Fashion Supply Chain 1.0
Fashion industry is one of the most primitive form of supply chain management and its practices have been extended, adopted and become the best practices that we use today.
In 1984, US Apparel Industry created the task force called "Crafted With Pride in the U.S.A. Council" with the goal to improve the overall competitiveness of the industry. One year later "Kurt Salmon Associates" was assigned to investigate the whole apparel supply chain. The result showed that materials were in the warehouse or in transit as long as 40 weeks! In order to reduce lead-time, Quick Response (QR) strategy was developed and there are 2 core principles, namely, partnership between retailers and suppliers to improve the information sharing and the adoption of technologies such as EDI, UPC Code and point of sales data (POS).
Fashion Supply Chain 2.0
When QR strategy has become saturated, companies have to find the ways to differentiate themselves, some adopt ERP system, others adopt Just-in-Time manufacturing concept. However, there is one company that stands out.
Zara who is the fashion retailer in Spain, has managed to get the attention from academics and the first case study about its strategies was published by Harvard Business School in 2003. In 2004, Kasra Ferdows, Michael A. Lewis, and Jose A.D. Machuca published the article on Harvard Business Review named "Rapid-Fire Fulfillment". This article was the result of 3-year interviews with the senior management of Zara. We've identified 7 rules that we can learn from them as below,
1. Produce in small lot
Small lot is the unique characteristics of lean manufacturing which is not the case here. The logic behind this is that small lot creates the sense of exclusivity. Customer need to make a quick decision otherwise the next day the products they want will be gone. So customer visits Zara's stores to see new products more often and this creates the huge amount of traffic and revenue.
2. Centralize design and product development
The norm in the apparel (and some other) industries is to develop new products by both in-house staffs and through merchandisers. In the latter case, suppliers need to send samples (through merchandisers) to buyers many many times. Elimination of this back-and-forth communication reduces the time to market drastically.
3. Utilize work cell organization
Each new product development team has its own designers, sales, procurement and production planners the same way as in a cellular manufacturing. This help Zara to streamline the internal communication a lot.
4. Control scheduling strictly
At Zara, store managers can place order 2 times a week, shipments are prepared and delivered within 24 hours (in Europe) and products will be on displayed at stores the same day they arrived. Since everything runs in a stead pace, they can reduce a waiting time at every step of the way.
5. Keep production in-house
Zara tries to stay away from low-cost country sourcing and make an investment in the in-house manufacturing as much as possible. The reason is that they believe the in-house production help them to increase the overall flexibility.
6. Automate production and warehouse facilities
Since Zara believes in time based competition, automation is the key to help them to increase the speed and the accuracy of the operations.
7. Adhere to all rules
Implementing any one of these rules alone is not quite effective. Then, they have to stick to all rules so the whole supply chain is running like the well-oiled machine.
Zara's supply chain is a very good example of the strategic alignment because people, processes and practices support time-based strategy perfectly.