Many students and practitioners of supply chain management are more than likely quite familiar with Spain based fashion clothing retailer Zara and its corporate parent Inditex. Many supply chain management case study curriculums include the notions of how this retail chain pioneered what is today termed “fast fashion.”
Zara’s supply chain is likely accepted as being the innovator in the practice of supply chain agility in a retail, and now in E-commerce driven supply chain network response management. The accomplishment is one of extraordinary sales and inventory turnover accomplished through the practice of fast design, coupled with proximity production sourcing able to design, produce and ship products to fashion focused customers in a matter of days.
As many supply chain management teams are aware, creating and sustaining such capabilities takes careful planning and persistence.
Indeed. in a Supply Chain Matters commentary published in 2017, we highlighted that Zara had already began its transition to a new strategy to meet the challenge of the Omni-channel focused online fashion consumer. The retailer was beginning a transition from smaller to larger physical stores that could accommodate in-store and online customer fulfillment needs.
In a Supply Chain Matters blog published in June of 2020, Zara Begins to Pivot to the Future of Post COVID-19 Retailing, we highlighted reports that Inditex was already focusing on what fast fashion response would likely need to be in a post pandemic Omni-channel world.
The Latest Iterations
Zara incurred its own challenges related to the pandemic, with upwards of 25 percent of its physical stores being remained closed until June. Sales volumes initially declined 44 percent in the fiscal first quarter that ended in April 2020, which resulted in an operating loss. The retailer accelerated plans to boost the value of online orders to more than 25 percent of total sales by 2022 from an existing level of 14 percent in 2019. Upwards of 1.200 smaller retail stores, mostly branded with non-Zara branded apparel, were closed while plans were made in operationalizing larger footprint stores to accommodate combinations of brick and mortar and online sales.
Last week the Bloomberg Supply Lines newsletter (Paid Subscription) updated its readers on Zara, noting that:
“In a year that saw global supply chains punished as factories came to a standstill, ports were hit by bottlenecks and stores were shut for weeks, the Spanish owner of Zara clothing brand saw its inventories drop by an impressive 9 percent.”
The report indicated that last year, fashion retailers such as H&M and Gap had experienced increases in inventory, while clothing brands such as Adidas and Nike struggled to adjust their supply chain strategies. Inditex not only reduced its overall inventory, but further managed a reported 77 percent increase in online orders.
Pablo Isla, chairman of Inditex indicated in a press conference that such an accomplishment would not have been possible “without proximity sourcing” where more than half of offered products are designed and produced within Spain, Portugal and Morocco as well as distributed from Spanish warehouses.
With a design to final product cycle time of a few weeks, Zara’s supply network capability has garnered a recognized reputation for being able to offer the latest in designer clothing when interest is highest. This is far different than relying on a globally dispersed design, shipping and distribution network.
In its commentary, Bloomberg cites and industry analyst at Societe Generale noting that Zara’s strengths have always been in response to situations of market volatility that may be caused by weather, the economy, fashion trends, and now a pandemic.
Those supply chain management case studies we mentioned in our opening can now be updated to account for this retailer’s actions and response to the COVID-19 pandemic.
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