ZARA: IT for Fast Fashion

Submitted to: Prof. D. Subramaniam

Name PRN
Apurva Pokhriyal 19020841050
Pratik Bhamre 19020841053
Aniket Patil 19020841073
 How ZARA started

1985
1963 1975 banner.
under one
other retail chains
to bring Zara and
officially founded
Inditex was

Opened First Zara

Store in La Coruna,
Spain.
Amanico Ortega, Founders Amanico
started small Ortega and his wife
clothing factories Rosalia Mera
in La Coruna,
Spain
Other Retail Chains of Inditex

Brand Founded Deals with

ZARA 1975 Continuous latest designs for women,
men and children
Massimo Dutti 1995 Higher fashion for men and women
Bershka 1998 Trendy clothes for younger market
Pull & Bear 1991 Casual clothing
Stardivarius 1999 Urban fashion for youth
OYSHO 2001 Lingerie

Zara Home 2003 Retailing various Housewares

UTERQUE 2008 Fashion accessories

 About ZARA

Flagship chain of Inditex group, Current CEO Carlos Crespo who

world’s largest apparel retailer. was before the COO.

Started out with low priced

products- imitations of high end Operates over 2259 stores in
fashion products. This move led to around 96 countries. In India 22
smashing success allowing them to operational stores in 12 cities
open more stores in Spain

Became the biggest retailer in the

Main international Competitors
world to raise awareness for Detox
H&M, Forever21, Boohoo, Gucci
campaign and switched to fully
and Gap. In India its main
toxic free production- after the
competitor is H&M
talks with Greenpeace (2012).
 Business Model
Speed and Decision Making
 Responds quickly to the demands of young, fashion conscious city dwellers. –”Be Fast not
First”.
Customer
 Very less marketing and advertising spent.
 Deliver only trendy styles in short span.
 Trust the judgement of employees- store managers given more responsibility.-decide what Manufacturing

garments would be on sale at their stores.

 Appointed “Commercials” at La Coruna –dedicated to a section and specific collection- what
clothes would be designed and produced. Distribution

 Two product managers + Designers=Material purchase, Production orders+ set prices.

 Store product managers (commercials)-interface with Zara stores around the world.
 Practiced autonomy of employees.
 Orders>Availability- Final decision by commercials.
Open Landscape view of a Department at Zara.
 Business Model
Anti-Marketing, Merchandising and Advertising
 No advertising unlike competitors. (0.3% of revenue< 4% of revenue)
 Promote twice yearly sales ( discount 15% as compared to 30%).
 Focus on Brand Experience-Stores located at Prime retail district in city’s best known street
 Store layout is completely changed every 4-5years. A 1500 sq. meter pilot store was used for
testing the designs.
 No “Classic clothes”-always in style, but new trends that are in style- clothes that have fairly
short life span( 75% merchandise was changed over 3-4 weeks.)
 Clothes to be worn 10 times.
 Offline for two main reasons- DC not configured to pick small orders- high sales return rates
50-60%> 5% store returns.
 Business Model
Financials and Growth
 In 2003, 550/1558 stores in 45 countries part of Zara under Inditex.
 1 store / day across the world
 46% (73% of which is Zara) groups sales were inside spain, France being the largest market.
 Women accounted for 60% of its sales.
 In 2019 Zara was valued at 18.4 Billion USD Vs its main competitor valued at 15.9 Billion
USD.
 Operations

Ordering
Objectives:
 Cater to the everchanging
consumer demands
 Respond quickly and Zara’s 3 cyclical processes

accurately
Design and
 Standardized ordering Fulfilment
Manufacturing
across the world
Ordering
 Supply chain strategy was aligned to business level strategy
 Ordering twice a week for replenishment as well as ordering of
new arrivals
 Stores had HARD Deadlines
 If any store misses deadlines then they will get
replenishment only based on past data and they won’t
receive any new arrivals
 Inventory balance was not stored on computers
 They had a handheld computer

The Offer Facilitation by Processing the

store manager order

• Descriptions • Segment the • After filling,

and pictures of offer and handhelds are
new arrivals beaming beamed back to
• Replenishment • Filling store manager
items different • Review and
handhelds as send the order
per the
segment
requirements
Fulfilment
It is basically shipping clothes to stores to satisfy their orders

• Set of commercials at La Coruna Finished Distribution

• They work with two pulls of information Factory
clothes centre
• These two pulls work in alignment with SKU
• For SKU there could be 3 possible cases-

• No decisions were required

Demand ~ • Inventory will be divided amongst all
Supply the stores Aggregated
orders from all
• Commercial decides which store stores
Demand > would get the available inventory Two pulls
Supply • Decision is made looking at past Total supply of
performance
inventory in
DC
Demand < • Production will increase as quickly as
Supply possible
Fulfilment
It is basically shipping clothes to stores to satisfy their orders

• Commercials can also ship new products that stores did not order
• Deliveries reach stores in 1-2 days
• There was little inventory anywhere in Zara’s supply chain
• Zara manufactures what the stores needed and only when they need it and then deliver it to the store. (Zara had no
backroom where excess inventory can be kept)
• Each section of all Zara stores ordered twice a week. (Women’s section accounted for highest share of sales)

• Replenished by • Replenished • Replenished by

truck from two from smaller air from the
Spanish DCs local DCs Spanish DCs

Norther Europe
Western Europe Latin America and Middle
East
Design and Manufacturing
 ZARA continuously introduced new products in the market throughout the year.
 They introduced around 11000 new items in a year while competitors introduced roughly 2000-4000
 Vertical integration of manufacturing operations enabled launch of new products with short lead times
 Network of specialised facilities that quickly can produce and deliver required goods.
 ZARA owned group of factories that performs initial steps of dyeing and cutting clothes.

Conception Production DC

3 Weeks

 ZARA need not rely on accurate long term sales forecast

 Commercials within the design teams communicates their guess to the factories in the form of first
production requirement
 Then commercials analyses stores’ response to decide future production
 Approaches and Organization
Consistent with Speed and Decentralized decision making

No CIO and No Formal processes to set IT budget

Applications for operations were developed internally

Writing applications on own rather than buying due to unique operations

IT Support 3 groups: Store Solutions, Logistics Support & Administrative Systems

Very High Staff Retention: One person had left in last 10 years
 La Coruña
 Applications were used to prepare offer and
distribute it over the Internet to stores across the
globe
 Applications were also used to receive orders from
all of the stores, aggregate them and compare the
aggregated order to available inventory for each
SKU
 Applications highlighted imbalances between
supply and demand and executed commercials’
decisions
 Another application kept track of theoretical
inventory for each SKU at each store. Theoretical
inventory helped make allocation decisions
(Accuracy >95%)
 At the end of each business day, each store
communicated that day’s sales for all SKUs to La
Coruña using POS terminals as shown
 Factories

Simple Applications to plan production

No use of sophisticated mathematics

to generate “optimal” plans and
schedules

Large computer-controlled equipment

to cut cloth into patterns (100 layers of
fabric at a time)
Image Source: www.nytimes.com
 Distribution Centers (DCs)

• DCs relied more on automation and computerization

• Automated conveyor belts facilitates receiving bulk

garments from factories.

• IS tracks each SKU for pick up and drop at appropriate

places.

• Humans are involved in taking garments off the belts ,

put them in hanger.

• IT department wrote the application of DC automation

in collaboration with vendors of conveyor equipment.
 Stores
 In ‘90s, fax order form systems were time consuming and
faced problems like paper shortage, unreliable fax machines,
15 m long forms etc.
 Salgado and his colleagues came up with handheld computers
that would communicate with La Coruña via modem
 In 2003, PDAs were primarily for ordering and for handling
garment returns to DCs
 Each Store had many PDAs to allow redundancy and division
of labor
 POS still used DOS (which was no longer supported by
Microsoft) because it was stable, effective& easy to roll out
 No IT support required for terminals in opening the new store
 Daily sales total from each terminals copied in floppies &
transferred to modem
 POS terminals and PDA’s did not contain information to
share with other stores
Conclusion
 DOS based POS system worked perfectly well for ZARA since scope of operations and order
fulfilment was doable on that system.
 Use of DOS based POS was user friendly, stable and easy to maintain. No need of separate
maintenance crew.
 But, it was like building bigger and bigger company on top of the OS which was getting obsolete
 Moreover, store managers had complained that, use of small devices is time consuming.
 Modern POS accommodates more sophisticated capabilities such as network within stores and across
the company
 With wireless network it would be easy to tally daily sales
 If stores are connected with La Coruna, then it could be easy to know inventory and different stores
and SKUs
 This can enable inventory transfer from one store to another
As per the data from Exhibit 13
In Euros
Operating System (Windows) 4,51,350
Hardware 28,83,330
Connectivity (annual cost per store) 1,27,440
Overall programming time required 3,75,000
Installation cost 14,16,000
Total 52,53,120

One time cost 51,25,680

Recurring Cost 1,27,440

Recurring cost includes annual connectivity charges rest all are one time costs and it accounts for 5.12 Million
Euros. However, parent organization Inditex had net income of 438 Million Euros in FY 2001-02. So,
upgradation cost can be easily funded by the company.
THANK YOU