Zara: The Technology Giant of the Fashion World
Zara is a company that defines what the fashion industry has termed 'fast fashion.' The flagship specialty chain of Spain-based clothing conglomerate, Inditex, Zara has built an information and distribution system that allows it to put the latest runway fashions in its stores in a matter of weeks at a fraction of what the big-name designers charge.
In addition to fast, Zara is prolific. In a typical year, Zara launches about 11,000 new items. Compare that to the 2,000 to 4,000 items introduced by both H&M and Gap. Zara stores receive new merchandise two to three times each week, compared to four to six times per year for most clothing retailers. More and smaller batches of items translates into fashion exclusivity. This in turn results in fewer mark-downs and higher profits.
Zara controls a true vertical marketing system. A good portion of the channel participants are centralized geographically around its corporate headquarters in a remote corner of Northeast Spain, rather than spread out around the globe. This and its IT system are what allow it to achieve the speed and responsiveness that it does.
1. As completely as possible, sketch the supply chain for Zara from raw materials to consumer purchase.
As the case points out, finding the starting point of a product concept is hard to nail down with Zara. But the following is an attempt to do this:
Design: The starting point is a collaborative phase that includes teams of creative professionals who carry out the design process and store managers who spot trends and feed data to corporate.
Materials: Zara makes 40 percent of its own fabric. It is not clear from the case where the other 60 percent comes from, but given the information on the rest of the process, it is likely purchased more on a local basis than on a global basis.
Cutting: Zara produces more than half of its own clothing. It cuts all fabric in-house at its complex in Spain.
Sewing: Cut fabric and designs are sent to one of several hundred local co-operatives.
Ironing: Ironing is performed in-house by workers trained for a specific task (lapels, shoulders, etc.).
Final preparation: Clothing is wrapped in plastic and transported on conveyors to local Zara-owned warehouses. The automated warehouses sort, pack, label, and allocate clothing items to specific regions and stores.
Delivery: Stores within a 24-hour drive receive deliveries by truck. All other stores receive their goods via air parcel.
Sale: All stores are company owned.
2. Discuss the concepts of horizontal and vertical conflict as they relate to Zara.
There is little information given in the case regarding channel conflict. But one could easily speculate as to the outcomes. Because Zara owns much of its own supply chain and exhibits an extreme amount of control over the elements that it does not own, conflict is likely minimal. With respect to horizontal conflict, the only members of the supply chain on a horizontal level would be the hundreds of local sewing co-operatives. It is difficult to imagine the type of complaints that such co-operatives might wage against each other that would affect Zara. However, horizontal issues might result in vertical conflict. Zara owns much of the supply chain. Thus, any conflict would be internal and could be handled in a much different manner than if the entities were independent. But the co-operatives are not company owned. Because there are so many of them, however, conflict should be minimized as Zara has plenty of options.
3. Which type of vertical marketing system does Zara exhibit? List all the benefits that Zara receives by having adopted this system.
While Zara does not own all of the stages of the vertical marketing system, it seems to have a strong control over those that it does not own. Zara's system fits the description of a corporate VMS better than it fits the contractual or administered systems. The text provides an outtake example of Zara in the section on corporate VMS that illustrates the benefits that Zara achieves through this structure. These include control over almost every aspect of the supply chain, more items produced, faster design-to-shelf times, lower inventories, and more frequent shipments. In short, Zara is faster, more flexible, and more efficient than other fashion houses and chains because of its corporate VMS.
4. Does Zara incur disadvantages from its 'fast-fashion' distribution system? Are these disadvantages offset by the advantages?
One disadvantage that Zara incurs is possibly a higher cost on materials and labor by not sourcing globally to the cheapest source. This, however, is offset by the cost savings of not having items shipped all over the world. It is also offset by dramatically faster response time between each stage. Because Zara's competitive advantage is the 'fast' part of the fashion, this is much more important than the minimal amount that Zara could save by sourcing globally.
5. How does Zara add value for the customer through major logistics functions?
Warehousing: The only warehousing done in this system is local and brief for the component parts and the finished items. This adds value by cutting down on costs associated with warehousing and by decreasing the time-to-shelf.
Inventory Management: The IT system and the VMS in general both contribute to Zara's ability to offer a just-in-time system. This results in lower inventories, cut costs, and faster throughput.
Transportation: Zara's shipping system is certainly quick. That is the big advantage. Shipping by air freight to individual stores is not the cheapest way to go. But again, Zara's competitive advantage is speed.
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