Spanish population used to buy clothes with frequency even when they not necessarily need them. When we get inside a shop we just try to find something that we like and if we are agree with the price we limit to buy it but, do we really know what is behind all this? This is the question that I formulated to myself. Therefore, to understand a little more which are the processes needed to create and bring the clothes that I buy later in the shops, I decided to focus in Zara which is one of the brands that I like but more importantly, is one of the companies widely known by the efficiency of its logistic. To sum up, below you will be able to read a und understand better how it works a retail company.
Zara is a retailer which belongs to the INDITEX group. It was created in 1975 in La Coruña and founded by Amancio Ortega. Afterward, during the eighties, it was implemented a logistic system which fitted with the company and with its future projection. Since then, the 3 important keys for their business are production, logistic and sales. This leads to them to be a good example of success, helping them to grow up as a company and expand around the globe. Nowadays, Zara counts with more than 2000 shops distributed in 88 countries.
In addition, in Zara every distribution unit acts as an independent strategic business unit where each has its own goals and resources while the central services i.e. Business Support Area and Corporate Department and the governance are left to the hub. However, Zara keeps the control over the whole international chain with property stores, production plants and also almost every business partner and supplier.
Image 1. Zara’s headquarter in Arteixo
In first place, in 2006 it was implemented a Store Management Terminals (TGT) composed by an informatics program which makes the information flow easily. Through this program, the store staff has access to every kind of information about the products, the warehouse and it is connected with other stores and their logistic center. Because of this, Zara knows at every moment what is going on in the stores around the world. It can obtain information about every piece that is sold and returned and even the stock available. As they know about the preferences of the consumers of each store basing on in which sizes, colors and pieces they sell more, they can stablish a rotation chain where the stores exchange products with others. The fast reposition leads to a reduction of the financial costs related to the storage and its maintaining.
After an order takes place, the products are disposed in boxes and introduced in a lorry which goes to the corresponding store. Zara also counts with agreements with airlines to transport to the farthest places the pieces. In addition, the shipments are dispatched from the distribution center twice a week. It passes only 24-48 hours to arrive to the store or 72 if the location of the store is more problematic. The sophisticated warehouses and a high delivery frequency with short lead times, are some of the factors that characterized Zara’s successful history.
Once the pieces arrive to the shop, the shop assistant has to place every piece in its place and ensure the correct disposition.
Another interesting point to be mentioned about clothes, is that Zara use fabric rather than yarn dyeing. This fact allows to postpone the uncertainty generated by the colors demand. Therefore, a wide color range can be offered with a short lead time.
In conclusion, Zara has been able to reduce the lead time by giving a quick response, achieving a close relationship between their different chains by the execution of integration strategies and to have the control of its suppliers. Moreover, Zara’s success is given by the strength of its chain of production and for the highly responsive logistic system. The logistic system is the link between the different processes of sales, production, design, supply and clothes rotation. In addition, their supply chain strategy is based in a fast response, acting instead of predicting which clothes will be more successfully sold and producing low quantities which lead to more options and a lower lead time.
To conclude, I´d like to recommend you to watch in La Sexta the tv program Salvados where it is exposed the other face of the retail industry. Below is the link of the whole program.
Agulló Fernández, I., 2012. Producir y consumir: la logística, clave del éxito de una cadena de moda. Política y Sociedad, 49(1), pp. 179-191.
Wageningen: Wageningen Academic Publishers, 2008. Proceedings of the 8th International Conference on management in Agrifood Chains and Networks, 28-30 May 2008, The Netherlands.