Tuesday, March 24, 2015

Zara- An Adaptive Strategic Approach

Image result for zara clothing logo
Among the public Zara is well known internationally for its cutting edge fashion trends and affordable prices. Due to Zara’s impeccable business model it has become an example of an exceptional adaptive strategic approach to retail. Understanding the fast pace speed of the fashion realm, Zara executives have streamlined their supply chain processes to become most responsive to customer needs to outpace their competitors.  

The first supply chain process Zara has streamlined is their inventory. Most retail companies predict fashion trends a year in advance and maintain a supply chain response of 5-7 months. Alternatively, Zara operates by shorter prediction times that require smaller and more frequent shipments to their stores. The length of Zara’s supply chain response is 2-2 ½ months, significantly less than their competitors. This enables them to maintain a “fresh” inventory while eliminating excess, allowing the company to save money. An additional, strategic benefit is that with a “fresh” inventory customers are more inclined to make visits to the stores. In fact, Zara customers make an estimated 17 visits per customer per year, which is much more frequent than the 3 visits per customer per year for Zara’s competitors.

The second area of focus has been reducing the strain of bottlenecks on the supply chain line. Dyeing and fit, along with sewing prove to be the largest bottlenecks of retail businesses. With this understanding Zara greatly invests its resources into these departments and keep these processes in-house. Doing this allows Zara to minimize the potential strain of these processes to enable quicker turn around. Complimentary to this is the outsourcing of 60% of their manufacturing processes. Strong relationships are maintained with their contractors and suppliers to allow for a quicker turn around process of the products being manufactured.

The third area is communication. Zara prefers direct communication from the internal staff. Retail managers convey information to top executives and the design team through word-of-mouth. This allows for information of customer preferences to travel faster throughout the company. In turn, Zara is able to act faster to increase responsiveness while also reducing inventory and generating cash. When designing a product the team works on one-floor. The team is comprised of: designers, pattern makers and merchandisers. Once again, this allows for the most effective communication of customer preferences.

Since its founding in 1963, Zara seems to have built an environment in which prepared minds can thrive to improve their organization overall. In this way, organizations can understand that adaptability can be developed throughout any area of the organization, as long as the approach allows the company to strategically overcome their competitors. At first glance, Zara appears to be like any other retail facility. Upon further inspection, we can understand that Zara has been able to craft a strategy that allows them to sustain their position as a fashion powerhouse.

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