Reference no: EM132100204

1- How does Zara's approach yield advantage over companies using more traditional approaches to logistics and supply chain management?

2- If you were Zara’s supply chain manager what difficulties might you face when implementing the company’s strategic objectives?

3- What might make it difficult for competitors to imitate Zara's approach?

4-What factors might limit over time the international success of Zara's approach?

Mini Case: ZARA: Using Innovative Supply Chain Management to Transform the International Fashion Industry

Traditionally, leading designers of women's fashions looked to Paris and other European fashion centers for insight into what clothing to offer to the markets. Fashion houses like Chanel and Gucci displayed their clothing lines twice a year in glamorous fashion shows. These designs, which often cost thousands of dollars, were affordable only for the very rich. The designs were subsequently copied by mall retailers and sold to the masses at lower prices, helping to ensure that consumer trends moved in sync with the fashion industry. The limited number of designs helped simplify planning and allowed clothing companies to survive even when they took six to nine months to bring a product from design to market.

That business model is disappearing rapidly as the international fashion industry evolves toward “fast fashion”—featuring up-to-the-minute fashion, low prices, and a clear market focus. Helping lead this revolution is a Spanish company called Zara, with over 2,000 clothing stores located in leading cities across more than 88 countries. Known for its fashionable and affordable clothing, Zara's competitive advantage comes from its world-class supply chain management skills.

The company's strategy of speed and flexibility has enabled Zara to dramatically shorten the fashion cycle. Store managers and roving observers use handheld devices to collect and send information regarding which designs are being well received by the buying public, which ones are not, and what will be the next hot trend. Zara's information systems also enable the company to better manage inventory, the primary cost of goods sold for clothing manufacturers and retailers. The textile manufacturers used by the company are mostly located close to Zara's headquarters, rather than lower-cost sources in the Far East that can lengthen the cycle time to market. Zara's use of information technology and advanced supply chain management techniques reduces cycle time from initial garment design to appearance in the company's retail stores to as little as 14 days—versus 3 to 15 months for most of its rivals’ products. Rapid turnaround times also mean the company can keep its best-selling designs well stocked and limit excess inventory of designs that do not resonate with the consumer.

Zara ruthlessly removes its product lines, even ones that have been selling well, every two weeks or so. Zara's culture of reacting very quickly to new fashion trends means that each time a customer walks into a Zara store, she can get the feel of entering a new place, one with fresh styles on display. “When you went to Gucci or Chanel in October, you knew the chances were good that clothes would still be there in February,” said Masoud Golsorkhi, editor of the London fashion magazine Tank. “With Zara, you know that if you don't buy it, right then and there, within 11 days the entire stock will change. You buy it now or never. And because the prices are so low, you buy it now.” Customers have thus come to know Zara as a chain offering a steady stream of new, “gotta-have-it” merchandise. The limited availability of its merchandise promotes impulse purchases—a “grab it while you can” mentality among shoppers.

Zara's revolutionary approach to the fashion industry means that it dictates industry standards on such dimensions as time to market, order fulfillment, costs, and customer satisfaction, as well as the ability to manage the linkages between these factors. The result is that high-end designers and fashion houses are being pressured to change their own operations and improve their ability to compete on speed. As Zara shows, effective supply chain management can indeed result in international competitive advantage.