Zara supply chain

Zara Supply Chain
Having read Harvard business review article on Zara supply chain by Kasra Ferdows (we are proud of him) n his colleague made me to write this.
It’s a fascinating story from the very beginning to the very end of it, if there’s any. Story begins with a big lingerie order in 1975 that was canceled from the German partner, Amancio Ortega had invested all he had on it so he opened a shop near his factory n started to sell them he named it ZARA.
Soon after he developed a magical supply chain, which in the point of my view is one of the best n smartest in the whole world. Not only they didn’t outsource but also everything is centered in one place. They believe to be successful you need to have five fingers touching the factory n five touching the customer.
Followings are principles of ZARA:
1-Close the communication loop:
Any kind of data hard or soft is transferred quickly. The aim is to close the loop between the end users n upstream operations.
2-Stick to a rhythm across the entire chain:
They spend money on anything that can speed things up.
3-Leverage your capital assets to increase supply chain flexibility:
It produces complicated products in-house (around 50% of their products) n outsource the simple ones (like sweaters in classic colors).
Now let’s take a deeper look at these principles all together n see what they do.
Zara supplies its stores in Europe with trucks half loaded with cloths on hangers or planes to Japan TWICE a week. Its awesome just imagine, how costly it can be to supply in such a way. But ZARA do. Why?
If you go to any of ZARA store around the world (above 650 stores) n choose a t-shirt for instance soon you find out that the rack is almost empty, just one, two from what you have chosen so it tempts you to buy it as soon as possible or you lose the chance to have it the other time you comeback. In such a way it cuts down on inventories n they don really need to markdown to sell what is left on racks cuz there’s almost nothing there.
Zara’s designers create approximately 40,000 new designs annually (Wows), from which 10,000 are selected for production. Zara releases new designs n models one after another, it’s incredible. Customers in central London, for example, visit the average store four times annually, but Zara’s customers visit its shops an average of SEVENTEEN times a year. Therefore Zara spends just 0.3% of its sales on ads while its rivals spend around 3-4% on ads. It’s good to know that Zara growth is 20% yearly.
In this text you can’t find anything about the operations for more information do read HBR on supply chain management, Rapid-Fire Fulfillment.
Wish you the BESTS.