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Process and Facility Design and Improvement: A Case Study on the Lean
Production Management of the Spanish Fashion Retailer Zara

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Process and Facility Design and Improvement: A Case Study on the Lean Production
Management of the Spanish Fashion Retailer Zara
Raymond Allan G. Vergara
Assistant Professor I
Marketing and Advertising Department
Ramon V. Del Rosario College of Business
De La Salle University Manila
raymond.vergara@dlsu.edu.ph

Abstract
This paper consists of two parts: (1) a review of literature on process and facility design, and
process improvement; and (2) a case analysis of the process design and production
management philosophies of the Spanish Inditex Group’s Zara, one of the world’s largest
vertically integrated fashion manufacturer and retailer.
Keywords: production management, process design, process improvement, fashion industry,
Zara

INTRODUCTION
In today’s economy, the average consumer is faced daily with a very wide range of choices
and alternatives. This, coupled with changing consumer trends and preferences, forces
companies today to operate in a highly competitive environment wherein both their short-
term tactics and long-term strategies must address the external demands of the market for
good—if not exceptional—products and services, and their own internal need for production
efficiency and cost minimization in order to survive.
To sustain itself, companies today “must be able to respond quickly to changes in demand,
production volume, and product mix” (Drira et al, 2007). To do so, it is crucial for companies
to design their operations structure to be highly productive and adaptable to change, which
involves establishing an efficient and effective process and facility design. Moreover, as
companies operate in a dynamic environment constantly pressured by changing consumer
demands, fast-paced technological advancements and growing global competitions,
companies must learn to continually evaluate and improve upon these processes and facilities.
This paper serves a review of existing literature on process design, facility design and process
improvement. Part I of this paper briefly examines the fundamentals of process design. Part II
examines current literature on facility design and details some gaps between theory and
practice. Part III provides a short primer on the current and most popular process
improvement principles. This paper assumes that facilities improvements come as a corollary
of process improvements, and will focus on the principles and current practices, and not on
the actual changes on the facility design.
PROCESS DESIGN
Operations management textbooks define process as “the basic building block of operations
… consist(ing) of a set of activities that need to be performed by consuming some resources
and time” (Mahadevan, 2010). Thus, process design essentially means the scheme by which
an outcome—in this case, goods and services—are produced, manufactured, assembled,
and/or provided. Designing a process takes into account the resources required to produce a
product—that is, your goods and services. Specifically, process designers consider how much
it will cost to produce the product, in terms of time, effort and equipment. Designers will also
consider whether such process will make productive use of available resources and how
much profit will be retained after taking into account all of the costs.
Lu and Wood (2006) define process design as an integral part of the product realization chain,
which, in manufacturing, involves product design, process design and process execution. The
product realization chain is important because it is responsible for the following objectives:
1. Speeds up time to market, or the relative time it takes from product conception to
market availability
2. Enhances productivity through “reduction of production costs, higher production
yields, improvement of production throughput (i.e., the rate of production for a
process over a period of time), and reduced work in progress (i.e. set of unfinished
items on inventory)”
3. Boosts customer acceptance of the new product
4. Brings product into a stronger competitive position
The common misconception in practice is that process design takes a backseat to product
design and process execution (Lu and Wood, 2005), but Pisano and Wheelwright (1995, as
cited in Lu and Wood, 2005) argue that inefficiencies in process design result in either delays
in the product launch or impedes the commercial success of the product. Process design,
therefore, is crucial because it “involves understanding the characteristics of the product to
determine the appropriate manufacturing techniques. It moves from a plan for the entire
production or execution system, to developing a plan for individual processes, through to
more specific details such as the design of tools and fixtures, the sourcing, outfitting and
testing of those tools and fixtures, and finally conducting pilot runs” (Lu and Wood, 2005).
Ultimately, in order for the product realization chain to fulfill its objectives of improving time
to market, enhancing productivity, boosting commercial success, and making the product
highly competitive, companies must properly conceive and design efficient and effective
processes that translate product blueprints into highly usable, competitive and successful
products.

FACILITY DESIGN
Clark and Fujimoto (1991, as cited in Lu and Wood, 2005) “effectiveness of process
engineering depends as much on the ability to interact with the factory,” emphasizing that
facilities serve an important role in the product realization chain. A company’s facilities,
particularly how it is laid out, affect the manufacturing costs, work in progress, lead times
and productivity (Drira et al, 2007). In addition, facilities, which include all machines,
equipment, working cells, etc., represent the largest and most expensive assets of the
organization, which makes it of crucial importance (Canen and Williamson, 1998). Its use
and productivity must be maximized in order to minimize the costs, particularly because “the
physical arrangement of processing facilities has long been accepted as being one of the
most significant” contributor to overall manufacturing costs (John et all, 2011).
Drira et al (2005) asserts that the facility design problem is concerned with two issues: (1)
finding the most efficient facility layout, and (2) selecting the materials right handling
equipment.
Facility Layout Problem
The problem of finding the most efficient and most effective arrangement of equipment,
workstations, and other resources is called the facility layout problem. It’s main concern is to
reduce material handling as much as possible, as poor materials handling generates a lot of
business problems (Canen and Williamson, 1998), such as lower productivity, material
damage and accidents, and inefficient use of storage, among others.
Canen and Williamson (1998) postulated that a good facility layout helps improve any
company’s business performance and lends to its competitive advantage; it does so by:
1. Reducing unnecessary material handling
2. Reducing operations costs
3. Keeping the smooth flow of products throughout the facility
4. Reducing inventory costs
5. Maximizing the use of space, allowing more products to be manufactured
Tompkins (2010) further emphasized the importance of a good facility layout: “Between 20%
and 50% of the total operating expenses within manufacturing is attributed to material
handling. Furthermore, it is generally agreed that effective facilities planning can reduce
these costs by at least 10% to 30%.”
Drira et all (2005) summarizes 4 general types of facility layouts:
1. A product layout has facilities organized according to the sequence of successive
manufacturing operations. This is typically the “assembly line” that most are familiar
with. This type of layout is most used by companies that produce high-volume and
low-variety products.
2. A process layout, on the other hand, groups facilities with similar functions together.
It has the advantage of flexibility, but may result in low utilization for some
equipment and scheduling confusion, particularly when specific working cells or
equipment are highly utilized for several processes.
3. A fixed layout is one where the product does not move; instead, it is the different
resources that are moved. This is used for products that are too large or too complex
to move, such as ships and aircraft.
4. A cell layout, also considered a combination layout, groups machines into cells to
process families of similar parts.
Literature on the facility layout problems is currently rich. However, Canen and Williamson
(1998) observed that while companies have much to gain from the current body of
knowledge, it is not being widely used either because these companies do not link with
academic institutions or are clueless about existing technology. Drira et al (2005), on the
other hand, point out that there are still areas to be explored, particularly in improving
methods of design for robust and adaptive layouts, finding solutions for complex layout
problems, and focusing on facility layout problems outside of the manufacturing realm.
PROCESS IMPROVEMENT
Quality has become very popular buzzwords and principles in operations management.
Managers are highly concerned with improving product quality and reducing costs through
process improvements. The point is to achieve a high level of customer satisfaction while still
positively impacting the company’s bottom line. Such need has spawned several principles
and guidelines. Many of these principles have graduated from mere operations improvement
guidelines to management approaches and principles.
This paper will concentrate on the following six of the most popular process improvement
principles:
1. Total quality management
2. Business process improvement
3. Business process reengineering
4. ISO 9000
5. Six Sigma
6. Lean management
Total Quality Management
Total quality management or TQM is a change management philosophy and process
improvement principle that originated from the research and works of Edward Deming and
Joseph Duran. Researchers have defined TQM as:
1. “An approach to improve effectiveness, flexibility, and competitiveness of a business
to meet customers’ requirements” (Oakland, 1993, as cited in Gouranourimi, 2012),
2. “The source of sustainable competitive advantage for business organizations”
(Terziovski, 2006, as cited in Gouranourimi, 2012)
3. “A source of attaining excellence, creating a right first-time attitude, acquiring
efficient business solutions, delighting customers and suppliers etc.” (Mohanty and
Behera, 1996, as cited in Gouranourimi, 2012), and
4. “A source of enhancing organizational performance through continuous improvement
in organization’s activities” (Claver-Cortes et al., 2008; Teh et al., 2009, as cited in
Gouranourimi, 2012)
TQM emphasizes on continuous quality improvement and focuses on implementing
incremental change within the organization and introduces minimal variations to existing
processes (Gouranourimi, 2012). In TQM, everyone in the organization is responsible for
product quality (Arnheiter and Maleyeff, 2005). It follows a bottom-up approach—it begins
with statistical analyses of data gathered from the production floor, and enhanced by training
and education of employees and managers within the organization (Gouranourimi, 2012).
Business Process Improvement
Business Process Improvement or BPI is a change management philosophy developed by
James Harrington in 1991 that increases the efficiency and efficacy of the business processes
that provide output to the firm’s customers, both internal and external, in the long run
(Zellner, 2011). Harrington (1991) asserts that BPI’s main objective is to design processes
that:
1. Eliminate errors
2. Minimize delays
 3. Maximize the use of assets
4. Promote understanding
5. Are easy to use
6. Are customer friendly
7. Are adaptable to customers’ changing needs
8. Provide the organization with a competitive advantage
9. Reduce excess head count
The criticism with BPI, however, involves its very generalized view on process improvement.
Current literature has failed to provide neither straight-cut implementation guidelines nor an
evaluation methodology for firms to follow and use (Adesola and Baines, 2005).
Business Process Reengineering
Business Process Reengineering or BPR, a result of the studies made by Michael Hammer
(1990), Thomas Davenport and James Short (1990, as cited in Gouranourimi, 2012), seems to
be the complete opposite of TQM. While TQM stresses incremental changes in existing
processes using a bottom-up approach, BPR underscores the need for radical and rapid
changes, which underlies the creation of new processes where needed, through a top-down
approach—hence, “reengineering” (Gouranourimi, 2012). Hammer (1990) argues,
“Reengineering strives to break away from the old rules about how we organize and conduct
business. It involves recognizing and rejecting some of them and then finding imaginative
new ways to accomplish work. From our redesigned processes, new rules will emerge that fit
the times. Only then can we hope to achieve quantum leaps in performance.”
BPR also places an emphasis on the critical role of information technology in upgrading the
processes within an organization.
ISO 9000
ISO 9000 is a quality management system, “standards provide guidance and tools for
companies and organizations who want to ensure that their products and services
consistently meet customer’s requirements, and that quality is consistently improved” (ISO
9000). It subscribes to 8 quality management principles
1. Customer focus
2. Leadership
3. Involvement of people
4. Process approach
5. System approach to management
6. Continual improvement
7. Factual approach to decision making
8. Mutually beneficial supplier relationships
ISO 9000 has received a lot of criticism. According to Douglas et al (2003), firms have
acknowledge that they are particularly disappointed with the following:
1. ISO 9000 certification provides no value added to the organization as a whole
2. Some firms with ISO 9000 certification do not deserve it and do not follow the
standard
3. It is not wholly applicable with the service sector
4. It lacks emphasis on continuous improvement
Six Sigma
Arnheiter and Maleyeff (2005) traces Six Sigma’s roots from two sources: (1) from Motorola
“in response to sub-standard product quality traced in many cases to decisions made by
engineers when designing component parts” and (2) in TQM, particularly on its emphasis on
the need to be systematic and methodical when making management decisions, particularly
since it affects customer satisfaction. It has since evolved into a comprehensive management
system. A review of literature reveals four definition streams for Six Sigma (Tjahjono, 2010):
1. Six Sigma as a statistical tool as a basis for process improvement under the purview
of quality management
2. Six Sigma as an operations management philosophy to be shared by everyone within
and outside the organization
3. Six Sigma as a business culture and a management commitment towards excellence
4. Finally, Six Sigma as a methodology for analysis towards continuous business
improvement
Six Sigma is also known to harp on education and training within the organization (Tjahjono,
2010, and Arnheiter and Maleyeff, 2005), stressing on the importance of mentoring to ensure
that everyone understands and accepts the responsibility of guaranteeing the quality of
processes, and therefore, products, of the organization.
Lean Management
Lean thinking or lean management, on the other hand, finds its roots from the Toyota
production system (TPS), a Japanes manufacturing philosophy pioneered by two engineers
Taiichi Ohno and Shigeo Shingo and inspired by the manufacturing techniques employed at
the Ford assembly plants in the 1910s (Arnheiter and Maleyeff, 2005). Lean essentially
means maximizing all resources available and minimizing, if not eliminating, waste or muda.
This is done either through kaizen, or continuous improvement, or through kaikaku, or radical
change.
Lean production is also known for the following elements (Arnheiter and Maleyeff, 2005):
1. It employs a pull strategy, a make-to-order approach wherein no product is produced
until a downstream customer requires it.
2. It aims to reduce lead times and subscribes to just-in-time (JIT) manufacturing (TPS
is also the birthplace of this method).
3. It continually works on reducing variability across the entire process and stresses on
standardization to reduce wastes.
4. It has zero quality control and instead incorporates quality “checks” through
automation and mistake proofing.
Like Six Sigma, lean management has evolved from a mere business process improvement
principle to a management philosophy that pervades through an organization’s culture and
beliefs.
LIVE CASE: THE INDITEX GROUP’S ZARA AND LEAN PRODUCTION
MANAGEMENT
i. Company Background
Zara, a global high street brand that operates close to 1,700 stores in 85 countries, is the
flagship of Spain’s Inditex Group. The fashion chain’s profitability is among the highest in
the industry, and was once described by the fashion director of the French luxury fashion
house LVMH as “the most innovative and devastating retailer in the world” (Gallaugher,
2008).
Zara is headquartered in one of the poorest of Spain’s autonomous regions, Galicia. But
where Galicia lacked in economic resources, it made up for it in its long legacy of tailors for
aristocrats and apparel artisans, and, according to Inditex CEO Jose Maria Castellano, a
strategic location in Europe that translated to transport cost efficiencies (Ghemawat and
Nueno, 2006), favorable conditions for manufacturing a global clothing brand with a
luxurious market image sold at very competitive prices.
ii. Trends and Problems in the Fashion Industry
Today’s trends in global fashion is challenging all players to evaluate and re-think their short
term tactics and long term strategies in order to compete. Mazaira et al (2003) enumerate
some of today’s pressing trends and challenges that are affecting company’s decisions:
1. Growing internationalization
2. Development of distribution chains
3. Increased competitive pressure
4. Low customer loyalty. “One brand wardrobes” no longer exist, and companies seek to
increase their share in customer wardrobes.
Mazaira et al (2003) also point to changing philosophies, particularly in the fashion industry.
Traditionally, clothing, accessories and shoes have been regarded as durable, non-perishable
consumption articles with no expiration. However, recent trends and increased competition
has changed how consumers see clothing and fashion. In today’s fast paced world, the
fashion industry now considers its products as highly perishable (Dutta, 2002).
The challenge for global fashion chains today is to survive despite the dynamic changes in
philosophy and trends in the industry. They need to craft strategies that minimize their costs
and maximize their profits in order to not only survive but also, possibly, win.
Zara’s business model is a response to this changing philosophy. Inditex CEO Jose Maria
Castellano believes that “(i)n fashion, stock is like food. It goes bad quick.” Clothes have a 3-
4 week selling expiration date. Which is why, Zara’s “business is all about reducing response
time.” (Mazaira et al, 2003)
iii. The Zara Business Model
The Zara business model defies all fashion industry norms. When most of its global
competitors resort to an internationalized supply chain that involves outsourced contract
manufacturers, Zara maintains a vertically-integrated model that controls the entire process—
from research, to design, to production, to distribution, to retail (Dutta, 2002; Gallaugher,
2008; Ghemawat and Nueno, 2006; Mazaira et al, 2003; Strategic Direction, 2005). Despite
defying standards, industry observers have all agreed that Zara’s business model has provided
it with a sustainable competitive advantage. Proof of this is an oversubscribed initial public
offering (IPO) in 2001.
Lean structure, agile processes
Its structure is in keeping with Lean Management and it’s size is relatively smaller compared
to its competition. About 80% of its entire staff is in retail, 8.5% in manufacturing, and the
rest are in design, logistics, distribution, and administration and support (Ghemawat and
Nueno, 2006).
It’s design and production teams are both housed in its headquarters, which enables it to
reduce production time lags and to react quickly to changes in orders and even fashion trends
(Strategic Direction, 2005). Zara’s winning formula begins with its ability to react swiftly to
customers’ needs and wants—Zara’s turnaround time, from design to production, is a mere 4-
5 weeks, compared to industry standards that go up to 12 months, averaging up to 6 months
for design and 3 months for production (Dutta, 2002; Gallaugher, 2008; Ghemawat and
Nueno, 2006).

As an exception, Zara outsources the production of product lines that have low value-added,
which are mostly basic pieces that have longer shelf lives and have low dollar value
contribution to its revenues (Dutta, 2002; Gallaugher, 2008; Mazaira et al, 2003).

High variety, low volume production

While most manufacturers subscribe to economies of scale to cut on costs, thereby
maximizing profits, Zara subscribes to a different profit maximization reasoning. The retail
giant is known to manufacture a high variety of designs at limited volumes.
In order to compete, Zara believes that it must provide its customers as much variety and
choice as it possibly can. This entails producing as many designs as possible—as much as
11,000 to 12,000 annually (Dutta, 2002; Ghemawat and Nueno, 2006). This is to entice
customers to keep coming back to stores for new products—and with product deliveries twice
weekly, Zara’s retail stores look fresh and new almost all the time.
The low volume of stock—only about 200,000 to 300,000 of each design are produced (, on
the other hand, creates an artificial scarcity opportunity that develops a unique customer
behavior (Dutta, 2002; Gallaugher, 2008; Ghemawat and Nueno, 2006; Mazaira et al, 2003;
Strategic Direction, 2005). Instead of merely window-shopping and waiting for stocks to go
on sale, Zara’s customers know that if they don’t buy what’s on the racks today, it is unlikely
that they will ever get to buy it at all. Because of its limited volume, customers develop a
“buy now or be sorry” attitude.
This production strategy has several implications:
1. Because stocks are sold quickly, it reduces working capital and inventory.
2. High variety contributes to higher customer satisfaction—more choices mean hitting
it right.
 3. Because customers know that new stock arrives twice weekly, Zara is able to reduce
its advertising costs—relying instead on its actual window displays (and customer
delight) to bring in the revenues
4. Reduces the risk of overstocking on failure products, or products that don’t sell well.
5. As a corollary to #4, reducing the risk of overstocking also reduces the need for sales
and discounts. While on average, its competitors sell 50% of their stock at discounted
prices, Zara’s production strategy allows it to sell a significant 85% of its stock at full
price (Gallaugher, 2008).
Ultimately, Zara’s production strategy allows the company to be sustainably profitable.
Despite admittedly high production costs—due to its high capital and labor intensity, the
company offsets it through significant inventory savings, reduced risks and significantly high
profit margins.

Centralized distribution center

Zara closely controls distribution, coursing all products to distribution centers within close
proximity of each other. The older, larger Galicia distribution center is nine times larger than
Amazon’s Nevada warehouse, while the Zaragoza facility was built to augment the
company’s distribution efforts as it poises itself to increase global presence. In keeping with
its fast turnaround and to ensure that all stocks reach its retail destinations when customer
demand for the stocks is high, no item in the facility stays longer than 72 hours. (Gallaugher,
2008)

iv. Trends and Problems in the Fashion Industry

Today’s trends in global fashion is challenging all players to evaluate and re-think their short
term tactics and long term strategies in order to compete. Mazaira et al (2003) enumerate
some of today’s pressing trends and challenges that are affecting company’s decisions:
5. Growing internationalization
6. Development of distribution chains
7. Increased competitive pressure
8. Low customer loyalty. “One brand wardrobes” no longer exist, and companies seek to
increase their share in customer wardrobes.
Mazaira et al (2003) also point to changing philosophies, particularly in the fashion industry.
Traditionally, clothing, accessories and shoes have been regarded as durable, non-perishable
consumption articles with no expiration. However, recent trends and increased competition
has changed how consumers see clothing and fashion. In today’s fast paced world, the
fashion industry now considers its products as highly perishable (Dutta, 2002).
The challenge for global fashion chains today is to survive despite the dynamic changes in
philosophy and trends in the industry. They need to craft strategies that minimize their costs
and maximize their profits in order to not only survive but also, possibly, win.
Zara’s business model is a response to this changing philosophy. Inditex CEO Jose Maria
Castellano believes that “(i)n fashion, stock is like food. It goes bad quick.” Clothes have a 3-
4 week selling expiration date. Which is why, Zara’s “business is all about reducing response
time.” (Mazaira et al, 2003)
v. Alternative Courses of Action: the Case of H&M and The Gap
Globally, Zara’s closest competitors are Sweden’s H&M and the United States’ The Gap.
These two companies present alternative business models to address the challenges in the
global fashion industry.
H&M
H&M was founded in 1947 in Sweden. Today, H&M employs 94,000 people, and operate
about 2,700 stores in 40 countries in Europe, North America, Asia, North Africa and the
Middle East.
Compared to Zara’s capital-intensive and vertically integrated business model, H&M works
with approximately 900 suppliers and owns no factories (Gallaugher, 2008). The company
outsources 100% of all of its production, 50% of which are located within Europe to ensure
logistical efficiencies (Ghemawat and Nueno, 2006). While H&M’s turnaround from design
to retail is about 3 to 5 months on average, well above industry standards of 9 to 12 months
(Dutta, 2002; Gallaugher, 2008; Ghemawat and Nueno, 2006), but still significantly higher
than Zara’s 4-5 weeks. Also unlike Zara, H&M decentralizes its distribution by building a
distribution facility in almost every country it enters.
Currently, H&M trails behind Zara as the second largest fashion retailer in Europe.

The Gap
The Gap follows a highly globalized business model that outsources 90% of its production
internationally; this model, while cost effective, entails a high volume, low variety production
with long supply chains (Ghemawat and Nueno, 2006). It follows the now traditional
outsourcing model of having to order months ahead before product lines are delivered to
retail store racks (Gallaugher, 2008).
The Gap’s business model also relies on fashion forecasting, as opposed to Zara’s fashion
reaction. Because of the long supply chain process, researchers and designers of The Gap
must accurately predict fashion trends in the next 12 months. In its heyday in the 1990s, The
Gap capitalized on its design and research team’s ability to accurate push the right product
lines to the market. Unfortunately, its heavy reliance on this strategy has contributed to its
demise in the 2000s. (Gallaugher, 2008)
vi. Analysis of Alternatives
While there are advantages to the traditional outsourcing models of most fashion
manufacturers and retailers, these models also present a disadvantage that Zara’s business
model aims to avoid:

Long supply chains

The current global outsourcing model, while cost effective in some fronts, entails a long
supply chain that may not be agile enough for the dynamic changes in fashion trends and
demand. Dutta (2002) argues that, typically, the chain from research and design to production
takes a lot of collaboration and a very long time frame. He maintains that the design process
alone takes 3 to 5 months, which require research, prototyping and costing; while the
production process takes 3-7 months, from decision-making and approvals (whether or not to
pursue the product), sourcing, merchandising and manufacturing itself.
Furthermore, Gallaugher (2008) argues that most overseas contract manufacturers require
long lead times. This means that the entire supply chain may take 9 to 12 months before any
of the stocks reach their retail stocks. By then, customers may have already changed their
fashion preferences, and the products, once considered fashionable and trendy, may already
be stale and out of date.
Fashion forecasting missteps
Most fashion manufacturers and retailers rely on forecasting. The problem is if the fashion
retailers and designers fail to be on target. This can cause disastrous results, as was the case
with The Gap, when it suddenly lost its ability to accurately forecast customer’s fashion
preferences (Gallaugher, 2008) and H&M, after Europe’s heatwave affects sales of its
Autumn 2012 collection (South China Morning Post, 2012).
vii. Recommendations
Because the fashion industry can be very fickle and dynamic, there is a need for a business
model that is agile enough to address changing trends and dictates. Supply chains must be
efficient and effective—turnaround times must be shortened. While accurate forecasting is an
important quality, Zara has shown that being lean and reactive pays.

viii. Implementation Plan

The following delineates Zara’s implementation of its vertically integrated lean operations.
Research
Zara has two sources of information: (1) its own design team, and (2) its front lines (i.e. retail
staff) (Dutta, 2002; Mazaira et al, 2003).
1. Design team
The design team, throughout the course of the entire year, uses traditional market research
methods to determine fashion trends. The team visits trade fairs, looks at what Zara’s
competitors are doing and coming out with, closely watches media for fashion trend reports,
visits clubs, fashion centers, schools/universities, etc.
2. Retail staff
While most of its competitors rely on fashion reports and forecasts to determine its
production lines, Zara turns to its front lines to determine what its customers want. Who
better to know and address these questions than the customers themselves? The retail staff are
able to determine these through 2 mechanisms.
The first is through its sales database. As customers orders are rang up, data is collected and
sent instantaneously to its Spanish headquarters, giving Zara’s design team first hand
information on what customers want (color, cut, style, etc.) in each of its geographic location.
The second mechanism is through customer feedback. Retail staff take note of every
comment that customers provide. Do the customers prefer a v-neck for this particular shirt?
Do they want it in a different color? This information is immediately communicated back to
its Spanish headquarters.
Design and Sampling
Zara employs approximately 200 young designers who come up with about 1 or 2 styles
weekly, based on fresh and up-to-date market research information that they receive from its
close to 1,700 outlets and their own research. Because the design team is relatively young,
they are open to design risks and feedback (Gallaugher, 2008). It also makes them agile and
able to keep up with the demands of their market.
Sampling is also a quick process in Zara since the company houses both the design and
production teams in the same facility. This means that the designers are able to translate their
sketches immediately into samples and prototypes (Dutta, 2002). Decision-making and
approvals, too, are given almost simultaneously because Zara’s executives take office also
within the same facility.
Production and Manufacturing
Zara controls almost the entire production process. While most of the fabric used is sourced
from third-party suppliers, Zara controls most of the dyeing process and is responsible for
cutting the fabric.
The cut fabrics are then distributed to third-party small facilities/workshops around its
headquarters to be sewn (Dutta, 2002; Gallaugher, 2008). Zara ensures standardization by
also providing easy to follow instructions on how to produce the garments (Dutta, 2002).
While this is typical, there are a few exceptions. Zara maintains the production of its most
fashion-sensitive lines in-house (Ghemawat and Nueno, 2006), while it outsources the
production of its low value-added product lines—basic fashion pieces with longer sell-by
dates, to facilities outside of Europe (Dutta, 2002; Gallaugher, 2008; Mazaira et al, 2003).

Logistics and Distribution

All finished products are transported back to Zara’s two distribution centers: the main facility
in Galicia and another facility in Zaragoza. No item stays in the facility longer than 72 hours.
It’s efficient distribution system allows the company to ship items to retail stores within
Europe in 24 to 36 hours, while items are shipped to stores outside of Europe within 48 hours
(Ghemawat and Nueno, 2006).

Retail
Zara delivers items twice weekly to all of its retail stores worldwide to keep it fresh with
stock. All items delivered are already ironed in advance, packed in hangers, and affixed with
security and price tags (Gallaugher, 2008). This allows the retail staff to concentrate on high
value adding activities, such as helping customers on the shop floor and gathering much
needed market intelligence, rather than contending with inventory (Mazaira et al, 2003).

Time Frame and Accomplishment Indicator

This whole process of product development and production, that is, from sketch to racks,
takes about 4 to 5 weeks for new products, and about 2 weeks for modified products, or
products that are customized or changed based on customer feedback (Dutta, 2002;
Gallaugher, 2008; Ghemawat and Nueno, 2006).
The customer is at the heart of our unique business model, which includes design, production,
distribution and sales through our extensive retail network. - Zara
Zara’s business model success is gauged by its ability to satisfy its customers while positively
impacting its bottom lines. It offers customers value by being able to provide them what they
need when they need it. As a result of its lean structure and agile processes, Zara is able to
translate feedback and research directly into commercially successful products that the
market demands. Where amendments and modifications with the product are required, Zara
competently fulfills these changes quickly and swiftly. It is no wonder that Zara is one of, if
not the world’s largest fashion retailer.
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