The History of Zara

Zara is the most successful brand of Spanish company Grupo Inditex. Its owner, Amancio Ortega, opened first retail store in 1975 in La Coruna, a small port in Spain. Zara became the world’s largest fashion retailer by 2008 end. By this time it had stores in over 70 countries, out performing its rivals like Gap of USA and Sweden based H&M (Hennes & Maurits) (http://www.guardian.co.uk/business/2008/aug/12/retail.spain).

Zara’s Innovative Operations:

Daniel Piette, director of fashion, LVMH has described Zara as “possibly the most devastating and innovating retailer in the world” http://tbmdb.blogspot.com/2009/12/business-model-example-zara-devastating.html, owing to the company’s innovative and unique approach in fashion retail.

Zara follows the concept of a vertically integrated supply chain, in which the company has a tight control over most of the design phase, production phase and distribution system to its chain of retail outlets. The rest of these processes is handled by its sister concerns with nearby locations. Unlike its competitors Zara does not outsource its production to Asian developing countries; the proximity of production units helps Zara by giving flexibility in production so that the company can meet the ever-changing demands of the consumers more efficiently than its competitors.

Zara has integrated the system of POS (Point Of Sales) and has formed a unique method that helps in the production of new designs. POS helps in monitoring what designs are bringing in maximum sales at the retail shops. The store managers are allowed freedom to decide which designs to display and which ones to keep back in the store, depending on the sales of those designs. Zara’s employees at the retail outlets gather feedbacks from the customers and convey the information to the headquarters with the help of hand-held PDAs that each employee is required to carry. At the headquarters, the design teams immediately respond to feedbacks sent via PDAs and begin designing new clothes accordingly. The clothes are manufactured and distributed to the retail stores within a short period of 2 to 4 weeks owing to the vertical integration of its supply chain. While its rivals are busy finding and identifying what the latest trends might be and finally take 4 to 9 months to distribute new designs to their respective stores, Zara manages to design, manufacture and distribute new designs in a matter of just of 30 days.

Taking advantage of the fast turn around time, Zara eschews the concept of producing just one collection per season, like its rivals do. Instead the designs keep on changing frequently so that Zara manages to deliver new designs twice a week to its retail shops. Zara only produces small quantities of each style so that there is continuous demand of popular designs. It cuts down on manufacturing costs as well. Thus Zara manages to deliver around 12000 different styles in a year whereas its competitors can produce only 4000-5000 per year. Hence, the company-coined phrase, ‘fast fashion’ http://www.3isite.com/articles/ImagesFashion_Zara_Part_I.pdf.

Current Technology in Information & Communication

Zara’s use of technology in information & technology is unique from its competitors. Firstly Zara uses much less technology, in terms of expenditure and work-force, than its competitors – just 0.5% of its work force compared to 2.5% of employees that its rivals utilise. Similarly Zara spends only 0.5% of its revenue on information technology compared to expenditure of 2% by its competitors. Secondly Zara employs a unique combination of human and IT intelligence. Managers at the stores and the market survey done by the employees, form the human intelligence while IT intelligence consists of the PDA devices used to send information collected by the managers and other employees carrying the PDAs. An order form is transmitted to each manager’s PDA asking for information such as availability of garments and patterns of garment sales. The managers of each retail outlets then divide this order form into sections and these sections are transmitted to the PDAs of each employee to fill up, based on customers’ feedback and the kind of designs sold. Employees then transmit back their respective sections to the manager’s PDA, after entering the customer’s requirements. The managers of each store are given total authority to determine and identify which sections are to be retained in the order form. The edited order form is then sent back to headquarters where the designing teams start working on the basis of the order forms. This unique hybrid of humans & technology helps in managing the inventories efficiently and quick and efficient link between demand and supply, thus successfully helping in their own doctrine of ‘fast fashion’.

Summing up Zara’s use of technology http://leoborjblog.wordpress.com/2009/08/10/zara-it-for-fast-fashion/: