The document discusses Zara's business model and use of technology. Some key points:
1. Zara links customer demand directly to manufacturing and distribution through vertical integration. Designers gather customer data from stores to quickly design and produce new products.
2. Products move from design to stores in just 3 weeks, much faster than competitors. Information technology helps share designs and gather sales data from stores twice weekly.
3. By producing locally and frequently updating stock based on sales, Zara can respond rapidly to fashion trends and consumer demands. This keeps customers returning to stores regularly.
Zara is a Spanish clothing retailer known for its rapid response to fashion trends. It operates over 531 stores globally using centralized legacy systems. While these provided data integrity and ease of training, they created bottlenecks and limited access. Zara recognized the need for faster processing systems to increase profits. It developed plans for a new distributed system using IT like ERP and RFID to achieve goals of short lead times, more styles, and reduced inventory risk. Key to Zara's success is its quick response supply chain and use of technology for market research, decision making, and inventory control.
Zara Fashion : Marketing Strategy and M.I.S.Akash Jauhari
Zara is a Spanish clothing retailer known for its "fast fashion" business model. It focuses on design, production, and distribution processes that allow it to quickly respond to shifting consumer demands. Zara designs and produces over 12,000 new items annually and aims to get new clothing styles to stores within 4-5 weeks. It uses information systems like a centralized database, RFID, and PDAs linked to its POS system to gather customer feedback and coordinate its entire global supply chain, allowing it to rapidly replenish stores based on sales data and trends. This integrated approach has helped Zara become highly profitable and given it a competitive advantage over slower rivals.
This document discusses the case of Zara, a large international clothing retailer known for its rapid response to fashion trends. It describes Zara's business model, which relies on vertical integration, in-house production, quick response times, centralized distribution, and low advertising costs. The document also discusses Zara's use of information systems across various parts of its business to gather customer data, track sales, coordinate design and production, manage logistics and distribution, and engage in other activities. Some challenges of implementing and maintaining such information systems are also outlined.
The presentation is create use as a material to the final case study presentation in Supply Chain class at Faculty of Engineering, Chulalongkorn University.
**All images use in the slide are from google images**
HBR Case Study - 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. Includes color exhibits.
Zara is a multinational clothing retailer and manufacturer headquartered in La Coruna, Spain. It was founded in 1975 and now operates in over 73 countries. Zara is known for its ability to take fashion trends from runway to stores in as little as 3 weeks. This is achieved through a business model focused on quick response to demand, in-house design, and local manufacturing and distribution. While Zara's systems have been successful, some argue it is time for an upgrade from outdated technology like floppy disks to support continued growth.
This document provides information about Zara, the largest clothing company owned by the Spanish fashion group Inditex. It discusses Zara's business model, strategies, and supply chain management approach. Zara aims to continuously innovate and provide new, affordable designs made from quality materials to satisfy customer desires. Through its fast fashion model, Zara is able to design, produce, and distribute new collections to stores within weeks, allowing it to stay on top of the latest trends. Zara has over 1,900 stores globally and is a leader in the fast fashion industry due to its ability to quickly replicate designs at low prices.
Zara is a Spanish clothing retailer known for its rapid response to fashion trends. It operates over 531 stores globally using centralized legacy systems. While these provided data integrity and ease of training, they created bottlenecks and limited access. Zara recognized the need for faster processing systems to increase profits. It developed plans for a new distributed system using IT like ERP and RFID to achieve goals of short lead times, more styles, and reduced inventory risk. Key to Zara's success is its quick response supply chain and use of technology for market research, decision making, and inventory control.
Zara Fashion : Marketing Strategy and M.I.S.Akash Jauhari
Zara is a Spanish clothing retailer known for its "fast fashion" business model. It focuses on design, production, and distribution processes that allow it to quickly respond to shifting consumer demands. Zara designs and produces over 12,000 new items annually and aims to get new clothing styles to stores within 4-5 weeks. It uses information systems like a centralized database, RFID, and PDAs linked to its POS system to gather customer feedback and coordinate its entire global supply chain, allowing it to rapidly replenish stores based on sales data and trends. This integrated approach has helped Zara become highly profitable and given it a competitive advantage over slower rivals.
This document discusses the case of Zara, a large international clothing retailer known for its rapid response to fashion trends. It describes Zara's business model, which relies on vertical integration, in-house production, quick response times, centralized distribution, and low advertising costs. The document also discusses Zara's use of information systems across various parts of its business to gather customer data, track sales, coordinate design and production, manage logistics and distribution, and engage in other activities. Some challenges of implementing and maintaining such information systems are also outlined.
The presentation is create use as a material to the final case study presentation in Supply Chain class at Faculty of Engineering, Chulalongkorn University.
**All images use in the slide are from google images**
HBR Case Study - 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. Includes color exhibits.
Zara is a multinational clothing retailer and manufacturer headquartered in La Coruna, Spain. It was founded in 1975 and now operates in over 73 countries. Zara is known for its ability to take fashion trends from runway to stores in as little as 3 weeks. This is achieved through a business model focused on quick response to demand, in-house design, and local manufacturing and distribution. While Zara's systems have been successful, some argue it is time for an upgrade from outdated technology like floppy disks to support continued growth.
This document provides information about Zara, the largest clothing company owned by the Spanish fashion group Inditex. It discusses Zara's business model, strategies, and supply chain management approach. Zara aims to continuously innovate and provide new, affordable designs made from quality materials to satisfy customer desires. Through its fast fashion model, Zara is able to design, produce, and distribute new collections to stores within weeks, allowing it to stay on top of the latest trends. Zara has over 1,900 stores globally and is a leader in the fast fashion industry due to its ability to quickly replicate designs at low prices.
Zara faced a decision about whether to upgrade its point-of-sale operating system. Currently it uses a stable but outdated DOS system with no online connectivity. Upgrading would modernize the system but could disrupt Zara's fast fashion business model which relies on quick response. A new system is recommended that maintains the stability and quick response of the current system while adding features like online connectivity between stores and headquarters to streamline operations and information sharing. Any change must not compromise Zara's ability to rapidly adapt to fashion trends.
Zara is a highly successful fashion retailer known for its fast fashion model. It introduces new designs two weeks after seeing them on runways rather than the industry standard of six months. Zara achieves this through an integrated operation strategy that allows for quick design, production, and distribution. Stores provide immediate customer feedback that designers use to create new items. Factories located in Spain enable rapid production to meet changing demand. An efficient supply chain distributes goods to stores within 24 hours in Europe. This strategy of speed, affordability, and variety has made Zara one of the world's largest clothing retailers.
Zara is a large Spanish clothing retailer known for its rapid fashion production model. It changes designs every 2 weeks compared to competitors' 2 months. Zara uses agents to scout trends and sends sketches to factories within 6 hours for production. Its infrastructure allows finishing goods to reach stores in 4-5 weeks. This rapid supply chain and production flexibility allows Zara to meet constantly changing fashion demands.
Zara follows a vertically integrated business model with an emphasis on speed, flexibility and decentralization to quickly respond to fashion trends, linking customer demand directly to manufacturing and distribution within 3 weeks. While Zara's current DOS-based POS system is simple and cost-effective, the company is considering upgrading to a new system to enable inter-connected stores, real-time data insights and support continued international expansion across over 500 stores globally. The upgrade would require significant one-time costs but is expected to increase operational efficiencies through improved inventory management and analytics.
This project contains a detailed evaluation of the business models of Zara and GAP in the e-commerce clothing retail space. The two companies have been compared and analyzed on the basis of total revenues, e-commerce presence, social media marketing process, new product introduction and product variability, followed by a detailed study containing SWOT analysis and the correlation of e-commerce with supply chain activities
Zara is by far the largest, most profitable and most internationalized fashion retail chain. Zara's success is based on a business system that depends on vertical integration, in-house production, quick response, one centralized distribution centre and low advertising cost. Zara's information system allows it to gather customer feedback and sales data in real-time to quickly design, produce, and distribute new fashion items to stores every few weeks. This rapid inventory turnover and frequent product refreshment is key to Zara maintaining its competitive edge over rivals in the fast fashion industry.
Zara has built a highly efficient supply chain and logistics system that allows it to bring new fashion designs from concept to stores in just 2 weeks. It uses a vertically integrated model where designs are created based on data from stores. Approved designs are quickly manufactured in nearby factories before being shipped to stores twice per week. Zara is proposing to expand this efficient model to the US by opening local distribution centers to manufacture and distribute to North American stores within 24 hours, reducing shipping costs and improving fashionability for American customers. While outsourcing logistics could improve efficiency, it risks losing control over their specialized system which is key to Zara's success.
Zara is a clothing retailer that uses modern technology in its marketing research and supply chain to quickly deliver fashionable designs at lower prices. It collects frequent customer feedback and uses IT to closely monitor trends. This allows Zara to make production decisions quickly and produce small quantities of many styles. As a result, Zara is able to deliver new fashion designs about twice a month while competitors take 3-5 months. This rapid turnover keeps customers engaged with frequent store visits and purchases.
The document outlines Zara's fast fashion business model and supply chain operations, which focuses on rapid design, production, and distribution of new fashion items to stores within weeks in order to stay on top of constantly changing trends, allowing Zara to maintain its competitive advantage over rivals with shorter inventory turnovers and product lifecycles. Zara's centralized operations and extensive use of data and technology allows it to quickly respond to demand changes through flexible procurement, production planning, and high-velocity logistics. This responsive supply chain model has supported Zara's global expansion to over 1700 stores in 78 countries while continually renewing its inventory with around 11,
Supply Chain Management of Zara (Case Study)Neha Chauhan
This document provides an overview of the Spanish apparel company Inditex and its flagship brand Zara. It discusses Zara's history and founding, Inditex's financial performance, Zara's unique business model centered around rapid design, production and distribution, and Zara's positioning within the global apparel industry. Key aspects of Zara's model include in-house design teams that produce new collections bi-weekly, local Spanish and Portuguese production facilities allowing for quick fulfillment, and a vertically integrated supply chain.
In this project, I worked with a group to create a buying plan for the shoes department of Zara. We analyzed up and coming trends for footwear and looked to see how those trends could further expand the ZARA shoe market.
Zara is a Spanish clothing retailer known for its rapid response to fashion trends. It produces around 450 million items per year through a vertically integrated supply chain that allows new designs to reach stores in as little as 2 weeks. Zara's unique approach prioritizes responsiveness over cost reduction through short production cycles, 2,000 stores worldwide, and a centralized distribution center in Spain. This enables Zara to replenish stores more frequently and have 11,000 new designs annually, driving its competitive advantage in fast fashion.
For ZARA stores to be able to offer cutting edge fashion at affordable prices requires the firm to exert a strong influence over almost the entire garment supply chain.
This document provides an overview and analysis of the Spanish fashion retailer Zara. It discusses Zara's history, business model, target markets, competitors, manufacturing and distribution processes, financial performance, and SWOT analysis. The key points are:
1. Zara was founded in 1975 in Spain and is known for its rapid response to fashion trends through a vertically integrated supply chain model.
2. It targets women and men aged 15-45, focusing on fashion-conscious middle-class customers.
3. Zara's success comes from its unique approach to product development and ability to bring designs from concept to stores in only 15 days through an efficient supply chain.
4. The analysis examines Zara
This document provides an overview and analysis of the Spanish clothing retailer Zara. It discusses:
1) Zara was founded in 1975 in Spain and is now one of the world's largest retailers, known for quick production cycles and trendy designs.
2) Zara's business model focuses on frequent new product introductions, short production cycles, over 1,000 suppliers, and fast delivery to over 6,000 stores worldwide.
3) Zara's target market is fashion-conscious consumers aged 15-45, with a focus on women's and men's clothing. The analysis identifies opportunities in the growing plus-size segment.
Zara is a major international fast fashion retailer owned by Inditex. It was founded in 1975 in La Coruña, Spain and has since expanded to over 2,000 stores across 88 countries. Zara commits to continuously innovating and providing new, quality designs at affordable prices faster than competitors. It aims to contribute to sustainable development through practices like using ecological fabrics and organic cotton. Zara's success is attributed to its ability to rapidly translate fashion trends into new collections available in stores through an integrated supply chain model.
This document discusses IT for fast fashion companies like Zara. It outlines Zara's business model and use of IT. It analyzes Zara using Porter's five forces. Zara turns fashionable clothing around in less than two weeks through limiting outsourcing and producing copies in-house. However, Zara's IT infrastructure is outdated, using DOS-based point of sale terminals without full network capabilities or inventory management. The document recommends Zara upgrade its systems to improve operations like demand forecasting and inventory replenishment through real-time information sharing and inventory management.
Zara is a Spanish fast fashion retailer known for its rapid production cycles that allow it to react quickly to new fashion trends. It has over 2000 stores globally and produces around 450 million items per year through a vertically integrated supply chain model. Key aspects of Zara's business model include small production runs that can be turned around in 2-3 weeks, frequent communication between stores and designers, and a highly responsive supply chain that can deliver new shipments globally within 24-48 hours. This approach allows Zara to offer new fashion items to customers much faster than competitors and keep inventory turnover high.
- Zara aims to develop a solid position in China and Australia by establishing brand awareness and loyalty to achieve 3% market share. It will enter these markets through wholly owned subsidiaries and flagship stores in Beijing and Sydney.
- Market research shows China has a large population and growing economy while Australia has a strong and stable economy. Both countries offer opportunities for Zara's fashion products but also face threats from competitors.
- Zara will target different demographics in each country by adjusting product sizes and styles to local preferences and climates. Advertising will utilize fashion magazines and events to promote the brand.
Zara is a Spanish clothing retailer known for its rapid response to new fashion trends. It is owned by Inditex Group and was founded in 1975 in A Coruña, Spain. Zara launches around 10,000 new designs each year and delivers new products to its 1,763 stores around the world twice each week. Through extensive market research and a vertically integrated supply chain located near its headquarters, Zara is able to quickly design, produce, and distribute new items to stores in response to emerging trends.
This document provides a case study on the supply chain management of Zara, a global clothing retailer. It discusses Zara's vertically integrated supply chain model that allows it to design, manufacture, and distribute new clothing collections within 2 weeks. This rapid replenishment model has contributed greatly to Zara's success. The document also compares Zara's supply chain to those of other retailers like Myer, Dell, and Toyota, noting differences in their approaches to areas like production, inventory management, and responsiveness to customer demands.
Zara has become very successful in the fashion industry due to its highly integrated supply chain that can design and produce new products in just two weeks. Zara relies on frequent information sharing between stores and designers, cross-functional collaboration, local manufacturing partners, and efficient distribution. As a result, Zara is able to keep inventory turnover high and quickly provide customers with the latest fashion trends, leading to strong financial performance for its parent company Inditex.
Zara faced a decision about whether to upgrade its point-of-sale operating system. Currently it uses a stable but outdated DOS system with no online connectivity. Upgrading would modernize the system but could disrupt Zara's fast fashion business model which relies on quick response. A new system is recommended that maintains the stability and quick response of the current system while adding features like online connectivity between stores and headquarters to streamline operations and information sharing. Any change must not compromise Zara's ability to rapidly adapt to fashion trends.
Zara is a highly successful fashion retailer known for its fast fashion model. It introduces new designs two weeks after seeing them on runways rather than the industry standard of six months. Zara achieves this through an integrated operation strategy that allows for quick design, production, and distribution. Stores provide immediate customer feedback that designers use to create new items. Factories located in Spain enable rapid production to meet changing demand. An efficient supply chain distributes goods to stores within 24 hours in Europe. This strategy of speed, affordability, and variety has made Zara one of the world's largest clothing retailers.
Zara is a large Spanish clothing retailer known for its rapid fashion production model. It changes designs every 2 weeks compared to competitors' 2 months. Zara uses agents to scout trends and sends sketches to factories within 6 hours for production. Its infrastructure allows finishing goods to reach stores in 4-5 weeks. This rapid supply chain and production flexibility allows Zara to meet constantly changing fashion demands.
Zara follows a vertically integrated business model with an emphasis on speed, flexibility and decentralization to quickly respond to fashion trends, linking customer demand directly to manufacturing and distribution within 3 weeks. While Zara's current DOS-based POS system is simple and cost-effective, the company is considering upgrading to a new system to enable inter-connected stores, real-time data insights and support continued international expansion across over 500 stores globally. The upgrade would require significant one-time costs but is expected to increase operational efficiencies through improved inventory management and analytics.
This project contains a detailed evaluation of the business models of Zara and GAP in the e-commerce clothing retail space. The two companies have been compared and analyzed on the basis of total revenues, e-commerce presence, social media marketing process, new product introduction and product variability, followed by a detailed study containing SWOT analysis and the correlation of e-commerce with supply chain activities
Zara is by far the largest, most profitable and most internationalized fashion retail chain. Zara's success is based on a business system that depends on vertical integration, in-house production, quick response, one centralized distribution centre and low advertising cost. Zara's information system allows it to gather customer feedback and sales data in real-time to quickly design, produce, and distribute new fashion items to stores every few weeks. This rapid inventory turnover and frequent product refreshment is key to Zara maintaining its competitive edge over rivals in the fast fashion industry.
Zara has built a highly efficient supply chain and logistics system that allows it to bring new fashion designs from concept to stores in just 2 weeks. It uses a vertically integrated model where designs are created based on data from stores. Approved designs are quickly manufactured in nearby factories before being shipped to stores twice per week. Zara is proposing to expand this efficient model to the US by opening local distribution centers to manufacture and distribute to North American stores within 24 hours, reducing shipping costs and improving fashionability for American customers. While outsourcing logistics could improve efficiency, it risks losing control over their specialized system which is key to Zara's success.
Zara is a clothing retailer that uses modern technology in its marketing research and supply chain to quickly deliver fashionable designs at lower prices. It collects frequent customer feedback and uses IT to closely monitor trends. This allows Zara to make production decisions quickly and produce small quantities of many styles. As a result, Zara is able to deliver new fashion designs about twice a month while competitors take 3-5 months. This rapid turnover keeps customers engaged with frequent store visits and purchases.
The document outlines Zara's fast fashion business model and supply chain operations, which focuses on rapid design, production, and distribution of new fashion items to stores within weeks in order to stay on top of constantly changing trends, allowing Zara to maintain its competitive advantage over rivals with shorter inventory turnovers and product lifecycles. Zara's centralized operations and extensive use of data and technology allows it to quickly respond to demand changes through flexible procurement, production planning, and high-velocity logistics. This responsive supply chain model has supported Zara's global expansion to over 1700 stores in 78 countries while continually renewing its inventory with around 11,
Supply Chain Management of Zara (Case Study)Neha Chauhan
This document provides an overview of the Spanish apparel company Inditex and its flagship brand Zara. It discusses Zara's history and founding, Inditex's financial performance, Zara's unique business model centered around rapid design, production and distribution, and Zara's positioning within the global apparel industry. Key aspects of Zara's model include in-house design teams that produce new collections bi-weekly, local Spanish and Portuguese production facilities allowing for quick fulfillment, and a vertically integrated supply chain.
In this project, I worked with a group to create a buying plan for the shoes department of Zara. We analyzed up and coming trends for footwear and looked to see how those trends could further expand the ZARA shoe market.
Zara is a Spanish clothing retailer known for its rapid response to fashion trends. It produces around 450 million items per year through a vertically integrated supply chain that allows new designs to reach stores in as little as 2 weeks. Zara's unique approach prioritizes responsiveness over cost reduction through short production cycles, 2,000 stores worldwide, and a centralized distribution center in Spain. This enables Zara to replenish stores more frequently and have 11,000 new designs annually, driving its competitive advantage in fast fashion.
For ZARA stores to be able to offer cutting edge fashion at affordable prices requires the firm to exert a strong influence over almost the entire garment supply chain.
This document provides an overview and analysis of the Spanish fashion retailer Zara. It discusses Zara's history, business model, target markets, competitors, manufacturing and distribution processes, financial performance, and SWOT analysis. The key points are:
1. Zara was founded in 1975 in Spain and is known for its rapid response to fashion trends through a vertically integrated supply chain model.
2. It targets women and men aged 15-45, focusing on fashion-conscious middle-class customers.
3. Zara's success comes from its unique approach to product development and ability to bring designs from concept to stores in only 15 days through an efficient supply chain.
4. The analysis examines Zara
This document provides an overview and analysis of the Spanish clothing retailer Zara. It discusses:
1) Zara was founded in 1975 in Spain and is now one of the world's largest retailers, known for quick production cycles and trendy designs.
2) Zara's business model focuses on frequent new product introductions, short production cycles, over 1,000 suppliers, and fast delivery to over 6,000 stores worldwide.
3) Zara's target market is fashion-conscious consumers aged 15-45, with a focus on women's and men's clothing. The analysis identifies opportunities in the growing plus-size segment.
Zara is a major international fast fashion retailer owned by Inditex. It was founded in 1975 in La Coruña, Spain and has since expanded to over 2,000 stores across 88 countries. Zara commits to continuously innovating and providing new, quality designs at affordable prices faster than competitors. It aims to contribute to sustainable development through practices like using ecological fabrics and organic cotton. Zara's success is attributed to its ability to rapidly translate fashion trends into new collections available in stores through an integrated supply chain model.
This document discusses IT for fast fashion companies like Zara. It outlines Zara's business model and use of IT. It analyzes Zara using Porter's five forces. Zara turns fashionable clothing around in less than two weeks through limiting outsourcing and producing copies in-house. However, Zara's IT infrastructure is outdated, using DOS-based point of sale terminals without full network capabilities or inventory management. The document recommends Zara upgrade its systems to improve operations like demand forecasting and inventory replenishment through real-time information sharing and inventory management.
Zara is a Spanish fast fashion retailer known for its rapid production cycles that allow it to react quickly to new fashion trends. It has over 2000 stores globally and produces around 450 million items per year through a vertically integrated supply chain model. Key aspects of Zara's business model include small production runs that can be turned around in 2-3 weeks, frequent communication between stores and designers, and a highly responsive supply chain that can deliver new shipments globally within 24-48 hours. This approach allows Zara to offer new fashion items to customers much faster than competitors and keep inventory turnover high.
- Zara aims to develop a solid position in China and Australia by establishing brand awareness and loyalty to achieve 3% market share. It will enter these markets through wholly owned subsidiaries and flagship stores in Beijing and Sydney.
- Market research shows China has a large population and growing economy while Australia has a strong and stable economy. Both countries offer opportunities for Zara's fashion products but also face threats from competitors.
- Zara will target different demographics in each country by adjusting product sizes and styles to local preferences and climates. Advertising will utilize fashion magazines and events to promote the brand.
Zara is a Spanish clothing retailer known for its rapid response to new fashion trends. It is owned by Inditex Group and was founded in 1975 in A Coruña, Spain. Zara launches around 10,000 new designs each year and delivers new products to its 1,763 stores around the world twice each week. Through extensive market research and a vertically integrated supply chain located near its headquarters, Zara is able to quickly design, produce, and distribute new items to stores in response to emerging trends.
This document provides a case study on the supply chain management of Zara, a global clothing retailer. It discusses Zara's vertically integrated supply chain model that allows it to design, manufacture, and distribute new clothing collections within 2 weeks. This rapid replenishment model has contributed greatly to Zara's success. The document also compares Zara's supply chain to those of other retailers like Myer, Dell, and Toyota, noting differences in their approaches to areas like production, inventory management, and responsiveness to customer demands.
Zara has become very successful in the fashion industry due to its highly integrated supply chain that can design and produce new products in just two weeks. Zara relies on frequent information sharing between stores and designers, cross-functional collaboration, local manufacturing partners, and efficient distribution. As a result, Zara is able to keep inventory turnover high and quickly provide customers with the latest fashion trends, leading to strong financial performance for its parent company Inditex.
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Over 1
Kaan Over
James K. Lill, Adriana Gil-Matos
Introduction to Engineering Management
October 30, 2016
Zara International: Fashion at the Speed of Light
This study analyzes the status of Zara International taking a broader look at the apparel industry where it operates and the competitive factors, its current operational performance, its market competiveness and its response to the new trends such market globalization. The study also stretches to find out whether Inditex is still providing worthy management benchmarks that firms such as Zara could follow.
Apparel Industry and Its Competitive Factors
The global apparel industry continues to grow healthily into the future. This is attributed to the absence of switching costs for consumers and great product differentiation which has resulted into moderate competition rate. Apparel industry is important to all the economies across the globe as it contribute immensely to trade, employment, investment and revenue all over the world. The industry has vast product differentiation, short product life cycles, and is characterized by great pace of demand change that is coupled with rather long and fixed supply processes.
According to statista.com, the US Apparel industry is estimated to be around $225billion with the women accounting for the largest sales volume at $110,826 million. As of 2015, the market was valued at approximately 343 billion U.S. dollars. Price per apparel article in US was estimated to be about $19. The clothing stores sales in the industry was also estimated to about $183.01bn. The U.S. Apparel Manufacturing was reported to have employed about 89,588 people as of 2014. At the retail level clothing store sales in U.S. was estimated at $183.01bn while the U.S. apparel and accessories retail e-commerce revenue was reported to be about $63.5 Major retail and discount stores are the likes of Target, Wal-Mart, and Kohl's; these firms operate by keeping profit margins thin at stores which sell moderately priced apparel.
As seen in the figure below, the market value of the apparel industry in the United States has been on the increase since 2011. In 2011 the market was valued at $309.98 billion, in 2012, this increased to $316.92 and in 2013 it reached $323.75 billion. In 2014, the market again recorded an increase standing at $331.49 billion. In 2015 it increased to $342.94 billion and currently it stands at $358.88 billion.
Fig1: Market value of apparel and footwear in the United States from 2011 to 2016 (In $billion)
The major competitive factors in the apparel industry include the cost of labor, cost of raw materials and the shipping costs (Lu 32). Besides these, in order to remain competitive within the apparel industry, firms must updated on the latest trends in the market. As such, firms must ensure tha.
Microsoft power point zara strategy caseTanya Boichun
Zara has been able to achieve competitive advantage and sustained profits above industry averages through its business model and vertical integration. It can design, produce, and deliver new fashion items to stores within 2-3 weeks, much faster than competitors. This speed and flexibility allows Zara to stay responsive to the latest trends. Its organizational structure with store manager autonomy and technological integration of feedback also enables rapid design adaptation. While imitable, Zara's full business model would be difficult for competitors to copy due to the costs and time required to develop comparable integration, culture, and processes.
This document summarizes a journal article about the internationalization of the Spanish fashion brand Zara. It provides background on Zara and its business model, which focuses on quick production turnaround and receiving frequent small shipments to stores based on customer feedback. The summary discusses Zara's international expansion, including its motivations such as market saturation at home and opportunities abroad from trade liberalization. Key aspects of Zara's internationalization process are also covered, such as its selection of major fashion markets and use of different entry strategies in different countries.
- Inditex is one of the largest fashion retailers in the world with over 6,700 stores globally. It has strong brand recognition for its Zara brand but lacks awareness in some markets like Asia and America.
- While Inditex has many strengths like its rapid fashion business model and strong financial performance, it faces threats from changing consumer preferences towards cheaper fashion and declining fast fashion trends. It is also over-reliant on European markets.
- The recommendations suggest Inditex focus on expanding its online presence, increase advertising, and further penetrate markets in Asia and America to drive future growth.
The project is a study on how Vertical Integration as a supply chain strategy has worked for Zara in emerging as a fast fashion system. It also focuses on analyzing the competitive advantages and the challenges of implementing Vertical Integration for Zara.
OPR 300 – Operations Management Case Study Supplying Fas.docxjacksnathalie
OPR 300 – Operations Management
Case Study
Supplying Fast Fashion
Contrast the approaches taken by H&M, Benetton and Zara in managing their supply chains.
Consider the following focus points:
1. How do they differ in terms of their approach to design stage of the supply chain?
2. How do they differ in terms of the manufacturing stage of the supply chain?
3. How do they differ in terms of the distribution stage of the supply chain?
4. How do they differ in terms of the retail stage of the supply chain?
5. For each brand, Identify and explain a SCM strategy or trend utilized in its supply chain.
6. In your opinion, which of the three companies have the best SCM and why?
Working individually, analyze the “supplying Fast Fashion” case study and present your analysis
in a report. Your work will be assessed according to the linked rubrics on blackboard. You are
encouraged to use online sources to support your analysis/recommendation. Make sure to
properly reference those sources in your report. The report should address all the questions
raised in the case study. Please use appropriate headings and subheadings where necessary. The
report should consist of the following sections:
Title page
Executive Summary
Introduction
Discussion
Recommendations
References
Please conform to the following:
• The report should be limited to 3-4 pages (700-1000 words) excluding title page and
references
• Use Times New Roman 12-pts font and 1.5-line spacing
• Use the APA referencing style
• Number each page consequently
2
Supplying Fast Fashion
Garment retailing has changed. No longer is there a standard look that all retailers adhere to for
a whole season. Fashion is fast, complex and furious. Different trends overlap and fashion ideas
that are not even on a store’s radar screen can become “must haves” within six months. Many
retail businesses with their own brands, such as H&M and Zara, sell up-to-the-minute
fashionability at low prices, in stores that are clearly focused on one particular market. In the
world of fast fashion, catwalk designs speed their way into high-street stores at prices anyone
can afford. The quality of the garment means that it may only last one season, but fast-fashion
customers don’t want yesterday’s trends. As Newsweek puts it, “being a quicker picker-upper” is
what made fashion retailers H&M and Zara successful. They thrive by practicing the new science
of “fast fashion”, compressing product development cycles as much as six times. But the retail
operations that customers see are only the end part of the supply chains that feeds them. And
these have also changed.
At its simplest level, the fast-fashion supply chain has four stages. First, the garments are
designed, after which they are manufactured. They are then distributed to the retail outlets,
where they are displayed and sold in retail operations designed to reflect the busi.
1) Porter's five forces analysis finds the global apparel industry has medium threat of new entrants due to modest growth and low capital requirements, but high bargaining power of customers and suppliers who face few switching costs. Rivalry is also high due to frequent price changes and ease of switching brands.
2) Zara's value chain emphasizes rapid design, production, and distribution through internal suppliers and owned factories. New collections are delivered to stores every two weeks to quickly reflect changing fashion trends. Marketing relies on brand reputation and store displays rather than advertising.
3) Zara's infrastructure allows for fast global coordination between managers, designers, and suppliers. Over half of its 60,000 young, female workforce is based
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introduction
Companies can effectively compete within an industry through innovative models.
Zara is an example, and its competitors are such as Gap, Southwest airlines, Wal-Mart and Dell among others.
Business model and key disruptive elements
Model Innovation disrupted market
-Deliver styles while still hot -marketing to convince buyers
-Reduce marketing cost and increase- -Increase marketing cost
layout cost.
-Hasten shift to customer demand -clearing the stock
Disruptive business model
The disruptive business model reduces the performance of the competitors by introducing new technologies that disrupt the normal activities in the industry.
4
most demanding use 1 2 3 4 3 4 5 6 30 1 2 3 4 2 3 4 5 low qu ality use 1 2 3 4 1 2 3 4
Ordering- orders are made on time and regulation made to ensure that the order is not late.
Fulfillment-the order is fulfilled by the La Coruna team.
Design and manufacturing- Design is made so as to meet the customers taste and ever changing desires.
Operations
The disruptive models change the way the operations are done. It introduces new operation models such as Zara’s the process of ordering, fulfillment and design.
5
Approaches and organization-consistent with the preference for speed and decentralized decision making.
Application development and other IT activities were the responsibility of an Is department of approximately 50 people
Information Technology(IT)
In side the factories,, relatively simple applications were used to plan production.
Most sophisticated ones were large computer controlled equipment that cut cloth into patterns.
Factories
Automated distribution centres e.g miles of automated conveyer belts facilitated the ongoing task of receiving bulk quantities of each garment from factories then recombining the garments into shipment for each store.
Distribution centres
Personal digital assistants(PDAs) and POS systems. Allows redundancy and division of labor.
Constantly upgrades PDAs to meet technological advancement.
POS terminals remained unchanged since they are remarkably stable, effective and easy to roll out and maintain over time.
stores
Zara leads in the profit margins and growth rate due to unique business model within the industry.
conclusion
Work sheet 4
What business is Zara in?
Worksheet#4
Core Competencies & Competitive Advantages
Learning Task#8
Zara Competencies
There are essentially business results and primary business measures which are reflective of Zara’s competitive advantages and core competencies. These are financial and operational. Write them down in the space provided on Worksheet #4
Zara’s core Competencies and how Zara has built them to execute the behavior drivers.
· To create a timely and accurate “one-number plan” that drives all the business functions and enables planning initial assortment at the store level.
· To develop a synchronized supply chain.
Zara has become extremely successful due to its responsive supply chain management. It can design, produce, and distribute new fashion items to its stores within 2 weeks, allowing it to stay on top of changing fashion trends. Zara's vertically integrated supply chain with in-house production facilities near headquarters allows it to quickly make changes to designs based on customer demand feedback collected by store managers. This fast production cycle, along with twice-weekly deliveries to stores, means customers always find new inventory that reflects the latest trends, fueling Zara's success.
This document provides an analysis of Zara and its business model. It begins with an introduction that outlines Zara's profile as the leading brand of Inditex, the largest apparel retailer in the world. It then discusses Zara's unique business model of vertical integration and rapid replenishment.
The document then covers various theoretical concepts relevant to analyzing Zara, including Porter's value chain analysis, PESTLE analysis, and the product lifecycle. It identifies the main issues facing Zara as the need to upgrade its aging POS systems and difficulties expanding beyond Europe due to cultural differences.
The focus areas for analysis are identified as Zara's strategic management decisions, how its information systems support decision making, reasons
Zara is a clothing brand known for fast fashion. It was founded in 1963 in Spain and opened its first store in 1975. Since then, Zara has expanded globally and now has over 2,000 stores in 96 countries. Zara's success is largely due to its ability to design and produce clothing in only two weeks in order to quickly respond to the latest fashion trends. It focuses on rapid production in small quantities, frequent store replenishments, and using its stores as a way to get customer feedback. Zara's core competencies include its vertical integration of design, production, and sales as well as its ability to quickly recreate fashion.
Zara's value chain is highly integrated and controlled. It sources materials and produces about half of products in Spain and Europe to allow for quick design changes. Products are shipped to stores within 24 hours in Europe. Store managers have autonomy to make replenishment orders based on sales data. Zara uses minimal marketing and focuses on window displays. Its competitive advantage lies in its ability to design, produce, and deliver fashion trends rapidly and at scale through its vertically integrated system.
HW #1Tech Alert on IT & Strategy (Ch 3-5Ch 3 -5 IT Strategy opt.docxwellesleyterresa
Zara gathers customer feedback and sales data from its stores to inform product design and inventory decisions. Store managers use PDAs to chat with customers and get input on styles. After closing, they analyze unsold items to identify customer preferences. Manager updates combine this qualitative feedback with quantitative sales data from POS systems. This evidence-based approach allows Zara to quickly design and reorder based on demand rather than guesses, helping it dominate the fast fashion industry.
Report Panel Discussion Session at Texproces 2016Matthijs Crietee
The panel discussion focused on how technology is being implemented globally to increase productivity in the apparel industry. Panelists discussed how more automated factories and a fully digital supply chain could enable mass customization. Where mass customization and automation make small-scale production feasible in high-income markets, reshoring and newshoring may occur. Panelists agreed that adopting new technologies across the entire supply chain is key, and that reshoring initiatives require investment in financing and training to develop expertise in apparel production.
Globalization Strategy of ZARA and MACRO ANalysisArshad TK
The document provides information about Zara's team members, perspectives, and an introduction to the company. It then analyzes Zara using various frameworks: PESTEL analysis looks at political, economic, social, technological, environmental, and legal factors. Scenario analysis examines three scenarios. CAGE analysis considers cultural, administrative, geographic, and economic distances between countries. The document also summarizes Zara's supply chain and competition. It outlines Zara's HRM plan and cultural web diagram.
Zara is a large international fashion retailer owned by Inditex, one of the world's largest fashion groups. It was founded in 1975 in Spain and has since expanded to over 2,000 stores globally. Zara is known for its fast fashion model which sees new designs manufactured and distributed to stores within weeks to respond rapidly to new trends. Key aspects of Zara's business model include an integrated design process, in-house manufacturing facilities, a highly efficient logistics network and a focus on locating stores in major cities worldwide. Zara aims to offer affordable, high-quality clothing to satisfy customer desires through continuous innovation.
Zara is a major fashion retailer known for its "fast fashion" business model. The document discusses Zara's current business state, which relies heavily on manual processes and limited information technology. Store managers have autonomy to select products for their stores. It is recommended that Zara implement a central inventory database and upgrade point-of-sale systems to provide employees with up-to-date inventory information across stores. This would increase productivity and allow Zara to enter the online retail space. The IT changes would empower employees while preserving Zara's decentralized decision-making structure.
Notion:
“a singular tool that handles all your work outside email and Slack”
Google Docs, Google Sheets, Confluence, Evernote, Trello , Todoist - all in one.
Lego Block structure with endless possibilities
Free Personal Use (similar to Ever Note) or Premium features at a price
Est. at over $2 Bn with 1M users
India has a large and growing liquor market, valued at $35 billion annually. The market includes Indian Made Foreign Liquor (IMFL) such as whiskey, rum, and brandy as well as beer and country liquor. IMFL and beer have seen high growth rates of over 10% and 15% respectively, while country liquor growth is slower. Kerala has a tradition of consuming toddy, or palm wine extracted from coconut trees, and has the highest per capita consumption of alcohol in India. However, the toddy industry is declining due to fewer tappers and changing consumer preferences. Revitalizing toddy production and marketing it as the traditional Neera beverage or developing premium brands could help boost the industry.
Apollo Tyres | IIMC | Sales & DistributionInduchoodan R
This document provides an overview of the tyre industry in India and Apollo Tyres' position within it. It summarizes insights from primary research interviews with Apollo sales managers, tyre dealers, and truck fleet owners. Key findings include: Apollo follows a fixed discount structure, while competitors offer increasing discounts based on volume; dealers prefer Apollo's structure as it benefits small and large dealers equally. Fleet owners prioritize durability, credit terms, and timely delivery when choosing tyres. The document also outlines motivators and barriers for dealers and fleet owners in selling or purchasing Apollo Tyres. It proposes strategies like expanding the dealer network and conceptualizing a fleet management system to increase Apollo's market share.
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Shopping Groups | IIMC | Consumer BehaviourInduchoodan R
This document discusses reference groups and their influence on consumer product choice decisions. It defines reference groups as groups that people refer to when evaluating themselves, and notes that reference groups can influence behavior through informational, normative, and identification influences. The document then examines different types of reference groups (membership vs non-membership, positive vs negative influence) and how marketers can approach reference groups through advertising, product trials, and point-of-sale strategies to influence consumer shopping groups.
Vivel: Integrated Marketing Communication Report | IIMC | IMCInduchoodan R
Vivel is ITC's personal care brand that targets the popular middle segment of the Indian soap and shampoo market. It offers multiple variants of soap and shampoo. Vivel Di Wills targets the upper middle class with slightly premium soaps, while regular Vivel offers affordable products to the middle class. ITC leverages its strong distribution network to ensure wide availability of Vivel. Bollywood actress Kareena Kapoor promotes the brand. The brand focuses on nourishment, protection and hydration to position itself against market leaders HUL and P&G.
Vivel: Integrated Marketing Communication Presentation | IIMC | IMCInduchoodan R
The document discusses the results of a study on the effects of exercise on memory and thinking abilities in older adults. The study found that regular exercise can help reduce the decline in thinking abilities that often occurs with age. Specifically, aerobic exercise was shown to improve scores on memory and thinking tests in sedentary older adults who exercised for 6 months.
Stereotypes in Brand Communication | IIM Calcutta | MTCIInduchoodan R
The document discusses several advertisements and their portrayal of gender and sexuality. It analyzes ads from Coca-Cola, Google, Starbucks, Motorola, Pantene, and Barbie. The Coca-Cola and Google ads received positive ratings for depicting LGBT characters in realistic ways without stereotypes. However, the Google ad was also criticized for reinforcing the stereotype that masculinity is defined by physical strength. The Starbucks ad used drag queens but was criticized for portraying them as clowns. The Motorola Super Bowl ad received negative attention for using sex and gay stereotypes to sell its product. The Pantene and Barbie ads tackled gender stereotypes and encouraged women's empowerment.
Storytelling in Marketing | IIM Calcutta | MTCIInduchoodan R
Coca-Cola aims to shift from creative excellence to content excellence by 2020. They will develop content that improves the world and people's lives while also achieving business goals. Coca-Cola wants to use stories and content from consumers to increase engagement and brand reach through videos that spark conversations and earn a place in popular culture.
Disruptive Content Business Models | IIM Calcutta | SEMMInduchoodan R
This document provides a link to a PDF file stored on Google Drive. Clicking the link allows downloading a higher quality version of some content currently being discussed or shared. The link suggests that a PDF format would provide better visual quality than other formats for whatever information is being conveyed.
Marketing through Sports | IIM Calcutta | SEMMInduchoodan R
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help alleviate symptoms of mental illness and boost overall mental well-being.
Teach for India | IIM Calcutta | Consumer BehaviourInduchoodan R
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive function. Exercise causes chemical changes in the brain that may help protect against developing mental illness and improve symptoms for those who already suffer from conditions like anxiety and depression.
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help boost feelings of calmness and well-being.
IIM CALCUTTA Final placement report_2015Induchoodan R
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against developing mental illness and improve symptoms for those who already have a condition.
Modi proposed a statue to stand for the ideals of Vallabhai Patel. It’s to represent the oneness of Indians despite the long standing socio-cultural diversity that exist in India and commemorate the man behind this unity and oneness of the nation. It would be the world's tallest statue. Mr Modi said: “The world will be forced to look at India when this statue stands tall.
Khadims | IIM Calcutta | Marketing ManagementInduchoodan R
The document analyzes the distribution strategy of Khadim's, a leading footwear retailer in India. It finds that Khadim's key strength is its distribution network, which includes over 650 retail outlets across India. The analysis is based on interviews with Khadim's senior marketing, sales, and store managers. Key findings relate to Khadim's formal feedback systems, distribution architecture, branding and marketing strategies, online retail distribution plans, target segments, and relationships with distributors and dealers. Recent fundraising and board changes are bringing new perspectives to help Khadim's prepare for further expansion nationwide.
How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
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An import error occurs when a program fails to import a module or library, disrupting its execution. In languages like Python, this issue arises when the specified module cannot be found or accessed, hindering the program's functionality. Resolving import errors is crucial for maintaining smooth software operation and uninterrupted development processes.
Reimagining Your Library Space: How to Increase the Vibes in Your Library No ...Diana Rendina
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How to Setup Warehouse & Location in Odoo 17 InventoryCeline George
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Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
This presentation includes basic of PCOS their pathology and treatment and also Ayurveda correlation of PCOS and Ayurvedic line of treatment mentioned in classics.
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
it describes the bony anatomy including the femoral head , acetabulum, labrum . also discusses the capsule , ligaments . muscle that act on the hip joint and the range of motion are outlined. factors affecting hip joint stability and weight transmission through the joint are summarized.
This document provides an overview of wound healing, its functions, stages, mechanisms, factors affecting it, and complications.
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Healing is the body’s response to injury in an attempt to restore normal structure and functions.
Healing can occur in two ways: Regeneration and Repair
There are 4 phases of wound healing: hemostasis, inflammation, proliferation, and remodeling. This document also describes the mechanism of wound healing. Factors that affect healing include infection, uncontrolled diabetes, poor nutrition, age, anemia, the presence of foreign bodies, etc.
Complications of wound healing like infection, hyperpigmentation of scar, contractures, and keloid formation.
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2. The original business idea was very simple.
Link customer demand to manufacturing,
and link manufacturing to distribution.
That is the idea we still live by.
— José María Castellano Ríos, Inditex CEO
3. Zara – Technology to Dominate MIS: The Strategic Dimensions
P a g e | 1 Group 7 | Term IV | PGP 2016
Group Members
0070/51 Arijit Kumar Gorai
0100/51 Bhujan M
0154/51 Induchoodan R
0237/51 Nikhil Nagpal
0290/51 Ranjit Singh
4. Zara – Technology to Dominate MIS: The Strategic Dimensions
P a g e | 2 Group 7 | Term IV | PGP 2016
Contents
The global textile and clothing industry............3
Zara..................................................................................4
Business Model ...........................................................4
Profitability in Fashion Products...........................5
The Fast Fashion model...........................................5
Linking Customers and Designers ..................5
Vertical Integration ...............................................6
Speed versus Low Labor Costs.........................7
Other Cost and Pricing Policies at Zara ........7
ZARA does not guess, it gathers data................8
Design........................................................................9
Manufacturing and Logistics.............................9
Stores .......................................................................11
Information Technology in ZARA.......................13
Collecting Information on Consumer’s Needs 13
Standardization of product information13
Product Information and Inventory Management 13
Distribution management ...........................13
Information Technology in Zara.........................14
Detailed Analysis.......................................................15
Firm-Based Value Chain....................................15
Model Application...............................................16
Implementation Opportunity Analysis........17
Implementation Effectiveness .............................18
Existing System Evaluation...............................18
Upgrading System Evaluation ........................19
How have other fashion giants leveraged Technology 19
Moving Forward........................................................20
Conclusion...................................................................22
References...................................................................23
5. Zara – Technology to Dominate MIS: The Strategic Dimensions
P a g e | 3 Group 7 | Term IV | PGP 2016
The Global textile and clothing industry
The removal of all import quotas in the textile and clothing industry from January 2005,
involving the unrestricted access of all members of the World Trade Organization (WTO) to
the European, American and Canadian markets is considered a key driving force in the
development of the clothing sector (Keenan, et al., 2004). This new scenario has created op-
portunities for large exporters like China and India 2 that is considerably increasing their mar-
ket share while at the same time creating challenges for European Union member states to
remain competitive internationally.
The major trends that are restructuring and characterizing the textile and clothing sector are
as follows:
• The European textile and clothing industry is characterized by fragmented production with a
large number of small and medium-sized companies mainly located in Italy, Great Britain,
France, Germany and Spain (Nordas, 2004), whilst distribution channels are highly
concentrated (Stengg, 2001)
• Increasing internationalization in the textile and apparel sector and the emergence of
international competitors (Cerviño, 1998). Consolidation of the sector through mergers, acqui-
sitions (Dunford, 2004) and strategic alliances (Samiee, 1995)
• Sub-contracting or delocalization of textile and clothing production to countries with lower
labor and transportation costs and reduced lead-time (Berkeley and Steuer, 2000)
• Re-evaluation of the business models to adapt to the customers´ changing taste (KPMG,
2005). Fashion companies are becoming more flexible and vertically organized, limited vertical
integration being more frequent than complete integration (Samiee, 1995). Adoption of new
technology to expand productivity and increase competitiveness (Berkeley and Steuer, 2000)
• The democratization of the fashion sector over the last decades (Mazaira, et al., 2003). Zara
has contributed greatly to this shift by offering the latest design at attractive prices
Source: http://core.ac.uk/download/pdf/334655.pdf
6. Zara – Technology to Dominate MIS: The Strategic Dimensions
P a g e | 4 Group 7 | Term IV | PGP 2016
Zara
Zara is a Spanish clothing and accessories retailer based in Galicia, Spain; founded by Amancio
Ortega and Rosalia Mera, owned by Inditex. Zara’s success is attributed to their low-priced
look-a-like products of popular higher-end clothing retailers and for their fast production of
new garments. In just three weeks, Zara can have a new product on shelves ready for th con-
sumer to purchase compared to their competitors that required from three to, even, six
months. The first store opened in La Corun~a proved to be a success, and Ortega saw the
opportunity to expand to other cities in Spain and even cities around the world, (Inditex’s Web-
site).
In a way Zara’s success could be also attributed to their information technology tools
employed at their production level; from a designer checking for sketches with colleagues to
market specialists, all the way to cross-functional teams examining clothing prototypes in the
hallways of Inditex building. All of this is possible thanks to the careful ways Zara deploys the
latest information technology tools to facilitate these informal exchanges (Ferdows et al. 2004).
Source: http://www2.uhv.edu/luj/MGT6352/Samples/Student%20Sample%203.pdf
Business Model
Jose Maria Castellano Rios, Inditex CEO said: “The original business idea was very simple. Link
customer demand to manufacturing, and link manufacturing to distribution. That is the idea
we still live by.”
Zara’s CEO and founder, Amancio Ortega, saw the great importance of having retailing and
manufacturing closely together in the apparel industry and from his view; Zara was able to
position itself as a company with vertical integration control system. It covers all phases of the
fashion process: design, manufacture, logistics and distribution to its self-managed stores. It
is also characterized by their strong focus on their customers.
Such business model helps reduce the “bullwhip effect”, that according to Ghemawat et al.
(2006),it is the tendency for fluctuations in final demand to get amplified as the orders are
transmitted back up the supply chain; because the fashion Market is not stable and it changes
extremely rapid Zara was among the first companies that could bring a new concept into the
Market in just three weeks from design to hanging from a store, ready for customers to
7. Zara – Technology to Dominate MIS: The Strategic Dimensions
P a g e | 5 Group 7 | Term IV | PGP 2016
purchase; in contrast their competitors that would take among 6 to 9 months. “Vertical inte-
gration enables them to shorten turnaround times and achieve greater flexibility, reducing
stock to a minimum and diminishing fashion risk to the greatest possible extent.
Zara’s strategy is very simple but has worked well in the past and still have maintained with
plenty of businesses despite past economic downturns. Amancio Ortega is extremely clear
about Zara’s main goal, and he tries to follow it to the best way possible.
Profitability in Fashion Products
Buy low, sell high. Buy on credit, sell on cash. The conventional retail profitability is a no brainer.
However, it does not work out for fashion products.
In highly perishable goods such as fashion products that are susceptible to seasons, gross
margin is meaningless if the product does not sell as planned. Given the unpredictability in
fashion, it is quite likely that one will end up selling a large proportion of products at a dis-
count.
Antonio Ortega Gaona, the founder of Inditex, thought that consumers would regard clothes
as perishable commodity just like yogurt, bread or fish to be consumed quickly, rather than
stored in cupboards, and he has gone about creating a retail business that provides “freshly
baked clothes”.
Working with him in the last few years, Inditex Chief Executive Jose Maria Castellano was
quoted as saying, “The business is all about reducing response time. In fashion, the stock is
like food. It goes bad quick.”
The Fast Fashion model
Zara describes its business model as “creativity and quality design together with a rapid re-
sponse to market demands” and the “democratization of fashion.” To deliver rapid responses
to customer demands and reasonable prices, Zara abandoned the fashion industry’s traditional
model of seasonal lines of clothing designed by star designers, manufactured by sub-
contractors months earlier, and marketed with heavy advertising. In contrast, the Zara holding
company operates over one hundred subsidiaries, including Zara, vertically integrating design,
just-in-time production, distribution, and retail sales to speed communication from customers
to designers.
Linking Customers and Designers
Over three hundred Zara designers continuously seek information about what customers may
like from a variety of sources. Designers attend fashion shows in Paris, New York, London, and
Milan; snap digital photos as models come down runways, and send them to headquarters.
Designers peruse magazines, observe styles worn by opinion leaders, and visit clubs, cafés,
and colleges to anticipate what innovations from other designers their customers may desire.
8. Zara – Technology to Dominate MIS: The Strategic Dimensions
P a g e | 6 Group 7 | Term IV | PGP 2016
The key source of information for Zara designers comes from its chains of dedicated stores;
Zara sells its products only through its stores and these stores sell only Zara products. Twice
weekly, stores send to headquarters daily sales totals and detailed information on items sold,
broken down by color and size. Store managers also place orders twice a week and have great
autonomy to select what they believe will sell in their store from wide and continuously up-
dated offerings. Designers review the success of products daily and respond to formal and
informal input from store managers. In Zara’s effort to make the creation of fashion an inter-
active process, José Toledo, a Zara executive, argues that customers be “our accomplices.”
Vertical Integration
Seeking to synchronize supply with ongoing changes in customer demands, Zara deviates
from industry norms by vertically integrating stages of production within the company. Zara
policy states that “production shall be adapted to customer demand production will be able
to focus on trend changes happening inside each season.' Thus, the company bases produc-
tion largely on customer demand as gleaned from continuously updated orders from store
managers. Most leading fashion firms combine design and sales but outsource manufacturing,
often to low-wage subcontractors in East Asia and elsewhere. While searching for cheap labor,
companies use networks of subcontractors that may buy, dye, embroider, and sew fabric each
in a different country. However, this process can stretch the design-to-retail cycle to as long
as eight months. Examples of this approach include companies like Gap, Abercrombie & Fitch,
Ann Taylor, and The Limited. John Thorbeck from supply chain 42 consulting firm Supply
Chainge sums up the industry as follows: “Everybody is gotten out Essays in Economic & Busi-
ness History — Vol XXV, 2007 of manufacturing’. In contrast, Zara produces a large proportion
of its products in its factories. Typically, Zara performs internally the more capital-intensive
and value-added intensive stages of production, such as purchasing raw materials, designing,
cutting, dyeing, quality control, ironing, packaging, labeling, distribution, and logistics and
outsources more labor-intensive and less value-added-intensive stages of production, such as
sewing. Company executives state that “the decision whether to externalize or to produce in
the group depends on costs, delivery date, and returns”. Zara maintains a diversified network
of suppliers of raw materials and fabrics in China, India, Morocco, Turkey, Germany, Italy, and
elsewhere. The company’s manufacturing subsidiaries dye, print, mark, and cut fabrics follow-
ing patterns set by designers. Once cut and processed, fabric is contracted out, mostly to a
network of over four hundred sewing cooperatives and independent workshops, especially in
rural areas around La Coruna, the commercial capital of Galicia, and Northern Portugal. After
sewing, products are sent back to Zara subsidiaries for quality control, finishing, and packag-
ing.” Zara subsidiaries also perform distribution and retail sales. All Zara products are shipped
from multi-million square foot logistics centers in Spain. At these facilities, products are
tagged, boxed, moved through miles of conveyor belts, and shipped to fulfill the orders of
individual stores. For European stores, products travel by truck in under twenty-four hours. For
other stores, products travel by plane and arrive within forty-eight hours. In 2005, 89 percent
of stores were company-managed. For markets with large cultural or legal business differ-
ences, Zara uses franchises with local partners, accounting for 11 percent of stores in 2005.
However, Zara franchises are tightly integrated within the company and use the same ordering
mechanisms.’
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Speed versus Low Labor Costs
Whereas most producers view fashion products as consumer durables, Zara - considers them
non-durables with sell-by periods of four weeks. Zara emphasizes the speed of its response to
customer demands more than finding low-cost employees. Some celebrate this approach as
slowing the decline of manufacturing employment in developed countries. For instance, Sup-
ply Chainge’s John Thorbeck argues that “Zara has proven that speed and flexibility matter
more than pure price.” Perhaps more cynically, John Quelch, professor of marketing at Harvard
Business School, says, “Nike, Levi’s and others face recriminations for exploiting low-cost labor
in emerging economies. Zara is less subject to criticism” Zara simply argues that its approach
be purely a business decision, stating “this is not a moral stance. To reduce lead time, we need
to produce closer, not cheaper.” Zara makes every effort to reduce its design-to-retail cycle.
These efforts include vertically integrating design and manufacturing far more than its com-
petitors, using mostly local subcontractors, and developing with Toyota “just in time” produc-
tion lines that can be modified based on demand. While the standard design-to-retail cycle in
the industry is five to six months, Zara’s cycle is only five weeks. Zara also needs only two weeks
to service repeat orders from stores or for orders involving only slight changes. According to
Ken Watson of the London-based Industry Forum for the UK fashion supply chain, “Zara spots
a trend, and thirty days later it is in their stores.” While Zara offers new collections each season,
these collections account for only 39 percent of sales. The other 61 percent is produced in
season, changing the colors, cuts, and fabrics of existing designs as well as adding completely
new ones.’ The shorter design-to-retail cycle allows Zara to bring more styles to its stores and
to update them constantly. While many competitors ship products to stores every twelve
weeks, Zara does so twice a week. The innovative Spanish producer believes that quickly
changing its offerings gives them scarcity value, leading customers to visit their stores more
often. As Carlos Herreros de las Cuevas describes it, “customers who enter a Zara store and
see something they like, know they have to buy it straight away, because it probably won’t be
there next To service customers who say “they always have something new:” Zara has increased
its number of new products per year from under ten thousand in the 1990s to over twenty
thousand in 2005.20 Rapid reaction to customer demands also cuts some costs. Small deliver-
ies twice a week prevent large stocks at stores and eliminate the need for large stockrooms.
Thus, inventories are 7 percent of Zara revenues compared with 13 percent at competitors.
The short design-to-retail cycle also increases Zara’s ability to adjust to fashion trends. If a
product is unsuccessful, Zara quickly cancels the further production, thus avoiding further ac-
cumulations that prompt the profit-draining clearance sales that plague rivals. Richard Hyman
of Verdict Research argues that “having up-to-the-minute sales data is not unusual these days.
What makes Zara different is that they can do something about it.” Thus, gross profit margins
of 56.2 percent at Zara in 2005 compare favorably with 50 percent at other specialty retailers
in the US.
Other Cost and Pricing Policies at Zara
Zara implements other distinctive policies such as avoiding cost-plus pricing, using little ad-
vertising, hiring unknown designers, and avoiding complex technologies. Avoiding the cost-
plus methods standard in the industry, Zara first identifies the prices customers are willing to
10. Zara – Technology to Dominate MIS: The Strategic Dimensions
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pay for their competitors’ products. Then, the company establishes target prices for its prod-
ucts, often 15 percent below those of competitors, and searches for suppliers through which
adequate margins can be maintained. Unconvinced of its effectiveness, Zara spends little on
advertising. Whereas Gap, H&M, and the industry spend 5.4 and 3.5 percent of revenues on
advertising respectively, Zara spends only 0.3 percent. To attract customers, Zara relies instead
on low prices, prime locations in fashionable districts, and centrally-designed award-winning
store displays. Zara also benefits from customers’ word of mouth and free coverage in a press
enthralled with Ortega’s reclusiveness and business model. Despite its communication-inten-
sive model, Zara avoids complex technology and spends little on information technology (IT).
For instance, stores send data to headquarters, using basic design personal digital assistants.
No permanent electronic networks link stores, headquarters, factories, and distribution cen-
ters. Also, managers Essays in Economic & Business History — Vol XXV, 2007 make decisions
about what subsidiaries or external providers to use informally, avoiding supply chain software.
Thus, whereas the US retail industry spends 2 percent of revenues on IT, Zara spends only 0.5
percent.
Source: http://www2.uhv.edu/luj/MGT6352/Samples/Student%20Sample%203.pdf
ZARA does not guess; it gathers data
How to ensure that stores carry the kind of things customers want to buy? Try asking them!
While having wrong items in its stores led to the downfall of GAP for nearly a decade, Zara’s
sophisticated process ensured that it did not have to predict or forecast, and hence avoided
errors that plagued other fashion giants.
Zara’s store managers lead the intelligence-gathering effort that ultimately determines what
ends up on each store’s racks. Armed with personal digital assistants (PDAs)—handheld
computing devices meant largely for mobile use outside an office setting—to gather customer
input, staff regularly chat up customers to gain feedback on what they’d like to see more of. A
Zara manager might casually ask, “What if this skirt were in a longer length?” “Would you like
it in a different color?” “What if this V-neck blouse were available in a round neck?” Managers
are motivated because they have skin in the game. The firm is keen to reward success—as
much as 70 percent of salaries can come from commissions. (K. Capell, “Zara Thrives by Break-
ing All the Rules,” BusinessWeek, October 9, 2008).
Another level of data gathering starts as soon as the doors close. Then the staff turns into a
sort of investigation unit in the forensics of trendspotting, looking for evidence in the piles of
unsold items that customers tried on but didn’t buy. Are there any preferences in cloth, color,
or styles offered among the products in stock? (D. Sull and S. Turconi, “Fast Fashion Lessons,”
Business Strategy Review, Summer 2008).
PDAs are also linked to the store’s point-of-sale (POS) system—a transaction processing sys-
tem that captures customer purchase information—showing how garments rank by sales. Us-
ing these two systems, managers can quickly and regularly send updates that combine the
hard data captured at the cash register with insights on what customers would like to see. (C.
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Rohwedder and K. Johnson, “Pace-Setting Zara Seeks More Speed to Fight Its Rising Cheap-Chic
Rivals,” Wall Street Journal, February 20, 2008). All this valuable data allows the firm to plan
styles and issue rebuy orders based on feedback rather than hunches and guesswork. The goal
is to improve the frequency and quality of decisions made by the design and planning teams.
Design
Rather than create trends by pushing new lines via catwalk fashion shows, Zara designs follow
evidence of customer demand. Data on what sells and what customers want to see goes
directly to “The Cube” outside La Coruña, where teams of some three hundred designers crank
out an astonishing thirty thousand items a year versus two to four thousand items offered up
at big chains like H&M (the world’s third largest fashion retailer) and Gap. (M. Pfeifer, “Fast and
Furious,” Latin Trade, September 2007; and “The Future of Fast Fashion,” Economist, June 18,
2005). While H&M has offered lines by star designers like Stella McCartney and Karl Lagerfeld,
as well as celebrity collaborations with Madonna and Kylie Minogue, the Zara design staff
consists mostly of young, hungry Project Runway types fresh from design school. There are no
prima donnas in “The Cube.” Team members must be humble enough to accept feedback from
colleagues and share credit for winning ideas. Individual bonuses are tied to the success of the
team, and teams are regularly rotated to cross-pollinate experience and encourage innovation.
Manufacturing and Logistics
In the fickle world of fashion, even seemingly well-targeted designs could go out of favor in
the months it takes to get plans to contract manufacturers, tool up production, then ship items
to warehouses and eventually to retail locations. However, getting locally targeted designs
quickly onto store shelves is where Zara excels. In one telling example, when Madonna played
a set of concerts in Spain, teenage girls arrived at the final show sporting a Zara knockoff of
the outfit she wore during her first performance. (“The Future of Fast Fashion,” Economist, June
18, 2005). The average time for a Zara concept to go from idea to an appearance in store is
fifteen days versus their rivals who receive new styles once or twice a season. Smaller tweaks
arrive even faster. If enough customers come in and ask for a round neck instead of a V-neck,
a new version can be in stores within just ten days. (J. Tagliabue, “A Rival to Gap That Operates
Like Dell,” New York Times, May 30, 2003). To put that in perspective, Zara is twelve times faster
than Gap despite offering roughly ten times more unique products! (M. Helft, “Fashion Fast
Forward,” Business 2.0, May 2002). At H&M, it takes three to five months to go from creation
to delivery—and they are considered one of the best. Other retailers need an average of six
months to design a new collection and then another three months to manufacture it. VF Corp
(Lee, Wrangler) can take nine months just to design a pair of jeans while J. Jill needs a year to
go from concept to store shelves. (L. Sullivan, “Designed to Cut Time,” InformationWeek, Feb-
ruary 28, 2005). At Zara, most of the products one sees in stores did not exist three weeks
before, not even as sketches. (J. Surowiecki, “The Most Devastating Retailer in the World,” New
Yorker, September 18, 2000).
The firm has become so much responsive. Through a competitor-crushing combination of
vertical integration and technology-orchestrated coordination of suppliers, just-in-time
manufacturing scheme, and a finely tuned logistic system. Vertical integration is when a single
firm owns several layers in its value chain. (Definition adopted from the “father” of the value
12. Zara – Technology to Dominate MIS: The Strategic Dimensions
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chain, Michael Porter). While H&M has nine hundred suppliers and no factories, nearly 60
percent of Zara’s merchandise is produced in-house, with an eye on leveraging technology in
those areas that speed up complex tasks, lower cycle time, and reduce error. Profits from this
clothing retailer come from blending math with a data-driven fashion sense. Inventory
Optimization models help the firm determine how many of which items in which sizes should
be delivered to each specific store during twice-weekly shipments, ensuring that each store is
stocked with just what it needs. (C. Gentry, “European Fashion Stores Edge Past U.S. Counter-
parts,” Chain Store Age, December 2007). Outside the distribution center in La Coruña, fabric is
cut and dyed by robots in twenty-three highly automated factories. Zara is so much vertically
integrated that it produces 40% of its fabric consumption and purchases most of its dyes from
its subsidiary. Roughly half of the cloth arrives undyed, so the firm can respond to any midsea-
son fashion shifts occur. Moreover, in the face of record-high cotton prices in 2010, Zara was
able to retool offerings away from more costly fabrics, preserving margins. By contrast, rival
H&M saw profits drop 10 percent largely due to margin pressure. (M. Johnson, “Investors Re-
lieved as Inditex Profit Soars.” Financial Times. March 21, 2011). After cutting and dying, many
items are stitched together through a network of local cooperatives that have worked with
Inditex so long they do not even operate with written contracts. The firm does leverage con-
tract manufacturers (mostly in Turkey and Asia) to produce staple items with longer shelf lives,
such as t-shirts and jeans, but such goods account for only about one-eighth of dollar volume.
(N. Tokatli, “Global Sourcing: Insights from the Global Clothing Industry—The Case of Zara, a
Fast Fashion Retailer,” Journal of Economic Geography 8, no. 1 (2008): 21—38).
All of the items the firm sells end up in a five-million-square-foot distribution center in La
Coruña, or a similar facility in Zaragoza in the northeast of Spain. The La Coruña facility is some
nine times the size of Amazon’s warehouse in Fernley, Nevada, or about the size of ninety
football fields. (M. Helft, “Fashion Fast Forward,” Business 2.0, May 2002). The facilities move
about two and a half million items every week, with no item staying in-house for more than
seventy-two hours. Ceiling-mounted racks and customized sorting machines patterned on
equipment used by overnight parcel services and leveraging Toyota-designed logistics, whisk
items from factories to staging areas for each store. Clothes are ironed in advance and packed
on hangers, with security and price tags affixed. This system means that instead of wrestling
with inventory during busy periods, employees in Zara stores simply move items from shipping
box to store racks, spending most of their time on value-added functions like helping
customers find what they want. Efforts like this help store staff regain as much as three hours
in prime selling time. (C. Rohwedder and K. Johnson, “Pace-Setting Zara Seeks More Speed to
Fight Its Rising Cheap-Chic Rivals,” Wall Street Journal, February 20, 2008; and K. Capell, “Zara
Thrives by Breaking All the Rules,” BusinessWeek, October 9, 2008).
Trucks serve destinations that can be reached overnight while chartered cargo flights serve
farther destinations within forty-eight hours. (K. Capell, “Zara Thrives by Breaking All the Rules,”
BusinessWeek, October 9, 2008). The firm recently tweaked its shipping models through Air
France–KLM Cargo and Emirates Air so flights can coordinate outbound shipment of all Inditex
brands with return legs loaded with raw materials and half-finished clothes items from
locations outside of Spain. Zara is also a pioneer in going green. In fall 2007, the firm’s CEO
13. Zara – Technology to Dominate MIS: The Strategic Dimensions
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unveiled an environmental strategy that includes the use of renewable energy systems at lo-
gistics centers including the introduction of biodiesel for the firm’s trucking fleet.
Stores
Most products are manufactured for a limited production run. While running out of bestsellers
might be seen as a disaster at most retailers, at Zara the practice delivers several benefits.
First, limited runs allow the firm to cultivate the exclusivity of its offerings. While a Gap in Los
Angeles carries nearly the same product line as one in Milwaukee, each Zara store is stocked
with items tailored to the tastes of its local clientele. A Fifth Avenue shopper quips, “At Gap,
everything is the same,” while a Zara shopper in Madrid says, “You’ll never end up looking like
someone else.” (K. Capell, “Fashion Conquistador,” BusinessWeek, September 4, 2006). Upon
visiting a Zara, the CEO of the National Retail Federation marveled, “It’s like you walk into a
new store every two weeks.” (M. Helft, “Fashion Fast Forward,” Business 2.0, May 2002).
Second, limited runs encourage customers to buy right away and at full price. Savvy Zara shop-
pers know the newest items arrive on black plastic hangers, with store staff transferring items
to wooden ones later on. Don’t bother asking when something will go on sale; if one waits for
three weeks, the item he wanted has almost certainly been sold or moved out to make room
for something new. Says one twenty-three-year-old Barcelona shopper, “If you see something
and don’t buy it, you can forget about coming back for it because it will be gone.” (K. Capell,
“Fashion Conquistador,” BusinessWeek, September 4, 2006). A study by consulting firm Bain &
Company estimated that the industry average markdown ratio is approximately 50 percent,
while Zara books some 85 percent of its products at full price. (D. Sull and S. Turconi, “Fast
Fashion Lessons,” Business Strategy Review, Summer 2008; and K. Capell, “Fashion Conquista-
dor,” BusinessWeek, September 4, 2006).
The constant parade of new, limited-run items also encourages customers to visit often. The
average Zara customer visits the store seventeen times per year, compared with only three
annual visits made to competitors. (N. Kumar and S. Linguri, “Fashion Sense,” Business Strategy
Review, Summer 2006). Even more impressive—Zara puts up these numbers with almost no
advertising. The firm’s founder has referred to advertising as “pointless distraction.” The asser-
tion carries particular weight when one considers that during Gap’s collapse, the firm increased
advertising spending but sales dropped. (P. Bhatnagar, “How Do You Ad(dress) the Gap?” For-
tune, October 11, 2004). Fashion retailers spend an average of 3.5 percent of revenue promot-
ing their products while ad spending at Inditex is just 0.3 percent. (“Zara, A Spanish Success
Story,” CNN.com, June 15, 2001, http://edition.cnn.com/BUSINESS/programs/yourbusiness/sto-
ries2001/zara)
Finally, limited production runs allow the firm to, as Zara’s CEO once put it, “reduce to a mini-
mum the risk of making a mistake, and we do make mistakes with our collections.” (C.
Vitzthum, “Zara’s Success Lies in Low-Cost Lines and a Rapid Turnover of Collections,” Wall Street
Journal, May 18, 2001). Failed product introductions are reported to be just 1 percent, com-
pared with the industry average of 10 percent. (N. Kumar and S. Linguri, “Fashion Sense,” Busi-
ness Strategy Review, Summer 2006). So even though Zara has higher manufacturing costs than
rivals, Inditex gross margins are 56.8 percent compared to 37.5 percent at Gap. (C. Rohwedder,
14. Zara – Technology to Dominate MIS: The Strategic Dimensions
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“Zara Grows as Retail Rivals Struggle,” Wall Street Journal, March 26, 2009). For labor cost
comparison, K. Capell, “Zara Thrives by Breaking All the Rules,” BusinessWeek, October 9, 2008,
reports that workers in Spain earn an average of $1,650/month versus $206/month in China’s
Guangdong Province.
While stores provide valuable frontline data, headquarters play a major role in directing in-
store operations. The software is used to schedule staff based on each store’s forecasted sales
volume, with locations staffing up at peak times such as lunch or early evening. The firm claims
these more flexible schedules have shaved staff work hours by 2 percent. This constant refine-
ment of operations throughout the firm’s value chain has helped reverse a prior trend of costs
rising faster than sales. (C. Rohwedder and K. Johnson, “Pace-Setting Zara Seeks More Speed to
Fight Its Rising Cheap-Chic Rivals,” Wall Street Journal, February 20, 2008).
Even the store displays are directed from “The Cube,” where a basement staging area known
as “Fashion Street” houses a Potemkin village of bogus storefronts meant to mimic some of
the chain’s most exclusive locations throughout the world. It’s here that workers test and fine-
tune the chain’s award-winning window displays, merchandise layout, and even determine the
in-store soundtrack. Every two weeks, new store layout marching orders are forwarded to
managers at each location. (C. Rohwedder and K. Johnson, “Pace-Setting Zara Seeks More Speed
to Fight Its Rising Cheap-Chic Rivals,” Wall Street Journal, February 20, 2008).
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Information Technology in ZARA
Information and communications technology are at the heart of Zara’s business.
Four critical information related areas that give Zara its speed include:
Collecting Information on Consumer’s Needs
Trend information flows daily and is fed into a database at head office. Designers check the
database for these dispatches as well as daily sales numbers, using the information to create
new lines and modify existing ones. Thus, designers have access to real-time information when
deciding with the commercial team about the fabric, cut, and price points of a new garment.
Standardization of product information
Different or incomplete specifications, and varying product information availability typically
adds several weeks to a typical retailer’s product design and approval process, but Zara
“warehouses” the product information with common definitions, allowing it to quickly and
accurately prepare designs, with clear cut manufacturing instructions.
Product Information and Inventory Management
Being able to manage thousands of fabric and trim specifications, design specifications as well
as their physical inventory, gives Zara’s team the capability to design a garment with available
stocks rather than having to wait for the material to come in.
Distribution management
Its State-of-the-art distribution facility functions with minimal human intervention. Approxi-
mately 200 kilometers of underground tracks move merchandise from Zara’s manufacturing
plants to the 400+ chutes that ensure each order reaches its right destination. Optical reading
16. Zara – Technology to Dominate MIS: The Strategic Dimensions
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devices sort out and distribute more than 60,000 items of clothing an hour. Zara’s merchandise
does not waste time waiting for human sorting.
Image Sources:
Internet
Information Technology in Zara
Zara stands apart from its competitors on that only 0.5% of its total revenues are used on IT
(Information Technology) and its IT compromises just 0.5% of Zara’s total workforce. However,
how a successful company can run with only such a small IT force? Alternatively, better yet,
how can Zara run so smoothly with today’s advanced technology? The answer to that is Hybrid
Model Information. Information from stores to headquarters relies on combined human intel-
ligence input and information technology, such as their PDA devices (“Zara’s business model”,
2011). Store managers input the requested order of what the store needs and in return another
group of “commercials” decide whether to allocate the inventory on that particular store or
send it to retails where there’s a greater movement of goods. Such decisions are based on
calculations from an application that tracks “theoretical inventory” of each SKU available. Inside
17. Zara – Technology to Dominate MIS: The Strategic Dimensions
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the factories, IT is used for the production of goods such as large computer-controlled cutting
equipment that cuts fabric in pattern using the most of all the fabric available. Distribution
centers use much of automation and computerization as well. Orders that come into the DC
are processed by computers which locates the products in the warehouse and supplies such
orders. Applications used in the DC were created by the IT department exclusively for the use
of Zara.
Detailed Analysis
“Zara’s business model is vertically integrated retailer in the apparel industry, linking customer
demand to manufacturing, and link manufacturing to distribution and retailing business.” With
the purpose for better understanding problems faced by business model operations; a review
of the primary and secondary activities of the firm’s business will be implemented using
Michaels Porter’s value chain model.
Firm-Based Value Chain
According to Laudon (2010), “The value chain model is very helpful for identifying competitive
forces and suggesting generic strategies; it also highlights specific activities in the business
where competitive strategies can be best applied and where information systems are more
likely to have a strategic impact. This model identifies specific, critical leverage points where a
firm can use information technology most effectively to enhance its competitive position.” The
value chain views any business as a series of basic activities that add value to the business’s
products or services.
The model classifies such activities into two major parts: primary activities and support activi-
ties. Primary activities are steps mostly related to the production and distribution of the busi-
ness’s products and services; which create value for the consumer (Laudon, 2010). They include
activities such as inbound logistics, operations, outbound logistics, sales and marketing, and
service (The Value Chain, 2010).
Activities described above need to be facilitated by the support activities and consist of
organization infrastructure (administration, finance, legal, quality management), human
resources management (recruiting, development, training and compensation of employees),
procurement (function of purchasing the raw materials and other inputs used in the value-
creating activities), and technology development (research and development, process
automation, and other technology development used to support the value-chain activities)
18. Zara – Technology to Dominate MIS: The Strategic Dimensions
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(The Value Chain, 2010). The implementation of support activities depends heavily on the suc-
cess of the firm in developing an accurate competitive advantage, for example, to develop a
cost advantage through innovative management of information systems.
Having a clear sense of the business value chain model, firms can ask themselves questions
along each stage of the value chain, for example “How can the firm use information systems
to improve operational efficiency, and improve customer and supplier intimacy?” Or “how
information systems can be used to improve the relationship with customers and with
suppliers who lie outside the firm’s value chain but belong to the firm’s extended value chain
where they are absolutely critical to your success? (Laudon, 2010)
Model Application
An application of Porter’s Model Value Chain is shown in Figure below:
Zara’s way to conduct business can be described following the model chain model por-
trayed above. Support activities consist of three main activities: Technology Development,
Zara is equipped with the mobile tracking system, and its sales personnel are equipped
with handheld organizers. Infrastructure store managers have a great input in Zara’s fash-
ion trend. They have handheld organizers to punch in fashion trends, comments and
orders from customers; once this information is gathered the designers will combine it
with their market research for new emerging trends. Sourcing, “Zara sources from external
suppliers with the help of purchasing offices in Beijing, Barcelona and Hong Kong apart
from their head office. It also requires fabric, inputs, and finished products from suppliers
in Spain and other Far East countries. One-half of the fabric is purchased in gray color. So
the designs can be updated quickly updated in between seasons. This practice reduces
overall cost and delays the processes to attain operational effectiveness”.
Primary activities start with the replenishment of existing items and requests for newly gar-
ments placed weekly by store managers. Fulfillment of orders depends highly on the aggre-
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gated orders from all the stores and the total supply of inventory in the DC. Design and man-
ufacturing come hand in hand, thanks to Zara’s vertically integrated operations it is possible
to create a new garment and in a couple of weeks have it out in the public.
Implementation Opportunity Analysis
Table (1) below portrays problem identification at functional areas along with the
opportunity for information systems technology with the associated decision level.
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Up to this point it can be stated that Zara follows a cost leadership strategy; it is driven by
following the lowest cost operation in the apparel industry, it produces highly standard-
ized products using high technology. This fact holds true at their DC’s where a great
amount of automation is used because the rest of the business is falling short. Stores have
to rely on fax machines and phone calls to headquarters for orders, inventory is not up to
date at store level, even PDA’s used by managers are not connected to other stores to
share information about inventory. The lack of a chief information officer impoverishes
Zara’s decision making in their initiatives to upgrade their IT department.
Implementation Effectiveness
Zara choose to invest within its own software rather than buying new technology simply
because the company’s operations were unique and commercial packages would not fit; also
the fact that Zara is a global company, it deals with various currencies that standard accounting
packaged would have to be extensively customized and comprehensive. Zara’s operating
system, DOS, is obsolete from the market affecting the firm with no reliable system for future
forecasting; “not keeping up any historical date means being unable to predict sells, plan or
estimate losses/gains and margin on particular designs.
Unreliable fax machines that were taking too long and costing too much to fax order forms
back and forth to stores caused delays and frustration. The use of telephones is greatly affected
by miscommunication and mishearing. From the above it can be deducted that Zara’s
internally application is not a good match for the firm’s needs because: their internally
developed applications are not easy to upgrade and are not compatible with other
applications, POS terminals are outdated and stores need POS terminals that will ensure no
infrastructure problems and its IT department is relatively small for the size of the firm.
The needs of how well the implemented functions of the IS/IT product can be categorized as
follow:
Existing System Evaluation
Tangible costs of the existing system will be the firm saved over 15,000 development hours
that would be required to port the software to a new operating system and instead used those
hours to keep Zara’s expansion into other countries. A disadvantage is that the cost of up-
grading to a new system would be quickly offset by the benefits of getting work done more
accurately and conveniently at stores. Zara will benefit because current strategies and tech-
nology favor low operational costs, low computer expenses, small IT workforce is a necessary
and minimal increase in expense when opening new stores. By maintaining low operational
costs, Zara’s performance can be demonstrated by its outstanding financial performance.
An intangible benefit of the existing system is that the system is easy to install at stores and
managers require little to no training on the system. Intangible costs are more problematic to
the firm because the current system is antiquated runs with the possibility to be discontinued.
It also hampers productivity gains due to slow labor intense data collection and transmission
that requires more labor hours to accomplish basic ordering and inventory functions. Zara’s
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corporate image is affected as well by not keeping up to date technological advances in the
firm’s functionality.
Upgrading System Evaluation
Tangible costs for the upgrading of the system would involve financial expenses. From all three
operational systems appraised by Zara, Linux is the best and cheaper option to adopt. Linux
service contract ranges from €10 to €150 and the expense depends on the IT staff knowledge
on the new system. To implement the upgrade Zara will also have to install new hardware,
costing an average of €5,000 per POS terminal, on top of that , costs of installation of new
cables, routers, training of staff will also add up to the total upgrade costs. Tangible benefits
will be that stores will increase their productivity levels, reports will be up-to-date, optimum
level of inventory will be kept at stores, less workforce will be required at every location and
feedback/comments from customers will reach designers ears at faster pace. All of these ex-
amples will positively impact Zara’s total revenue.
Intangible costs for the upgrading of the system would include staff flexibility in learning a
new system. Zara’s staff is accustom to current system and implementing a new system will
require extensive training, frustration and patience that some of the employees would not be
willing to put up to, thus fostering an uneasy workplace environment for employees that are
reluctant to new changes. Intangible benefits of the new system are: improved asset utilization
by more efficiently transfer items between stores, improved resource control by tracking store
inventory, improved organizational planning by increasing orders’ size or frequency based on
real-time inventory data, increased organization flexibility by incorporating communication
between designers, store managers and product managers with real-time data on sales across
the world.
Source: http://www2.uhv.edu/luj/MGT6352/Samples/Student%20Sample%203.pdf
How have other fashion giants leveraged Technology
Researchers Donald Sull and Stefano Turconi discovered, “Whether measured by IT workers as
a percentage of total employees or total spending as a percentage of sales, Zara’s IT
expenditure is less than one-fourth the fashion industry average.”D. Sull and S. Turconi, “Fast
Fashion Lessons,” Business Strategy Review, Summer 2008. Zara excels by targeting technol-
ogy investment at the points in its value chain where it will have the most significant impact,
making sure that every dollar spent on tech has a payoff.
Contrast this with high-end fashion house Prada’s efforts at its flagship Manhattan location.
The firm hired the Pritzker Prize—winning hipster architect Rem Koolhaas to design a location
Prada would fill with jaw-dropping technology. All items for sale in the store would sport radio
frequency identification (RFID) tags (small chip-based tags that wirelessly emit a unique iden-
tifying code for the item that they are attached to). Walk into a glass dressing room and cus-
tomers could turn the walls opaque, then into a kind of combination mirror and heads-up
display. By wirelessly reading the tags on each garment, dressing rooms would recognize what
was brought in and make recommendations of matching accessories as well as similar prod-
ucts that patrons might consider. Customers could check inventory, and staff wielding PDAs
22. Zara – Technology to Dominate MIS: The Strategic Dimensions
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could do the same. A dressing room camera would allow clients to see their front and back
view side-by-side as they tried on clothes.
It all sounded slick, but the execution of the vision was disastrous. Customers did not under-
stand the foot pedals that controlled the dressing room doors and displays. Reports surfaced
of fashionistas disrobing in full view, thinking the walls went opaque when they didn’t. Others
got stuck in dressing rooms when pedals failed to work, or doors broke, unable to withstand
the demands of the high-traffic tourist location. The inventory database was often inaccurate,
regularly reporting items as out of stock even though they were not. As for the PDAs, staff
reported that they “don’t use them anymore” and that “we put them away, so tourists do not
play with them.” The investment in Prada’s in-store technology was also simply too high, with
estimates suggesting the location took in just one-third the sales needed to justify expenses.
(G. Lindsay, “Prada’s High-Tech Misstep,” Business 2.0, March 1, 2004).
The Prada example offers critical lessons for managers. While it’s easy to get seduced by tech-
nology, an information system (IS) is made up of more than hardware and software. An IS also
includes data used or created by the system, as well as the procedures and the people who
interact with the system. (A. Sanchenko, “Foundations of Information Systems in Business” (lec-
ture, October 13, 2007), www.scribd.com/doc/396076/Foundations-of-Information-Systems-in-
Business).
Getting the right mix of these five components is critical to executing a flawless information
system rollout. Financial considerations should forecast the return on investment (ROI)—the
amount earned from an expenditure—of any such effort (i.e., what will we get for our money
and how long will it take to receive payback?). Moreover, designers need to test thoroughly
the system before deployment. At Prada’s Manhattan flagship store, the effort looked like tech
chosen because it seemed fashionable rather than functional.
Moving Forward
The Holy Grail for the strategist is to craft a sustainable competitive advantage that is difficult
for competitors to replicate. Moreover, for nearly two decades Zara has delivered the goods.
However, that’s not to say the firm is done facing challenges.
Consider the limitations of Zara’s Spain-centric, just-in-time manufacturing model. By moving
all of the firm’s deliveries through just two locations, both in Spain, the firm remains hostage
to anything that could create a disruption in the region. Firms often hedge risks that could
shut down operations—think weather, natural disaster, terrorism, labor strife, or political un-
rest—by spreading facilities throughout the globe. If problems occur in northern Spain, Zara
has no such fallback.
In addition to the operations vulnerabilities above, the model also leaves the firm potentially
more susceptible to financial vulnerabilities during periods when the euro strengthens relative
to the dollar. Many low-cost manufacturing regions have currencies that are either pegged to
the dollar or have otherwise fallen against the euro. This situation means Zara’s Spain-centric
costs rise at higher rates compared to competitors, presenting a challenge in keeping profit
margins in check. Rising transportation costs are another concern. If fuel costs rise, the model
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of twice-weekly deliveries that has been key to defining the Zara experience becomes more
expensive to maintain.
Still, Zara makes up for cost increases by raising prices overseas (in the United States, Zara
items can cost 40 percent or more than they do in Spain). Zara reports that all North American
stores are profitable and that it can continue to grow its presence, serving forty to fifty stores
with just two U.S. jet flights a week. (J. Tagliabue, “A Rival to Gap That Operates Like Dell,” New
York Times, May 30, 2003.) Management has considered a logistics center in Asia but expects
current capacity will suffice until 2013. (C. Rohwedder and K. Johnson, “Pace-Setting Zara Seeks
More Speed to Fight Its Rising Cheap-Chic Rivals,” Wall Street Journal, February 20, 2008.)
Another possibility might be a center in the Maquiladora region of northern Mexico, which
could serve the U.S. markets via trucking capacity similar to the firm’s Spain-based access to
Europe, while also providing a regional center to serve expansion throughout the Western
Hemisphere.
Rivals have studied the Zara recipe, and while none has attained the efficiency of Amancio
Ortega’s firm, many are trying to learn from the master. There is a precedent for contract firms
closing the cycle time gap with vertically integrated competitors that own their factories. Dell
(a firm that builds its own PCs while nearly all its competitors use contract labor) has seen its
manufacturing advantage from vertical integration fall as the partners that supply rivals have
mimicked its techniques and have become far more efficient. (T. Friscia, K. O’Marah, D. Hofman,
and J. Souza, “The AMR Research Supply Chain Top 25 for 2009,” AMR Research, May 28, 2009,
http://www.amrresearch.com/Content/View.aspx?compURI=tcm:7-43469).
In terms of the number of new models offered, clothing is more complex than computing,
suggesting that Zara’s value chain may be more difficult to copy. Still, H&M has increased the
frequency of new items in stores, Forever 21 and Uniqlo get new looks within six weeks, and
Renner, a Brazilian fast fashion rival, rolls out mini collections every two months. (M. Pfeifer,
“Fast and Furious,” Latin Trade, September 2007; and C. Rohwedder and K. Johnson, “Pace-
Setting Zara Seeks More Speed to Fight Its Rising Cheap-Chic Rivals,” Wall Street Journal,
February 20, 2008). Rivals have a keen eye on Inditex, with the CFO of luxury goods firm
Burberry claiming the firm is a “fantastic case study” and “we are mindful of their techniques.”
(C. Rohwedder and K. Johnson, “Pace-Setting Zara Seeks More Speed to Fight Its Rising Cheap-
Chic Rivals,” Wall Street Journal, February 20, 2008).
Finally, firm financial performance can also be impacted by broader economic conditions.
When the economy falters, consumers simply buy less and may move a greater share of their
wallet to less-stylish and lower-cost offerings from deep discounters like Wal-Mart. Zara is also
particularly susceptible to conditions in Spain since that market accounts for nearly 40 percent
of Inditex sales (J. Hall, “Zara Is Now Bigger Than Gap,” Telegraph, August 18, 2008), as well as
to broader West European conditions (which with Spain make up 79 percent of sales). (C.
Rohwedder, “Zara Grows as Retail Rivals Struggle,” Wall Street Journal, March 26, 2009). Global
expansion will provide the firm with a mix of locations that may be better able to endure
downturns in any single region. Recent Spanish and European financial difficulties have made
clear the need to decrease dependence on sales within one region.
24. Zara – Technology to Dominate MIS: The Strategic Dimensions
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Conclusion
Zara’s winning formula can only exist through management’s savvy understanding of how
information systems can enable winning strategies (many tech initiatives were led by José
Maria Castellano, a “technophile” business professor who became Ortega’s right-hand man in
the 1980s). (C. Rohwedder and K. Johnson, “Pace-Setting Zara Seeks More Speed to Fight Its
Rising Cheap-Chic Rivals,” Wall Street Journal, February 20, 2008). It is technology that helps
Zara identify and manufacture the clothes customers want, get those products to market
quickly, and eliminate costs related to advertising, inventory missteps, and markdowns. A strat-
egist must always scan the state of the market as well as the state of the art in technology,
looking for new opportunities and remaining aware of impending threats. With systems so
highly tuned for success, it may be unwise to bet against “The Cube.”
Source: http://2012books.lardbucket.org/books/getting-the-most-out-of-information-systems-
v1.3/s07-zara-fast-fashion-from-savvy-s.html
25. Zara – Technology to Dominate MIS: The Strategic Dimensions
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