Clothing retailer Zara is no ordinary company. It has changed the way in which fashion apparel are manufactured and sold. And it has done so by leveraging technology and by defying prevailing wisdom of experts. Zara, based in Spain, is owned by Inditex. Zara has stores in more than 68 countries, including India.
Zara takes just 15 days to complete the entire value chain from designing a set of clothes to manufacturing them to sending them in the stores for final sale. Its competitors take somewhere between 3 months and 6 months for doing the same thing. This shorter lead time and cycle time gives Zara unbeatable competitive advantage over rivals. Every 15 days customers get to see new style of clothes in Zara’s stores.
Zara achieves this superfast lead time by having vertical integration. It owns most of the factories in which its clothes are manufactured. These factories are located in Spain and use state-of-the-art technology in production.
The prevailing wisdom is to outsource manufacturing to contract manufacturers in low cost locations such as Bangladesh and China. Zara doesn’t believe in this wisdom. By owning its factories, Zara tends to have tighter control over its manufacturing processes. It is able to implement Just-in-Time (JIT) manufacturing. JIT enables it to manufacture clothes fast and to carry as little inventory as possible.
The vertical integration is not limited to owning manufacturing facilities. Much of the fiber and dyes that go into manufacturing of clothes are manufactured by Zara’s subsidiaries.
Zara uses sophisticated inventory optimization software to determine inventory needs of its stores around the world. Managers in its stores use personal digital assistants (PDAs) to regularly get feedback from customers on the style of clothes that they like and those that they don’t. They then send these feedbacks to the team of 300 designers that sit in the company’s headquarters in Spain. On the basis of this feedback, the designers turn out somewhere between 3000 and 4000 new designs of clothes every year. They use computer-aided-designing and other designing software in the process of designing clothes.
Zara also has a unique distribution model. It owns just two large distribution centers. Both these distribution centers are located in Spain. From the manufacturing and sewing facilities the finished clothes are shipped to these two distribution centers. From the distribution centers they are then shipped to stores around the world. In order to minimize transportation time, Zara uses trucks for short distance transportation and chartered cargo flights for long distance transportation.