The business market especially the fashion industry is growing and evolving at a very quick pace. Professionals are implementing the latest supply chain strategies to stay relevant in a highly competitive business environment. However, Zara is the world’s leading retail fashion brand, and the company is finding new methods to amplify SC operations and offer easy fashion access to customers.
Zara’s main products and services are as follows;
- Beauty Goods
- Fast fashion
Key statistical facts and figures about Zara are as follows;
- The retail fashion brand has a network of more than 2200 stores in 100 countries across the globe
- The annual revenue of the company in 2021 was 19588 million Euros
- Annual production rate of the fashion brand is 450 million products and goods
Key Elements of Zara Supply Chain Management
Some of the key elements of Zara supply chain management are as follows;
Zara is a world’s leading retail fashion brand and the company has taken a number of steps that focus on ethical sourcing and sustainability in their supply chain strategy. While launching every new product, the objective of the company is to decrease the environmental impact by offering affordable fashion products and accessories to the customers. However, some of the key elements of ethical sourcing of the company are as follows;
- Employing natural and organic fiber
- Reducing the effect of dangerous chemicals
- Analyzing ethical standards in the SC network and processes
Business Strategy & Operational Processes
Zara follows the strategy of vertical integration and diversification for growth. The company launches retail clothes, and manufactures, and designs color designs within 2 weeks after their appearance on the catwalk show. Usually, it takes 6 months for companies in the fashion industry to produce clothes and launch items. The brand has ownership of its supply chain network and processes, and it allows the company to perform speedily and quickly.
The growth and success of Zara depend on keeping a significant amount of items for in-house production and maintaining an 85% reserve of their capacity for in-season adjustments. In-house production helps companies to achieve flexibility in terms of launching a variety of new products.
However, Zara only commits to manufacture 15-25% of the clothes for the season in advance; and 50-60% of the items the company produces by the start of the season. It means that the company manufactures and designs roundabout 50% of the clothes during the season. If a particular design starts trending during the season, then the company starts manufacturing it. The designer of the company would develop new styles and quickly deliver them to stores if the demand is high for the trend.
Stock Strategic Approach
The strategy of Zara is to sell most of the items at full price during the season because of the sense of scarcity, new trends, and exclusiveness. The overall cost of the company is low due to the markdown of merchandise relevant to competitors. However, the brand earns 85% of the revenue on its clothes, while the industry makes 60-70%. The unsold items contribute 10% of the company’s stock
Lean Inventory Management
Lean inventory optimization allows the fashion brand to find the quantity of stock that the company should ship to its retail store twice a week. The stock delivery is small, but it makes sure that they would receive only needed items rather than an overload of stock. However, the quick production system during the season to ship stock often, but in small batches. While following the latest trends, if the company manufactures designs in haste that don’t sell well, then it does little harm to the company.
Small batch production helps the company to avoid tons of unsold stock. If the trending design doesn’t work, the company has the time to experiment with a different design and keep on trying one after another.
Centralized Order Fulfillment
The stores and outlets of Zara send their orders to the parent brand twice per week. The leaving and arrival time of the company’s trucks is precise and specific. Labeling and pricing of clothes and garments are due after reaching their destination, and then they’re ready for sale.
However, every person involved in the supply chain network is aware of their role and responsibilities and it would impact the entire organization. It ranges from design, procurement, manufacturing and production, and distribution to retail. The customers of Zara are also aware of the fact that they should visit the store for fresh stock.
Solid Distribution Network
The logistical and distribution network and system allow Zara to deliver clothes to the European market within a day; it reaches the Asian and American markets within 40 hours.
Cross-function operational strategy plays a key role in the success of Zara. When combined it the supply chain, it allows the company to control mass-scale production. Resultantly, it leads them towards value creation of shareholders, high profitability, and well-managed inventory.
Zara is balancing the requirements of fast fashion by making it socially and environmentally sustainable. The company has taken various steps to decrease the consumption of water in the production stage. The brand is encouraging people to decrease the fast fashion trend and developing designs that could work in different seasons.
Conclusion: Zara Supply Chain Management
After an in-depth study of Zara supply chain management; we have realized that Zara is the world’s leading fashion brand with an efficient supply chain network. If you are learning about the SC processes of Zara, then you should keep in mind the abovementioned elements.
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