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Supply Chain Mastery: A Blueprint for Success in the Zara Fashion Industry

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International Journal of Trend in Research and Development, Volume 11(1), ISSN: 2394-9333
www.ijtrd.com
Supply Chain Mastery: A Blueprint for Success in the
Zara Fashion Industry
1
Wendi Melisa and 2Lena Ellitan,
1,2
Faculty of Business, Widya Mandala Catholic University Surabaya, Indonesia

Abstract: Supply chain management (SCM) is the process that


carried out to control the movement of goods and services to and
from the business. It encompasses each stage including
transforming raw materials and components into a finished
good, delivering it to the end customers. Supply chain
management can help to improve the activity streamline to
become more efficient and effective. This is possible as they
watch closely all of the internal activities (inventories,
production, distribution, and sales). Company may identify and
terminate wasteful action and maximize customer value. The
purpose of this paper aret: To understand the Zara’s overall
supply chain management; To check the strategy fit of Zara’s
supply chain strategy; To analyze the performance of Zara’s
supply chain; To understand Zara supply chain driver; To Image 1. The Sales of Fast Fashion Industry in US
understand the problem in Zara’s supply chain; and To find out
Source: Perri, J. (2023). Shein holds largest U.S. fast fashion
the solution in solving the Zara supply chain problem Zara's market share. https://secondmeasure.com/datapoints/fast-
success may be attributed in large part to its dedication to
fashion-market-share-us-consumer- spending-data-shein-hm-
manage their supply chain management and build a strong
zara/
competitive advantage with it. In fact, there are several
approaches that they use in creating the supply chain strategy As part of the fast fashion industry member, they are pursuing
including, vertical integration, JIT manufacturing, strategic fit, to have low-priced clothing that moved quickly from the
and its ability to adopt the technological advancement. All of this designing process until it is ready to be displayed in retail stores.
effort is done to let Zara have better control over their processes Zara adds new designs every 15 days with approximately 11,000
starting from the beginning to the very end. This situation lets items per year averagely (Ferdows et al., 2014). This situation
each of the Zara’s departments to manage close relationship and will not be possible if Zara does not have a highly responsive
create synergy. It is going to be fundamental aspect for a supply chain that is supported by good management. What makes
company who wants to have good supply chain coordination just supply chain becomes more crucial for Zara is that pricing of
like what Zara did. clothing apparels is mostly controlled by the demand of the
market, instead of the manufacturing cost. This is why the
Keywords: Supply Chain Management (SCM); SCM Mastery,
biggest challenge for the player in fast fashion industry is to have
SCM Performance, Zara
short lead time throughout the supply chain activities.
I. INTRODUCTION
Rather than chasing economies of scale, Zara keeps their
The tight competition happening in the world of business pushes products manufacturing in small batches instead. Company
the company to well-manage their supply chain to be the most prefers to manage the design, warehouse, distribution, and
efficient and effective. All of this effort will lead them to build a logistics functions by themselves. It holds its retail stores to a
strong competitive advantage which is fundamental to win the rigid timetable for placing orders and receiving stock. Price tags
competition. In fact, Zara as one of the largest international fast put on items before they’re shipped, rather than once it arrived
fashion companies can be successful due to great effort in at stores. Clearly, they are working really hard to ensure they
maintaining the supply chain activities. Supply chain refers as the will not lose the chance and momentum to sell the product at its
parties that directly or indirectly involved in meeting the “golden time”. If they failed to make it on time, these products
customers demand (Meindl & Chopra, 2014). Technically, it will end up in discount section because no one looking for it
covers almost everything since the beginning of production anymore. Aside from that, Zara offers a wide range of product
process until the product arrives at the customer’s hand. Their selection not only clothing line for woman, men, and children,
good management in supply chain completely brings a strong but they also have cosmetics, perfumes, and household products.
benefit as the customers can always find the trendiest clothing It makes managing supply chain becomes harder and
apparels in Zara. It is also supported by the data of fast fashion complicated for Zara. The purpose of this paper is:
industries sales in US, Zara was positioned in the top from May
1. To understand the Zara’s overall supply chain
2020 to November 2022.
management
2. To check the strategy fit of Zara’s supply chain strategy
3. To analyze the performance of Zara’s supply chain
4. To understand Zara supply chain driver
5. To understand the problem in Zara’s supply chain
6. To find out the solution in solving the Zara supply

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chain problem wide range of product variety quickly. These two departments
have different focus and can cause a conflict which is something
II. LITERATURE REVIEW
that must be avoided.
Supply Chain Management
Supply Chain Drivers
Supply chain management (SCM) is the process that carried out
Supply chain is made out of several functions. According to
to control the movement of goods and services to and from the
Mendl & Chopra (2014) each of the parts do have influence
business. It encompasses each stage including transforming raw
towards the supply chain performance as a whole and it consists
materials and components into a finished good, delivering it to
of: facilities, inventory, transportation, information, sourcing,
the end customers. Supply chain management can help to
and pricing. Company has to create a strategy to make all of the
improve the activity streamline to become more efficient and
drivers moving to the same direction and expected performance.
effective. This is possible as they watch closely all of the internal
In recent years, cross-functional drivers have played a bigger
activities (inventories, production, distribution, and sales).
role in increasing the supply chain surplus. The three cross-
Company may identify and terminate wasteful action and
functional drivers are receiving greater attention in supply chain
maximize customer value (Fernando, 2023). SCM will be the
management, though logistics still plays a significant role.
base for a company to build the competitive advantage.
It is crucial to understand that the supply chain drivers are
Supply chain management can contribute towards the
interconnected to one and another and run their parts. Effective
accomplishment of multiple corporate goals. This is what makes
supply chain management design takes this interaction into
it becoming a must for every company to have a supply chain
consideration and make the necessary trade-offs to provide the
management. For instance, when company controls the
required degree of responsiveness. In addition, the adoption of
manufacturing process, expectedly the product quality will be
information technology allows company to deliver information
enhanced. Customers’ perception towards the company and its
effectively, adding manufacturing flexibility, and better
products are going to be stronger. If there is less error made
responsiveness in transportation. If the company keep the right
within the manufacturing process, then the company will have
amount of inventory, it leads them to reach the state of lowest
to destroy less product that is not meeting the standards. Cost-
possible cost which is beneficial for the firm’s financial
wise, company is better off at this point. Shipping activities
performance.
should be closely managed as it can boost the responsiveness
towards customers service area and prevent any form of
shortages or oversupply. Hence, supply chain management
A supply chain strategy will be based on either responsiveness
offers numerous chances for businesses to increase their profit
or efficiency (Mendl & Chopra, 2014). Supply chain manager
margins and open up the potential to be successful global
has the responsibility to resolve the trade-off between
enterprise.
responsiveness and efficiency in each of the above categories.
Strategic Fit Talking about efficiency in performing a task means that the
costs are as low as it possibly could. In a strategy based on
Strategic fit is fundamental to the success of supply chain
efficiency throughout the supply chain, the customers receive
management because it is the degree whether they supply chain
low prices (Chaharsooghi, S. & Heydari, J. 2011). However,
is aligned or not with the main strategy of business. There are
they cannot always have quick and easy in obtaining their order.
two main elements that constitute strategic fit which are the
Meanwhile, a strategy that based on responsiveness, provide
expectation of customers and the performance of the supply
customers with high availability of products, short lead times,
chain itself in responding to the established competitive strategy
and innovative products that has been developed well
(Chaharsooghi, S. & Heydari, J. 2011). The target audience that
(Chaharsooghi, S. & Heydari, J. 2011). As a trade-off, the
the business hopes to attract defines the expectations of the
customers cannot expect such low prices just like the one they
customer. A business's fundamental approach to exceeding
have in a company with efficiency strategy.
customer expectations in comparison to its rivals is known as its
"competitive strategy." In fact, a company's competitive strategy Table 1. Supply Chain Driver Trade Off between Efficiency
takes into account its target market and their particular and Responsiveness
requirements, including those related to the kind of product,
ordering, information, specialized services, and so forth.
Strategic fit ensures that the supply chain is designed and
managed to support the achievement of the organization’s
strategic objectives. There are four points that must be fulfilled
in achieving the strategy fit state which are: All of the functional
strategies should align with the overall company’s strategy and
objectives. Here they are all working together to support the
business as one, instead of focusing on their own goodness. Good
supply chain management will produce automatic alignment
between the supply chain strategy and company big strategy.
An organization may fail due to a lack of strategic fit because
the resources, processes, and overall supply chain design may
not have the capabilities to support the required objectives. For
instance, a scenario where distribution is aiming for the most
affordable mode of transportation. The best option to maximize
the distribution capacity is by collecting the orders into a big Network of Supply Chain
group and send them all at once, instead of making small batch
shipping. However, the marketing department wants to serve The supply chain can be defined as a network within an
organization where each various processes and activities are
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International Journal of Trend in Research and Development, Volume 11(1), ISSN: 2394-9333
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being connected and producing output in the form of products or of the supply chain member has to share all information because
services. There are two big grouping system use to define the it may have implication on other stages. Lack of coordination in
components position in the chain which are the upstream and the supply chain is going to cause objectives conflict because
downstream (Huddiniah, E. & Pradana, H., 2023). It is an the flow of information may not be running in the way it
upstream component when the process is in the beginning or supposed to. It can result such as delay and distortion of
closer to the source raw materials. Meanwhile, downstream information. Different stages of a supply chain may have
components classified when it is closer to customers. different objectives. When each of the stages focus with its own
profits, the total supply chain surplus can get down. The most
Understanding the supply chain network is crucial as it greatly
common effect that occurs in the company without a proper
influences the process of coordination and communication
supply chain coordination is the bullwhip effect. It means there
among partners. And so, it can reduce the associated risks and
is an order increases as the process in moving up from retailers
uncertainties. If the supply chain has less process or levels, the
to wholesalers to manufacturers, and lastly to suppliers. The
better will be for the company. It is going to boost the supply
bullwhip effect distorts information about the amount of demand
chain efficiency because less interactions that must be made will
required actually within the supply chain. Each of the supply
lead to less probability for disruptions. Supply chain complexity
chain activities are having their own estimation that may varies
affected by 2 reasoning which are: the supply chain directly and
because they are not sharing the information throughout the
the supply chain extension.
supply chain.
In detail, the differentiation can be seen by looking at direct
Information Technology
supply chain consist of what parts. There are companies,
suppliers, and customers which involved in the flow of products, Information technology or IT defines as the use of technological
finances, and information from manufacturers to distributors, infrastructure such as computer, storage, network, etc. in
and to retailers. Meanwhile, an extended supply chain refers to creating, processing, storing, securing and exchanging
the organizations, people, activities, information, and resources electronic data (Castagna, R). In the world of supply chain,
that produce and distribute a product or service (customers, information plays a key role because this is where all of the
regulators, and other stakeholders who impact the supply chain coordination comes from. The characteristics of the information
process). must be accurate, accessible, and must be relevant to the
importance of supply chain. In fact, none of the supply chain
Supply Chain Sourcing
activities can run without information. All of the decision and
Sourcing belongs to the supply chain upstream where it is closer activities run will be based on the information itself. IT has
to the early process of a product. Basically, it is a decision made become a necessity currently rather than an option for a
by the company to purchase goods and services that later needed company’s supply chain. Business processes can speed up with
for the next step (Mendl & Chopra, 2014). It can be divided into the adoption of information technology and prevent the
two categories which are in-house and outsourcing. Outsourcing possibility of bottleneck. As a result, the productivity rate of
means that the company is not the one who will execute that supply chain and the supply chain visibility will be improved.
activity themselves, instead they will give that away to the third The use of information in supply chain drivers will take account
party. The decision whether to outsource or not vary across as:
different industry and company. As the purpose of managing
1. Inventory: demand pattern, carrying cost,
supply chain is to increase the supply chain surplus, hence the
stockout cost, and ordering cost
company should choose to outsource when it can significantly
2. Transportation: costs, customer locations,
increase the surplus without increasing the supply chain risks.
and shipping size
Supply Chain Transportation 3. Facility: location, capacity, schedules,
exchange rate, and taxes
Transportation, which includes all operations related to moving
goods from their point of origin to their final destination, is III. RESULT AND DISCUSSION
essential to the smooth operation of a supply chain. Since it is
Company Profile
rare for manufacturing and consumption of goods to take place in
the same place, transportation plays a role in almost every supply Zara is started as a family-owned company back then in 1975 in
chain. As a result, selecting the right kind of transportation downtown Galicia, Northen Spain by Amancio Ortega and
becomes crucial for businesses that manage their supply chains. Rosala Mera. The business gained popularity in between the
There are numerous options, each with unique benefits and Spanish and finally able to have nine additional stores in some
drawbacks, including as air, package carriers, truck, train, water, Spain’s big cities. “Instant fashion” is the terms used by Ortega
pipeline, and intermodal. The selection of a transportation mode to explain their revolutionary move in designing, producing, and
is impacted by the type of goods being transported and the distributing with shorten lead times and ability to react quickly
broader strategy of the firm. Businesses need to thoroughly to new trends. Their biggest expenditure is spent on information
analyze their goals, taking into account variables like batch size, technology system and hiring more designers so that they could
cost, and speed. Furthermore, adherence to transport policies, work in a group.
the condition of infrastructure, and the caliber of equipment all
After some time, Zara is getting even bigger and keep expanding
have a significant impact on how effective a certain method of
their operation until they reached the global market which
transportation is. In light of these factors, businesses frequently
includes; Portugal, New York, Paris, Belgium, Greece, Mexico,
discover that using a mix of transportation methods is required
Malta, Cyprus, and many more. Approximately, Zara has around
to balance inventory and transportation expenses.
2,264 stores in 96 countries. Zara began the journey as a modest
Supply Chain Coordination fashion business in Spain, and has grown into the world’s largest
fast-fashion retailer (Kala,K. 2018). They have more than
It is necessary to build strong coordination because when the
174,000 employees worked for them. The founder of Zara,
whole supply chain activities are moving in the same synergy,
Amancio Ortega is considered as the world’s, sixth-richest
the supply chain surplus will increase. To build coordination, all
man.Zara always tries to be ahead in the fashion industry by
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bringing more meaningful style to the world that is accessible to patterns are always changing every time.
everyone, no matter where they are. Their value is to create
Supply Chain Performance of Zara
something inspiringly beautiful, always on- trend, and
responsibly crafted fashion. Zara has the ability to maintain their Looking at the Zara’s supply chain which focus in speed, it
reactive and responsive behaviour in facing the changing shows that they are trying to provide best suitable strategy
demand, trend, and feedbacks coming from the customers. That supply chain to help the company achieve the main objectives
is why they could provide the right idea and decision in the right or goals. As previously discussed in the strategic fit, there must
moment. Those efforts are best believed as the best way to build be an alignment between the big company strategy to reach the
an intimate relationship with its customers. They are working to main objective with the strategy that implemented in each of the
make its business more sustainable. unit functions. The mission statement of Zara is to “give
customers what they want, and get it to them faster than anyone
Zara’s Supply Chain Management
else.” (Visionary Team). It is so obvious that Zara has achieved
Zara supply chain management is well known to be rapid and the strategic fit as the supply chain works has been followed
very responsive in fulfilling the demand of fast fashion industry. their mission. In terms of the strategy chosen, Zara adopts the
After almost thirty years later, this giant retail currently responsiveness as their main focus in the supply chain.
produces over 450 million clothes items a day and releases
12,000 new designs (Lai, O. 2022). It is without a doubt that
Zara becoming one of the brands with the fastest turnovers in
fashion industry. The key point of fast fashion industry is cheap,
yet fast production of non- durable clothing. In addition to that,
if refers to the following graph, it is obvious that Zara currently
dominate the European market by having a high stock valuation
(Reuters, 2023). They have beat H&M, one of their rivalries in
this industry.

Image 3. Strategic Fit Scheme


Source: Chung, D. (2018). What is Strategic Fit?.
https://danny- chung.medium.com/what-is-strategic-fit-
Image 2. Stock Price Comparison of Zara and H&M 735af99a3ba0
Source: Reuters. (2023). Zara owner Inditex seen outshining An advantage that Zara can retain from having a responsive
H&M in fast- fashion showdown. supply chain is that the ability to deal with uncertain demand
https://www.reuters.com/business/retail-consumer/zara-owner- better than those who adopt efficient supply chain. In
inditex-seen-outshining-hm-fast-fashion-showdown-2023-03-14/ corresponding to the characteristics of fast fashion industry,
prices for clothing apparels are determined by market demand
The supply chain process of Zara will be started with the
rather than manufacturing costs. So, the biggest enemy for Zara
designing phase as they immediately send creative sketches to
here is the time. Once they slow down, most probably the
the Cube's clothing designers after getting inspiration from the
products will be late and no longer demanded by the customers.
fashion events. It takes four to six weeks to design and produce
The other competitors may have sold those similar items in the
new things, and two weeks to modify the one that already on the
store before Zara. Here, they must able to offer a wider variety
market. The company targets ladies between the ages of 24 to 35
of designs and choices to its clients while maintaining a sense of
that is fashionable. In order to reach this market, Zara open their
urgency to buy due to its short lead times for delivery.
stores in town centers and other areas where there are a lot of
Additionally, once an item or style sells out, it might not come
women in this age range. Limited manufacturing runs make a
back into stock.
given design scarce, which instills a sense of urgency and
motivates customers to purchase while supplies last. Zara does Until a customer purchases your product, you are in charge over
not have a lot of excess inventory as a result, and it is not required its development. By following this mindset, Zara's supply chain
to price down its clothes items much. has become extremely quick because they try to make sure
everything is within their reach. At just 15 days, the company
Compared to competitors with only 3 to 4 turns, in averages Zara
can design, manufacture, deliver, and display a new outfit at one
can do 12 inventory rotations annually which equal to 3 times
of its stores worldwide. In the fashion industry, where designers
more productive. The factory scheduling is determined by the
usually take months to plan for the next season, such a pace is
orders that stores place each in weekly basis. Demand
unheard of. The in-house design and manufacturing teams at
forecasting will be easier due to these short-term concentrated
Zara are compelled by the quick fashion company to work with
order cycles. In fact, this is far more accurate than competitors
a restricted range of pre-selected fabrics and materials. While
who may place orders every two weeks or every month.
there would be less room for creativity, the network's tiers of
Customers visit Zara stores in Spain on average of 17 times a
supplier hand-offs and months of lead time would also be
year, compared to competitors' 3 visits. It is more difficult for
eliminated.
individuals to see them clearly online because their apparel

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The responsiveness of Zara’s supply chain also comes with a Zara is able to have full control over the production process,
price as they cannot provide a completely low-cost operation. It from designing new styles to producing final goods, thanks to
has implication towards the selling price may not be the cheapest vertical integration. Because the departments are becoming
one in the industry, but still considerably competitive enough. close to one another inside The Cube. They can collaborate,
When a customer made a purchase, price is not the only thing communicate easily, reacting quickly to new trends in fashion.
that become a consideration, but usually they also look at the Zara's manufacturing facilities demonstrate the company's
value resides in the goods. Supported by the amount of net sales dedication to innovation. To increase productivity, the company
data from Inditex group, Zara always give the biggest has made investments in automated production processes
contribution starting from 2013 to 2022. It is followed by technologies. This uncovers the use of sophisticated machinery
Bershka and Pull&Bear in the second and third position. for sewing, finishing, and cutting fabric. ensuring that the
finished goods meet strict quality and precision standards.
Another important component of Zara's facilities is distribution.
Zara offers a decentralized distribution mechanism as an
alternative to big centralized warehouses. The business runs a
number of automated distribution hubs that are well-situated
close to major markets. Sophisticated conveyors and sorting
systems are installed in these centres to enable the precise and
efficient transport of goods. In order to facilitate Zara's distinct
"fast fashion" business model, its logistics infrastructure is built
to ensure that goods are delivered quickly from production to
distribution and, eventually, to retail locations.
The store spaces owned by Zara are essential to establishing a
unique shopping experience and take part as the fundamental
aspect of their sales performance. The business carefully selects
the best sites for its operations, which are frequently in widely
Image 4. Net Sales of Inditex Group Based on Brand recognized shopping areas. Zara retail spaces are distinguished
by their minimalist aesthetic, with a thoughtfully chosen
Source: Smith, P. (2023). Net sales of the Inditex Group arrangement that highlights a select number of each item.
worldwide from 2013 to 2022. Customers have a sense of curiosity and urgency due to the
https://www.statista.com/statistics/456505/sales-inditex-group- constant introduction of new things and the scarcity concept.
worldwide-by-format/
Inventory
Zara’s Supply Chain Drivers
In the case of managing inventory level, Zara implements the
Facilities just-in- time manufacturing or JIT which defines as an approach
Located in Artexio one of the small towns in Spanish Coastline, to manage a supply chain in the most efficient and cost-effective
Zara owns a big landmark where this is the heart of Zara's manners. To run this JIT, it requires a good coordination among
operations or most popularly known as "The Cube". However, the procurement and production departments to ensure that they
beneath its cobbled streets is a 124-mile network of high-speed may produce the right item with the right quantity, at the right
monorail tracks that come together beneath an enormous and time, and place in fulfilling customer’s demand. The key point
daunting megastructure. For almost Zara's 200- person design that differentiates it with any other strategies is the effort to create
team, procurement, and production teams work together in The only when it is needed. Zara is trying to avoid creating waste
Cube. Whether you shop in Tokyo, Mumbai, Rio de Janeiro, and keep their inventory level lean.
London, or any other city, The Cube is where at least half of the The implementation of JIT in Zara production process can be
Fast Fashion inventory at every Zara outlet comes from seen starting from the beginning of supply chain activity which
(Procurify, 2023). is the production. They are working hard to ensure that the goods
produced must have been displayed in the retail store in within 14
days. Instead of having a vast quantity of products for each
design, Zara produces more collections with relatively small
quantities (Dfreight, 2023). They may have improved the
resource occupancy and the production streamline. From this
small batched, it is going to be easier to deliver and quicker as
well to arrive at the customers’ hand.
Customers are pushed to make immediate purchases by the
emphasis on quick response. A certain style in a Zara store may
sell out in less than a week, in contrast to many other clothing
stores where some of the clothes will stays there for months.
WIGIG is Zara's guiding principle: when it's gone, it's gone.
This gives the sense of exclusivity and helps to eliminate the
Image 5. Zara’s The Cube possibility of excessive inventory kept. Now, product will be in
Source: Procurify. (2023). Fahsion Distrupted: The sales floor longer, and have lesser time in the warehouse.
Definitive Guide To Zara’s Global Supply Chain. Transportation
https://www.procurify.com/blog/supply-chain-beats-zara-
spend-culture/ Inditex's (the group owns Zara) commitment to bring new
innovation has been one of its key differentiators. Currently, Zara

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has spent about two billion euros on logistics and technological that this allows Zara to build stronger connection to its
adoption in an attempt to fortify its production and distribution, customers. As in effort to that, they choose to install unified POS
reduce waste in the supply chain, and optimize costs. Large system in every of their stores to track and integrate the sales
technical systems that give real-time information are necessary throughout their retail chain stores. From this information, Zara
for the entire logistics process (Xujie et al., 2019). The direct can have better reading on customers demand that frequently
impact of this mass investment on Zara is that they ability to changes overtime in real time. All of this POS systems are
maximize the speed and precision of product delivery for its connected to one mother POS which will be transmitted again
customers across the globe. to the headquarter by modem. In this way, Zara can get the
precise information regarding the stock keeping unit availability
Now, they have a highly on time delivery service which elevate
in each store and immediately react when there is a demand
their ability to stay ahead in following the fashion trends.
fluctuation. Here the purpose is to avoid the bullwhip effect
Combination of the inventory, shipping, and scheduling
where it usually happens due to the misinformation.
strategies were is brought to satisfy the customers demand right
in the good timing (Dfreight, 2023). Zaracarefully manage Before Zara introduces new items to the market, they usually
their costs incurred to improve their profitability. Any arrange a small survey to obtain some information by testing
unnecessary transportation expense will get banished. In fact, new products in a handful of stores that are representative of
they have successfully in creating a supply chain transportation larger sales patterns. During the process, some information on
network that they can depend onto. how well the item will sell may be generated. This information
can then be used to advise the large initial shipment. An
expanded view of demand can be obtained with the appropriate
retail sample. Such information can be a driver for retailer in the
proper direction and become the basis to make operation
decisions. Additionally, it offers Zara better control over retail
inventory in terms of quantity, pricing, and product mix. Zara
can determine how quickly products and information are
released because of the degree of control attained (Edmondson,
2003).
Sourcing
In order to increase the supply chain's adaptability to shifting
Image 6. Zara Logistics Route consumer needs and new fashion trends, Zara has made
significant capital expenditures to acquire ownership over the
Source: Mhugos. (2020). Zara Clothing Company Supply
manufacturing, distribution, and retail channels or known as
Chain. https://www.scmglobe.com/zara-clothing-company-
vertical integration. Acquiring manufacturing facilities allows
supply-chain/
Zara to significantly regulate capacity and schedules, which
The supply chain structure of Zara is seen in the picture would be impossible to accomplish if the firm were highly
attachment above. The Cube and the corporate headquarters are dependent on outside suppliers, particularly those in the far east
situated in northwest Spain. This is where the centre of (Ferdows et al., 2004). As many of its operations typically only
manufacturing is located. Meanwhile, Zara decided on a more operate one shift, Zara is able to quickly and easily modify the
centrally placed location for their primary centre for distribution production volume of individual clothes because they may run
and logistics. They choose a different location strategy for the several plants for this one-shift production. These highly
logistic hub because they have to ensure that it is a strategic place automated production operations can work overtime to
(can be accessed easily and located relatively in the middle). accommodate unforeseen or seasonal demands. Zara's capacity
This facility is housed in a major logistical hub that the Spanish to adjust how rapidly it ramps up or down production has a
government built in Zaragoza. Vendors supply raw materials to significant impact on its ability to quickly cancel product lines
Zara's production facility. The completed clothing is then taken that did not perform well and refill popular items. This lessens
from the Cube to the Zara logistics centre located in Zaragoza. the likelihood of stockouts, clearance sales, and backlogs in
And from there, they are shipped and transported by truck to inventory, all of which regularly reduce Zara’s profitability.
retail locations all over the world.
Aside from relying with the in-house sourcing, Zara also
As Zara has implemented a robust delivery schedule, with outsources some of their fashion category products to original
shipments occurring twice a week on a daily basis. This frequent design manufacturers (ODM suppliers) in geographically
delivery system underscores Zara's commitment to maintaining a proximate countries such as: Turkey, Morocco Portugal and
rapid inventory turnover. The goods should be arrived in Bulgaria. Carefully selecting the supplier will help Zara to
between two days or even probably less than that from the compress order-to-delivery lead times (Gereffi & Memedovic,
ordering time. When the product is shipped, all of it already has 2003; Tokatli, 2008). Comparative advantages can be
a price tag attached and hang. Although hanging the clothes may reallocated in favour of these geographically close countries
take more space than if they just fold it, but they are trying to based on "transport time," as one of the location consideration
speed up the time required to display their goods to the store. components that is different from the "transport cost" that will
So, from themoment the delivery trucks are unloaded, Zara's be the main factor typically taken into account in economic
products seamlessly transition to the retail floor, ready to be geography models (Orcao & Pérez, 2014). Flexibility is greatly
showcased to eager shoppers. There is no need to iron it again increased even though production in these close sources can be
or placing the price tag. more costly than producing in a nation that offers lower labour
wages.
Information
Pricing
Information has become an essential part of every business. It
contributes to the success of Zara. McAfee et al., (2007) stated Zara carries out a low-pricing strategy where they are targeting

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International Journal of Trend in Research and Development, Volume 11(1), ISSN: 2394-9333
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on customers who are in college or just enter the job market. Their forefront-of-fast-fashion
age ranges from 20 to 35. This age group is highly sensitive to
There are ten logistical facilities located in close proximity to
fashion and has some money at their disposal but cannot
Inditex's corporate headquarters. Meanwhile, the Zara
frequently buy luxurious or high-end products. Zara can allow
distribution center is located in Arteixo, Spain, and processes
them to pursue their fashion needs at an affordable price (Li,
clothing products, The Cube. It includes 11 production units, the
2021). In other words, Zara’s products can be defined with high
corporate headquarters, and 464,500 square meters (5 million
on fashion yet low on prices. They implemented the low pricing
square feet) of space. Within a 16-kilometer (10-mile) radius,
strategy to set their product price. In fact, trying to become the
these 11 factories owned by Zara are also connected to the
lowest one in the market by cut off the unnecessary cost such as
distribution center via monorail connections as previously
advertisements and raw material. It has an overall low-cost
mentioned in the earlier section. This underground high-speed
supply chain structure compared to its competitors.
monorail helps Zara to transport their fabric through 200–211
As a global company, they set their price differently in each of km of underground tunnels (Mhugos, 2020). It is highly
the country or country specific. The product price tag is placed convenient and makes the distribution network integration
locally in each respective market, instead of it is done in “The becomes smoother.
Cube”. Under this scenario, Zara will be able to follow the
The monorail system is also used by Zara's manufacturing
customers’ willingness to pay that may differs to match the
facilities to transport completed goods—roughly 50,000 outfits
condition and characteristics of corresponding countries. Thus,
per week from each factory—to the distribution centre so they
the production budget should be kept low, so Zara can easily
can be shipped to retail locations. In comparison, Zara’s
adjust their price whenever needed. Furthermore, the brand uses
competitor will usually need 2 to 4 weeks to move across their
various schemes to run the sales promotion to boost their sales.
product to the designated country. Since Zara sends the goods in
For instance, Zara has low level of discounting around the year
bulk, it is going to be useful to have cheaper per product cost.
and discountsales of 50% or more twice in a year, for which the
They also avoid overlapping or duplicating their transportation
consumers eagerly wait.
routes, Zara will send the finished product directly to the local
The fashion industry is always changing and is primarily driven distribution centres and eliminate the process to send back the
by consumer demand rather than supply. In order to win the product to the central distribution. In fact, it helps them save
customer's heart, Zara gives its customers what they desire. Fast- money on transportation which leads to better cost efficiency.
fashion brands are characterized: have quick production Later, this amount of money that has been saved could be used
schedules, inexpensive labor, and inexpensive materials. These for another investment.
elements allow Zara to pursue a low-price strategy. ZARA is
Regardless of its origin or destination, everything will be
known its first-rate reputation, second-rate output, and third-rate
delivered to the distribution centres in Spain. There, the product
cost. It has low expenses for raw materials, advertising, and
is going to be picked, sorted, packed and loaded to be later sent on
design. The prices at Zara are around one-fourth of those of rival
to Zara’s global chain store network. Since the distribution centre
companies.
is more like a transit place rather than a warehouse to store
They aim to attract customers by offering their items at a fair goods, the products are going to be there for a few hours or at
price. Given that its costs are lower than those of premium maximum of three days. The goal is to produce and deliver the
fashion labels, Zara will come out on top in the pricing war. This things that the businesses requested at the appropriate time.
is one of their true competitive advantages. Value-based pricing Within eight hours of a store making an order, the distribution
strategies, which center price determination on consumers' centre arranges for the shipment of clothing in the precise sizes
assessments of value rather than business expenses, are primarily and styles that the retail stores have requested. In order to be able
utilized by Zara. Its target market is those who desire fashionable to respond to demand spikes during the start of the two selling
clothing but cannot afford the premium labels. These goods will seasons in January and July, as well as to unforeseen demand
be offered for a discount. Furthermore, it frequently offers surges, Inditex often reserves 100% surplus capacity in its
discounts at the end of the season. distribution centres. This allows it to increase utilization rates of
its underutilized capacity.
Distribution Networks of Zara Supply Chain
Zara Transportation and Shipping Procurement
The main focus of Zara’s logistics system is the rapidness. They
heavily rely on air fright as their main option to ship the finished
product. To smoothen the process of transporting goods, Zara
creates their own intelligent system as a better media
transmission of information. In addition, they have built 200
miles network as a means to transport their material (connecting
the headquarters with the suppliers, vendors, etc.). Another
unique strategy implements by Zara to cut off the lead time in
shipping is that they use the direct transportation from
distribution centre to retail stores. They do not use any logistics
transit station. In this way, they do not need to do loading and
unloading multiple times just like what the other competitors did
and save them some amount of cost (Xuejie et al., 2019).
Image 7. Zara Main Distribution Centre
Zara purchases vast amounts of a few varieties of fabric (about
Source: Magsino, M. (n/a). Putting the Fast in Fashion: four or five, though this can vary from year to year). They keep
How Zara Drastically Reduced Lead Times. the material variety to be limited and let the designers use their
https://www.fohlio.com/blog/zaras-fashion-revolution-how- creativity to make several different models from it. Zara handle
strategic-optimization-of-lead-time-propelled-them-to-the- all in-house cutting, dying, and garment design. In this manner,

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International Journal of Trend in Research and Development, Volume 11(1), ISSN: 2394-9333
www.ijtrd.com
fabric producers may quickly transport large amounts of fabric it is impossible to be able to get the exact number of inventories
straight to the Zara distribution centre, or the Cube. The that will suit the customers demand 100%, but at least it must not
company buys raw fabric from vendors in Greece, Portugal, be too far apart. Another thing why would a company working so
Spain, and Italy. And after orders are placed, those vendors hard on eliminating too excessive inventory because inventory
deliver within five days. The majority of supplier inbound cost is expensive.
logistics use trucks. Later, these materials will be sent to the
Coordination Among the Supply Chain
Zara’s textile factories with the use of underground monorail.
Managing a coordination among the supply chain activities are
Chu (2005) observed that trucks and sea freight handle 20% to
fundamental to increase the chance or possibility to achieve
25% of Zara's product shipments. The remaining are carried via
surplus. If there is one of the components that are not in align
the air. Roughly 35% of Zara's clothing is shipped hung, and
with the others, this will lead to a clash of interest. Since
65% of it is shipped folded. Since hung clothing takes up more
maintaining control over inventories is one of the biggest
space than folded clothing, it costs more to ship, but this is
challenges faced the retail industry, it is imperative that
necessary to ensure that the item is delivered to the store floor-
information from the other departments be received as soon as
ready. All of Inditex's product distribution and delivery to retail
possible in order to analyse the data's evolution and make
locations are handled by outside contractors. The following
decisions about inventory, human or material resources, etc.
delivery times apply to the deliveries when they arrive at their
destination stores: Europe: twenty-four hours. 48 hours in the To provide extra support for carrying out coordination easily,
US, 48 hours in China, and 72 hours in Japan. Zara implemented the automation of warehouse operations and
the utilization of closely connected companies in all aspects of
According to Ferdows (2004), once the product arrived at store,
the transportation of goods. There are various tools and software
the store employees do not need to iron the clothes and put price
programs used in the logistics process which are custom made,
tag, because everything has been done before the product is
designed, and developed internally by Zara team to create a
shipped. It allows them to directly displayed the received goods
software that can meet and 100% suitable for their operations
as soon as it is arrived. Since there is less than 0.5% shrinkage
(Mapfre Global Risks). This system doubles the pace of box
and 98.9% accuracy in the shipments, Zara just need to work on
transit, storage, and collection while improving efficiency and
it a little more. It is clear that Zara values speed above everything
accuracy for delivery time management.
else and that time, rather than kilometres, is used to measure
distance. Twice a week, stores place orders and get deliveries.
Every retail store receives a customized variety of products
exactly as par ordered twice a week, usually within 2-4 days of
the order placing, depending on the location. These orders are
guided by inventory optimization models.
Zara Supply Chain Souring
Zara adopted the concept of vertically integrated supply chain
where they are involved strongly in maintaining control over
Image 8. Annual Sales of Major Global Apparel Manufacturer
various stages throughout the supply chain starting from design,
and Retailer 2022 Source: Fast Retailing. (2023). Industry
production to distribution. The perks of having this strategy: it
Ranking Major Global Apparel Manufacturer and Retailer.
enables Zara to keep a significant portion of its production
operations in-house, this strategy distinguishes the company https://www.fastretailing.com/eng/ir/direction/posi
from many of its rivals. By doing this, Zara has developed an tion.html
impressive degree of operational flexibility and efficiency that
From the table above, it can be seen that Zara under the Inditex
allows it to quickly adapt to shifting consumer wants and market
is positioned in the top as the global apparel manufacturer with
trends.
the highest sales amounting to 34,5 billion US dollar. It proves
One of the exclusive advantages of Zara's vertically integrated Zara’s supply chain coordination and strategy implemented was
supply chain is its ability to command a staggering 85% of the doing its job and resulted into an expected outcome. They would
overall price on its clothing items. This is a significant departure not be able to have this outstanding sales performance if there is
from the industry average, which usually ranged over 60%. no synergy among the supply chain parts. Mentioned previously,
Zara's higher percentage demonstrates the economic benefits of a lot of company failed in running their business due to the lack
in-house manufacturing (Businesslogisticssite. 2017). With this of system and infrastructure to support the communication
level of vertical integration, the corporation is able to optimize process between the supply chain functionals.
manufacturing costs, reduce outsourced fees, and increase total
Zara Information and Technology
profit margins. Moreover, Zara's ability to quickly adjust to
rapidly changing fashion trends is facilitated by its choice to Technology has played a key role in improving customer service,
keep a significant portion of its production in its own facilities. supply networks, and sales. The apparel retail market now has
It means that in-house sourcing does give bigger supply chain more participants and lower entry barriers thanks to further
surplus for Zara. This is an objective that will be seek by every improvements in digital technology. Businesses and individuals
company’s supply chain. can build online stores on the internet without having to invest
in infrastructure in order to sell things. Because of this, e-
The company has the ability to quickly turn design thoughts into
commerce is growing faster than ever. It gives consumers the
finished goods and launch them on the market. In addition to
freedom and convenience to shop whenever they want.
being in line with current fashion trends, Zara's speedy operation
does help them to approach the market before anyone else and Big Data, like blockchain technology, makes it simpler and
lower the risk of excess inventory, which is a major problem in more effective for businesses to gather and manage information
the retail sector. Excess inventory happens when there is a such as stock origin, manufacture dates, and transaction records.
mismatch between the amount of supply and demand. Of course, Since today's tech-savvy consumers want greater transparency

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International Journal of Trend in Research and Development, Volume 11(1), ISSN: 2394-9333
www.ijtrd.com
from their purchases, accessing data in order to share and foster low pricing strategy to match their target consumer which is the
trust is quickly becoming the standard. It is anticipated that middle-aged woman ranged to 20-35. In addition to that,
advancements in technology will have a dramatic effect on managing the whole supply chain system would not be possible
the way people spend. Furthermore, artificial intelligence without having enough information. Thus, information is
technologies are already being used to replace sales staff, completely necessary and become an essential part. All of the
estimate demand for the upcoming season, and improve decision, strategy, and action done by Zara is made due to the
consumer engagements through interactive online chat information obtained. For instance, they adopt POS and RFID to
functionalities and algorithms that suggest appropriate products. track their product and get the actual information about the
Additional tools like cloud computing, IoT, and distributed and demand. Besides that, technology and information has helped
cognitive intelligence are changing the way business is done. them to be more efficient in terms of the cost, time, and
accuracy. Zara has risen to the top of the fashion sector because
Information technology facilitates data sharing and
to its strict control. They always try to be the first one that
communication with its manufacturers and suppliers. Zara's
brought the trend to the shop floor with only 15 days
operations are therefore more accelerated and quicker than those
procurement process.
of any of its rivals. With twice weekly updates to both online
and retail collections, and 48-hour delivery to any location in the References
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