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ZARA'S CASE STUDY -the Strategy of the Fast Fashion Pioneer The Strategy of the Fast Fashion Pioneer

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Zara: The Evolving Fast-Fashion Industry

Zara: The Evolving Fast-Fashion Industry ^ W34418

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Publication Date: December 10, 2023

Source: Ivey Publishing

In 2023, the fast-fashion industry found itself under attack on several fronts: a growing poor reputation regarding its significant negative social and environmental impacts; the increasing prevalence of online shopping and the entrance of many new competitors who were not burdened with expensive bricks-and-mortar retail networks; and the evolution of artificial intelligence (AI) technology in helping to identify future fashion trends. Industria de Diseño Textil SA (Inditex) and its flagship brand Zara had just come off a record 2022, with industry-leading sales, gross margins, and profits. They were also ahead of the industry with 25.8 per cent of sales through their online channels. However, the challenges the fast-fashion industry faced were significant for Zara and required a long-term strategic response. Daniel Doiron is affiliated with University of New Brunswick Saint John

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Zara's Secret for Fast Fashion

by Kasra Ferdows, Michael A. Lewis and Jose A.D. Machuca

Editor's note: With some 650 stores in 50 countries, Spanish clothing retailer Zara has hit on a formula for supply chain success that works by defying conventional wisdom. This excerpt from a recent Harvard Business Review profile zeros in on how Zara's supply chain communicates, allowing it to design, produce, and deliver a garment in fifteen days.

In Zara stores, customers can always find new products—but they're in limited supply. There is a sense of tantalizing exclusivity, since only a few items are on display even though stores are spacious (the average size is around 1,000 square meters). A customer thinks, "This green shirt fits me, and there is one on the rack. If I don't buy it now, I'll lose my chance."

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 them resemble the latest couture creations. But Zara often beats the high-fashion houses to the market and offers almost the same products, made with less expensive fabric, at much lower prices. Since most garments come in five to six colors and five to seven sizes, Zara's system has to deal with something in the realm of 300,000 new stock-keeping units (SKUs), on average, every year.

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, and so on. Most companies insert layers of bureaucracy that can bog down communication between departments. But Zara's organization, operational procedures, performance measures, and even its office layouts are all designed to make information transfer easy.

Zara's single, centralized design and production center is attached to Inditex (Zara's parent company) headquarters in La Coruña. It consists of three spacious halls—one for women's clothing lines, one for men's, and one for children's. Unlike most companies, which try to excise redundant labor to cut costs, Zara makes a point of running three parallel, but operationally distinct, product families. Accordingly, separate design, sales, and procurement and production-planning staffs are dedicated to each clothing line. A store may receive three different calls from La Coruña 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. Though it's more expensive to operate three channels, the information flow for each channel is fast, direct, and unencumbered by problems in other channels—making the overall supply chain more responsive.

In each hall, floor to ceiling windows overlooking the Spanish countryside reinforce a sense of cheery informality and openness. Unlike companies that sequester their design staffs, Zara's cadre of 200 designers sits right in the midst of the production process. Split among the three lines, these mostly twentysomething designers—hired because of their enthusiasm and talent, no prima donnas allowed—work next to the market specialists and procurement and production planners. Large circular tables play host to impromptu meetings. Racks of the latest fashion magazines and catalogs fill the walls. A small prototype shop has been set up in the corner of each hall, which encourages everyone to comment on new garments as they evolve.

The physical and organizational proximity of the three groups increases both the speed and the quality of the design process. Designers can quickly and informally check initial sketches with colleagues. Market specialists, who are in constant touch with store managers (and many of whom have been store managers themselves), provide quick feedback about the look of the new designs (style, color, fabric, and so on) and suggest possible market price points. Procurement and production planners make preliminary, but crucial, estimates of manufacturing costs and available capacity. The cross-functional teams can examine prototypes in the hall, choose a design, and commit resources for its production and introduction in a few hours, if necessary.

Zara is careful about the way it deploys the latest information technology tools to facilitate these informal exchanges. Customized handheld computers support the connection between the retail stores and La Coruña. These PDAs augment regular (often weekly) phone conversations between the store managers and the market specialists assigned to them. Through the PDAs and telephone conversations, stores transmit all kinds of information to La Coruña—such hard data as orders and sales trends and such soft data as customer reactions and the "buzz" around a new style. While any company can use PDAs to communicate, Zara's flat organization ensures that important conversations don't fall through the bureaucratic cracks.

Once the team selects a prototype for production, the designers refine colors and textures on a computer-aided design system. If the item is to be made in one of Zara's factories, they transmit the specs directly to the relevant cutting machines and other systems in that factory. Bar codes track the cut pieces as they are converted into garments through the various steps involved in production (including sewing operations usually done by subcontractors), distribution, and delivery to the stores, where the communication cycle began.

The constant flow of updated data mitigates the so-called bullwhip effect—the tendency of supply chains (and all open-loop information systems) to amplify small disturbances. A small change in retail orders, for example, can result in wide fluctuations in factory orders after it's transmitted through wholesalers and distributors. In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, Zara lets them adjust 40 percent to 50 percent. In this way, Zara avoids costly overproduction and the subsequent sales and discounting prevalent in the industry.

Excerpted with permission from "Rapid-Fire Fulfillment," Harvard Business Review , Vol. 82, No.11, November 2004.

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Kasra Ferdows is the Heisley Family Professor of Global Manufacturing at Georgetown University's McDonough School of Business in Washington DC.

Michael A. Lewis is a professor of operations and supply management at the University of Bath School of Management in the UK.

Jose A.D. Machuca is a professor of operations management at the University of Seville in Spain.

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Digital Innovation and Transformation Mba student perspectives. Assignments Assignment: Data and Analytics as… ZARA: Achieving the “Fast” in Fast Fashion through Analytics How does fast fashion make any business sense? Zara uses intensive data and analytics to manage a tight supply chain and give customers exactly what they want. Introduction Zara’s parent company Inditex has managed to thrive in the last decade while several other fashion retailers have faced declining sales or stagnant growth. Inditex has grown over 220% in annual revenue since 2004, more than its key competitors like H&M, Gap, or Banana Republic (1). The value of a fast fashion brand is to bring the latest designs and “trendiest trends” into the market as quickly as possible, preferably as soon as they became hot on the catwalk, and to provide these at a reasonable price. The traditional fashion industry is not well equipped to provide such value as it operates on a bi-annual or seasonal basis, with long production lead times due to outsourced manufacturing to low cost-centers. Zara has turned the industry on its head by using data and analytics to track demand on a real-time, localized basis and push new inventory in response to customer pull. This enables them to manage one of the most efficient supply chains in the fashion industry, and to create the fast fashion category as a market leader. Pathways to a Just Digital Future How Zara Uses Data Inditex is a mammoth retailer, producing over 840 million garments in a year, the majority of which are sold by Zara (2). Every item of clothing is tagged with an RFID microchip before it leaves a centralized warehouse, which enables them to track that piece of inventory until it is sold to a customer (3). The data about the sale of each SKU, inventory levels in each store, and the speed at which a particular SKU moves from the shelf to the POS is sent on a real time basis to Inditex’s central data processing center (see picture below). This center is open 24 hours a day and collects information from all 6000+ Inditex stores across 80+ countries and is used by teams for inventory management, distribution, design and customer service improvements (4). Zara’s Data Processing Center receives real-time data from around the world (4). When the apparel arrives in store, RFID enables the stockist to determine which items need replenishing and where they are located, which has made their inventory and stock takes 80% faster than before (3). If a customer needs a particular SKU, salespeople are able to serve them better by locating it immediately in store or at a nearby location. Moreover, every Zara location receives inventory replenishments twice a week, which is tailored to that stores real-time updates on SKU-level inventory data. The sales tracking data is critical in enabling Zara to serve its customers with trends that they actually want, and eliminate designs that don’t have customer pull. Zara’s design team is an egalitarian team of over 350 designers that use inspiration from the catwalk to design apparel on daily basis. Every morning, they dive through the sales data from stores across the world to determine what items are selling and accordingly tailor their designs that day. They also receive qualitative feedback from empowered sales employees that send in feedback and customer sentiment on a daily basis to the central HQ e.g., “customers don’t like the zipper” or “she wishes it was longer” (1). At the start of the planning process, Zara orders very small batches of any given design from their manufacturers (even just 4-6 of a shirt per store). The majority of Zara’s factories are located proximally in Europe and North Africa, enabling them to manufacture new designs close to home and ship them to their stores within 2-3 weeks. They then test these designs in store, and if the data suggests the designs take off, Zara can quickly order more inventory in the right sizes, in the locations that demanded it. Such store-level data allows Zara to be hyper-local in serving their customer’s needs – as tastes can vary on a neighborhood level. As Inditex’s communication director told the New York Times, “ Neighborhoods share trends more than countries do. For example, the store on Fifth Avenue in Midtown New York is more similar to the store in Ginza, Tokyo, which is an elegant area that’s also touristic. And SoHo is closer to Shibuya, which is very trendy and young.” (5) Unlike other retailers that may order inventory based on their hypotheses about tastes at a regional level, Zara is tailors its collections based on the exact zip code and demographic that a given location serves (5). Zara’s Results vs. Competitors Zara sells over 11,000 distinct items per year versus its competitors that carry 2,000 to 4,000. However Zara also boasts the lowest year-end inventory levels in the fashion industry. This lean working capital management offsets their higher production costs and enables them to boast rapid sales turnover rates. At Zara, only 15% to 25% of a line is designed ahead of the season, and over 50% of items are designed and manufactured in the middle of a season based on what becomes popular (2). This is in direct contrast to a close competitor like H&M where 80% of designs are made ahead of the season, and 20% is done in real-time during the season (6). Most other retailers commit 100% of their designs ahead of a season, and are often left with excess inventory that they then have to discount heavily at season-end. Instead, Zara’s quick replenishment cycles create a sense of scarcity which might actually generate more demand: “With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. You buy it now or never.” (5) https://www.bloomberg.com/news/articles/2016-11-23/zara-s-recipe-for-success-more-data-fewer-bosses http://www.digitalistmag.com/digital-supply-networks/2016/03/30/zaras-agile-supply-chain-is-source-of-competitive-advantage-04083335 http://static.inditex.com/annual_report_2015/en/our-priorities/innovation-in-customer-services.php http://www.refinery29.com/2016/02/102423/zara-facts?utm_campaign=160322-zara-secrets&utm_content=everywhere&utm_medium=editorial&utm_source=email#slide-11 http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=all https://erply.com/in-the-success-stories-of-hm-zara-ikea-and-walmart-luck-is-not-a-key-factor/ Student comments on ZARA: Achieving the “Fast” in Fast Fashion through Analytics Great post Ravneet – I had never read about Zara’s extremely quick supply chain or hyper-local testing. I have a question for you about fast fashion in general, but especially for Zara since it produces and sells more distinct items than its competitors: it seems that many designers are not fond of the “runway-inspired” fashions sold at these stores and some have even sued stores for copying their designs. Do you think Zara and other brands like it are doing anything wrong, and if not, what recourse do designers have for “imitations” of their work? Thanks for the post Ravneet. Zara and H&M are beacons of hope for a mostly distressed industry. Do you think Zara’s advantage could be sustained in the event of a full-on assault by the Amazons of the world? Leave a comment Cancel reply You must be logged in to post a comment. Harvard Business School → Faculty & Research → November 2009 (Revised January 2010) HBS Case Collection Zara: Managing Stores for Fast Fashion Format: Print | Pages: 19 More from the Authors Faculty Research Climate Governance at Linde plc (B) June 2024 (Revised June 2024) Climate Governance at Linde plc (A) Funderbeam: teaming up or going alone. Climate Governance at Linde plc (B)  By: Lynn S. Paine, Suraj Srinivasan, Emilie Billaud and Vincent Marie Dessain Climate Governance at Linde plc (A)  By: Lynn S. Paine, Suraj Srinivasan, Emilie Billaud and Vincent Dessain Funderbeam: Teaming Up or Going Alone?  By: Paul A. Gompers, Elena Corsi and Orna Dan 500 COMMENTS (PDF) ZARA'S CASE STUDY -the Strategy of the Fast Fashion Pioneer The Learn how Zara, the fast fashion pioneer, achieved success with its unique strategy and supply chain management. Read the case study on ResearchGate. ZARA: Fast Fashion Powered by ZARA's success, Inditex has expanded into 39 countries, making it one of the most global retailers in the world. But in 2002, it faces important questions concerning its future growth. ... Harvard Business School Case 703-497, April 2003. (Revised December 2006.) Educators; Purchase; Related Work. April 2003 (Revised December 2006 ... Zara: The Evolving Fast-Fashion Industry Industria de Diseño Textil SA (Inditex) and its flagship brand Zara had just come off a record 2022, with industry-leading sales, gross margins, and profits. They were also ahead of the industry with 25.8 per cent of sales through their online channels. However, the challenges the fast-fashion industry faced were significant for Zara and ... ZARA: Fast Fashion Business growth Customer analysis Demand planning Global strategy Market analysis Production. Source: Harvard Business School. Product #: 703497-PDF-ENG. Length: 35 page (s) Focuses on Inditex, an apparel retailer from Spain, which has set up an extremely quick response system for its ZARA chain. Instead of predicting mont. PDF ZARA: Fast Fashion JOSÉ LUIS NUENO. ARA: Fast FashionFashion is the imitation of a given example and satisfies the demand for socia. adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap pr. Zara: An Integrated Store and Online Model (A) In 2010, amidst the growth of ecommerce and the emergence of new, purely online, fashion players, Zara launched its first online store, Zara.com. Since then, Zara's online business had grown at a fast pace. By 2018, 12% of Inditex Group's total sales came from the online channel. Since the inception of the first online store, Inditex ... ZARA: Fast Fashion Case Studies. Strategy & Execution; ZARA: Fast Fashion. ... Register as a Premium Educator at hbsp.harvard.edu, plan a course, and save your students up to 50% with your academic discount. Product Description. Publication Date: April 01 ... Powered by ZARA's success, Inditex has expanded into 39 countries, making it one of the most global ... ZARA Source: Harvard Business School. Product #: 503050-PDF-ENG. Length: 26 page (s) Fashion retailer ZARA has achieved spectacular growth via a distinctive design-on-demand operating model. This case describes this model and outlines. Zara: The Evolving Fast-Fashion Industry Industria de Diseño Textil SA (Inditex) and its flagship brand Zara had just come off a record 2022, with industry-leading sales, gross margins, and profits. They were also ahead of the industry with 25.8 per cent of sales through their online channels. However, the challenges the fast-fashion industry faced were significant for Zara and ... Zara Fashion retailer ZARA has achieved spectacular growth via a distinctive design-on-demand operating model. This case describes this model and outlines a number of challenges facing the company, with a particular emphasis on its international expansion. ... David J., and Guillermo D"Andrea. "Zara." Harvard Business School Case 503-050, March 2003 ... Rapid-Fire Fulfillment 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. Zara's Secret for Fast Fashion Zara's Secret for Fast Fashion. 2/21/2005. Spanish retailer Zara has hit on a formula for supply chain success that works. By defying conventional wisdom, Zara can design and distribute a garment to market in just fifteen days. From Harvard Business Review. by Kasra Ferdows, Michael A. Lewis and Jose A.D. Machuca. Zara: IT for Fast Fashion IT infrastructure Operations and supply chain management Organizational structure and design. Source: Harvard Business School. Product #: 604081-PDF-ENG. Length: 23 page (s) In 2003, Zara's CIO must decide whether to upgrade the retailer's IT infrastructure and capabilities. At the time of the case, the company relies on a. ZARA: Achieving the "Fast" in Fast Fashion through Analytics Zara uses intensive data and analytics to manage a tight supply chain and give customers exactly what they want. Introduction. Zara's parent company Inditex has managed to thrive in the last decade while several other fashion retailers have faced declining sales or stagnant growth. Inditex has grown over 220% in annual revenue since 2004 ... Zara: IT for Fast Fashion Abstract. In 2003, Zara's CIO must decide whether to upgrade the retailer's IT infrastructure and capabilities. At the time of the case, the company relies on an out-of-date operating system for its store terminals and has no full-time network in place across stores. Despite these limitations, however, Zara's parent company, Inditex, has built ... HBS HBS - Zara Fast Fashion Case Write Up - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. This write-up identifies Zara's chosen strategy, value chain, operating economics and competitive advantage; as well as recommendations. What Business Is Zara In? (Revised) Industria de Diseño Textil, SA (Inditex), primarily through its flagship brand Zara, had grown to be the world's number-one fashion manufacturer and retailer with the introduction of what many considered a disruptive fast-fashion business model. However, Inditex's chief executive officer insisted that this term failed to describe the company's business model accurately. Like other successful ... PDF Zara Case: Fast Fashion from Savvy Systems Zara's operations are concentrated in La Coruña and Zaragoza, Spain. A sampling of the firm's designs, and "The Cube", as shown on the firm's websites. The firm tripled in size between 1996 and 2000, then skyrocketed from $2.43 billion in 2001 to $13.6 billion in 2007. ZARA: Fast Fashion Powered by ZARA's success, Inditex has expanded into 39 countries, making it one of the most global retailers in the world. But in 2002, it faces important questions concerning its future growth. ... Harvard Business School Multimedia/Video Case 703-416, May 2003. (Revised May 2009.) Educators; Purchase; More from the Author. December 2011 ... PDF Zara'S Case Study ZARA'S CASE STUDY The Strategy of the Fast Fashion Pioneer Ana Mafalda Ricardo Morgado Costa Case study submitted as partial requirement for the conferral of Master in Management Supervisor: Prof. Mónica Ferreira, Invited Professor, ISCTE Business School, Marketing, Operations and General Management Department September 2017 Case Flash Forward: Zara: Fast Fashion Each Case Flash Forward provides educators and students with a brief, 2-3 page update of key changes at a particular company covered in a related case study. It is a compilation of publicly-available content prepared by an experienced editor. This Case Flash Forward provides an update on Inditex and Zara, including significant developments, current executives, key readings, and basic financials. Zara: Managing Stores for Fast Fashion Abstract. Pablo Isla, the CEO of Zara, wanted to improve operational efficiencies in managing its store network. In particular, he wanted to improve labor productivity at the stores. He considered outsourcing certain store operations to third parties, changing the way store managers were compensated, and creating formal operating procedures for ... SHEIN vs. Zara: Digital transformation in the fast-fashion industry In May 2021, SHEIN overtook Amazon as the most downloaded shopping app on the US iOS and Android app stores. During the pandemic in 2020, SHEIN achieved substantial sales growth and is now catching up with the fast-fashion giant Zara. This case first briefly discusses the apparel and fast-fashion industry and the creation of the fast-fashion model by Zara. Then it covers SHEIN's historical ... assignment essay homework paper phd report resume review speech thesis