The following commentary is the author’s weekly guest blog appearing on the Supply Chain Expert Community web site.
Many analysts and academics in our supply chain world often point to Inditex S.A. and its apparel retailer Zara as a benchmark in supply chain agility. It seems that in spite of many industry challenges, this retailer continues to demonstrate resiliency to changing fashion, market entry and economic conditions. It is no surprise that this retailer provides the content for many business case studies.
I recall reading a Wall Street Journal article published in mid-June indicating that the company again posted another profit increase in spite of the challenging economic conditions across Europe. In the April 30 ending quarter, Inditex posted a 30 percent increase in profits. Second quarter retail sales have also been trending higher. All occurred in a building environment of economic uncertainty.
Zara has rapidly expanded its presence across Asia and Latin America and expects to have 425 stores across China alone by the end of this year. This retailer has averaged an opening of more than a store a day in recent years and now is moving toward implementing an online sales presence. Continuing to support these efforts is a supply chain response capability with deep information technology demand sensing capabilities that can respond to changing consumer tastes in a matter of a few short weeks.
In investment circles, Zara’s continued growth and profitability has been attributed to its broad geographic market diversity along with its responsive supply chain network. Volume production facilities have been located close to its corporate headquarters in Spain where upwards of 5500 suppliers are currently located, augmented by a logistics capability that can replenish any store twice a week. While production costs tend to be more expensive with this production sourcing model, supply chain agility compensates with quick adaption to changes in consumer tastes. At the recently held Annual General Meeting, Inditex Chairmen and CEO spoke of the new addition to corporate headquarters, the construction of a new state-of-the art logistics center involving an investment of 190 million euros, and continued deployment of supplier clusters.
As the economic crisis worsens across Europe, with Spain being one of the epicenter countries of financial concern, we can all speculate whether Zara will suffer some setbacks as the financial environment surrounding this retailer becomes ever more challenged. Then again, a legacy of supply chain agility and resiliency rises to the occasion.