning pace, Zara utilizes Just-in-Time (JIT) production methods to keep turnaround times as tight as possible.
JIT production, also known as JIT manufacturing, is a lean strategy centered on eliminating waste from business processes to allow for a highly efficient, streamlined system. This, in turn, enables companies to meet customer demand immediately.
To achieve this, Zara does much of its production in-house, with many of its facilities located near the company’s Galicia, Spain, headquarters. It also maintains about 85% of capacity for any necessary in-season adjustments — allowing for greater flexibility and agility in how and when new items are launched.
For companies looking to increase their speed to market, Zara’s unique production strategies can offer valuable lessons. Though most smaller businesses cannot achieve the same efficiency, there are a few key areas on which they can focus:
- Investing in in-house production processes can allow for greater flexibility and better oversight, reducing the risk of errors, delays, and inefficiencies.
- Automating in-house production can make a huge difference in getting products manufactured and out the door as quickly as possible while increasing accuracy.
- Producing products in limited or smaller quantities lends an air of exclusivity and urgency to the shopping experience, helping to push customers to purchase.
Zara has also tapped into vertical integration to keep its supply chain running smoothly. By acquiring businesses at different stages of the chain, Zara is able to maintain better control of the value chain, which means it can react quickly to shifting consumer demands.
Relying minimally on outsourcing, Zara controls everything from design to display to shipping, allowing it to gather valuable data at every stage. This data can then be analyzed to identify inefficiencies, pinpoint areas of success, and create accurate forecasting.
Aside from greater control, vertical integration also helps the global clothing retailer reduce risk, provide greater transparency to customers, and lower the cost of distribution. And because Zara is able to maintain control and oversight throughout the entire supply chain, better communication and collaboration between different partners can be achieved as well.
Drawing from the Zara model, businesses may want to consider their options for purchasing suppliers, merging with partners, or even investing in the sales end of the process.
These strategies are particularly useful for companies that feel their suppliers are exerting too much power over them. Vertical integration also provides better flexibility to weather difficult market conditions. However, there is greater risk involved in maintaining control over all or most of the supply chain, and the upfront organizational costs can be steep.
The Effect of COVID-19 on the Zara Supply Chain
As the global COVID-19 crisis continues to alter the market environment across industries of all kinds, Zara — along with many other clothing retailers — has been forced to reexamine its supply chain.
Fashion retailers typically operate on very thin margins, making major disruptions like the coronavirus pandemic challenging to deal with. In the first two weeks of March, Zara reported a 24% drop in sales. However, because the company does so little third-party outsourcing, it has been able to retain close control of its processes.
Brian Sather, CEO of Blacksmith International, which manages apparel-production outsourcing, highlighted the benefit of working with local facilities and suppliers, as Zara does: “Brands who are successful in the future will diversify their supply chain and incorporate local for local manufacturing principles.”
Image Credit: Zara / https://twitter.com/zarausa