Zara is famous for their up-to-the-instant offerings. How do they do it? Supply chain management is the key.

Most apparel retailers commit six months in advance to designs, which makes up up 6o% of seasonal lines. This means that most products are manufactured by the beginnings of seasons, limiting the retailers ability to respond to trends. In others words, there is a certain amount of risk when you decide what to manufacture. On the contrary,  50% of Zara’s product line is manufactured in the middle of a season, meaning that they can react to new design styles while the trend is peaking.

Zara is capable of doing this because a significant amount of their production occurs “in-house” and 85% of factory capacity is reserved for these in-season manufacturing. In order to be able to ship small batches more time-efficiently, they manufacture many of their products in Europe. Although the wages of European workers are higher than those of Asia, latest trends can hit shelves within two weeks. In addition, small batches ensure that there is not a ton of unsold inventory to get rid of.

I have always wondered why Zara does not hold many sales. Now I know, and I admire how their operations managers have come up with this revolutionary tactic. Does this mean I’ll start shopping at Zara? Nope, too expensive.

Reference:

• “How Zara Gets Fresh Styles to Stores Insanely Fast-within Weeks.” Slate Magazine. Slate Magazine, n.d. Web. 19 Nov. 2012. <http://www.slate.com/articles/arts/operations/2012/06/zara_s_fast_fashion_how_the_company_gets_new_styles_to_stores_so_quickly_.html>.