Zara: Fast Fashion

Zara:  Fast Fashion - mini-assignment #1

In the case (Ghemawat & Nueno, 2003), Zara, Spanish haute couture and low-cost, is the most valuable flagship chain store in the six separate chains of Inditex group.  The owner is Spanish tycoon Amancio Ortega who opened the Zara first retail store in 1975(Inditex, n.d.). According to the case, Zara brings the € 441 million to Inditex which 100% owned Zara. About 76% of total sales are contributed by Zara’s 507 stores and € 2.477 billion. Zara, vertical integration company, has three product lines, such as, men, women and children. Each of them has special creative team as designers, procurement specialists and product developers. Creative team relies on fast fashion by Zara IT system to create new products, and to adjust product line after the season. Therefore, Zara has only 1% new product failure rate which it comparing to10 percent of the industry standard failure rate. That seems being successful. There is one business model benefit to Zara which is SCM.

Zara's SCM strategy

Zara is a vertically integrated company, and also each level has different dynamic supply chain. For example, manufacture, warehouse, and retail stores. The centralized decision-making makes information, funds, and products flow more efficiency than other companies, and reduces the cycle time as the quick response system. Before, Zara used local supply chain in Spanish. Now, Zara uses the global apparel supply chain as new strategy. According to the case, there are about 40% of finished clothes were produced by Zara. Rest of them supports from global apparel supply chains, such as Asian, Europe, and North Africa. Zara’s SCM strategy is fast. It compresses the cycle time by quick response. According to the case Exhibit 4 (Cycle Time Compression through Quick Response,2003, p.22), Zara only use 6 weeks in the cycle time as “fast fashion” comparing to six months as the cycle time in the 30 years before. Therefore, Zara has much faster speed of the global apparel supply chain.