The first time that Mahesh Nagarajan came to speak to our class, one of the points that he made was that even though it might seem like a good problem to have, having to much demand is not a good thing. As examples we talked about Apple and Lululemon among other companies, who found that their production could not keep up with current demand.
The next time we had Mahesh as a guest professor, we examined Zara and its form of mass-customization, which involves extremely fast product creation and constantly introducing new products.
It seems that in 2009, Lululemon tried to take a page out of Zara’s book. For the full article, take a look here:
http://www.theglobeandmail.com/globe-investor/new-mantra-pays-off-for-lululemon/article1395294/
It’s remarkable how Lululemon found instant success by creating a supply chain system that could track customer spending and react quickly to take advantage of that knowledge. This tactic also included shipping weekly to stores, again copying Zara. It makes you wonder if more clothing retailers will realize the benefits of this strategy and slowly begin implementing it, removing Zara’s competitive advantage. It certainly seems to work; take a look at Lululemon’s stock prices over the past year.
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