7 Rules of Fashion Supply Chain (Zara Case Study)

We will show you the development of the fashion industry and how Zara manages to bring the operations management to the next level and becomes fashion supply chain leader.

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 and fashion 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, 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 system, others adopt a Just-in-Time manufacturing concept. However, there is one company that stands out.

Zara who is the leading 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,




Fashion Supply Chain (Zara Supply Chain Case Study)

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 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 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, inventory management and production planners the same way as in cellular manufacturing. This help Zara to streamline 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 display at stores on the same day they arrived. Since everything runs at a steady pace, they can reduce waiting time at 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, automation project 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.

Is this fashion supply chain case study useful?


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.


Last review and update: August 20, 2019
About the Editor
Ben Benjabutr is the editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in various functions in supply chain magement. In his free time, he enjoys reading business and management books. You can connect with him via Twitter, and Quora or drop him a line via e-mail.