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.
Sources
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