7 Fashion Supply Chain Lessons from Zara

We will show the development of the fashion industry and how Zara brings operations management to the next level and becomes a leader in fashion supply chain.

Fashion Supply Chain 1.0

The fashion industry is one of the most primitive forms 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 for as long as 40 weeks! In order to reduce lead-time, Quick Response (QR) strategy was developed and there are 2 core principles, namely, the 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 ways to differentiate themselves, some adopt ERP systems, and others adopt a Just-in-Time manufacturing concept. However, there is one company that stands out.

Zara which is the leading fashion retailer in Spain has managed to get the attention of 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 an article in 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 below,

1. Produce in a small lot

The small lot is the unique characteristics of lean manufacturing and six sigma which is not the case here. The logic behind this is that a small lot creates a sense of exclusivity. Customer needs 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 a 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 staff and 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, inventory management, and production planners the same way as in cellular manufacturing. This helps Zara to streamline internal communication a lot.

4. Control scheduling strictly

At Zara, store managers can place orders 2 times a week, shipments are prepared and delivered within 24 hours (in Europe) and products will be on display at stores on the same day they arrived. Since everything runs at a steady pace, they can reduce waiting time every step of the way.

5. Keep production in-house

Zara tries to stay away from the most common international business tactics, namely, low-cost country sourcing and supplier negotiations. They make an investment in in-house manufacturing as much as possible. The reason is that they believe the in-house production helps them to increase their overall flexibility.

6. Automate production and warehouse facilities

Since Zara believes in time-based competition, an automation project is a key to helping 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 a well-oiled machine.

Zara's supply chain is a very good example of strategic alignment because people, processes, and practices support time-based strategy perfectly.

References
- Lummus, R. R., Krumwiede, D. W., & Vokurka, R. J. (2001). The relationship of logistics to supply chain management: developing a common industry definition. Industrial Management & Data Systems, 101(8), 426-432.

- Ferdows, K., Lewis, M. A., & Machuca, J. A. (2004). Rapid-fire fulfillment. Harvard business review, 82(11), 104-117.


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Last review and update: July 5, 2022