Zara’s Competitive Advantage
by
Kenneth Vines
Zara was founded in A Coruña, Galicia, Spain in 1975 by Amancio Ortega. In the
beginning Zara clothes offered affordable replicas of expensive designer clothing. In the 1980s
Zara’s founder Ortega began to make adjustments to Zara’s manufacturing, distribution, and
design strategies to help create a responsive supply chain. These adjustments to Zara’s supply
chain proved to be successful and allowed them to open retail stores in more than seventy three
countries. Today Zara is the world’s largest fashion retailer which is due to its vertically
integrated value-chain and responsive supply chain.
It is a well-known fact that Zara employs a team of over two hundred designers to
implement the company’s “fast fashion” design principles. Without an efficient, well-planned,
and organized supply chain to manufacture and distribute their clothes Zara could employ two
thousand designers and it would not matter. Zara’s supply chain is what allows them to pull their
clothes to retail stores and ultimately to the customer. Zara’s manufacturing process is similar to
the just-in-time processes Toyota implements in car manufacturing. In fact in the early 1990s
Zara collaborated with Toyota’s operations consulting firm to help install a just-in-time system
in Zara’s manufacturing factories.
Zara’s procurement process begins in Europe and China where they have long established
relationships with suppliers in Europe and a promising newly established relationship with
China. When Zara procures fabric half of it is undyed in an effort to provide maximum design
flexibility. Zara’s vertically integrated value-chain allows them to continue to cut cost in their
supply chain. Comditel, which is owned by Zara’s parent company Inditex, does all the dying,
patterning, and finishing of the undyed fabric that is used by Zara. After the fabric is cut, Zara
then subcontracts labor-intensive sewing activities to small workshops in local Galicia and
northern Portugal. Next, these subcontractors send the finished garments to Zara’s distribution
center.
Zara’s distribution center system adds significant value to their supply chain. With the
continued use of JIT principles Zara doesn’t have to experience high inventory cost. Zara’s
distribution center system includes two large distribution centers and three small satellite centers.
Zara’s four hundred thousand square foot distribution center located in Arteixo is where their
distribution process begins. Once the garments arrive they are fitted with mobile tracking
devices that allow them to be sorted into its corresponding barcoded area. Inditex’s director of
logistics Lorena Alba stated that “The vast majority of clothes are in here only a few hours”
which displays the company’s practice of using distribution centers as places to move garments
to rather than store garments. Orders are usually shipped by time zone to allow Zara to better
meet customer demand. Zara utilizes the services of 3PLs two days a week to ship merchandise
by truck to their European retail stores. The non-European shipments are shipped by air.
Zara’s retail stores help distributes merchandise downstream directly to the customer.
Store locations are usually chosen according to the traffic in shopping districts. With a less than
one percent advertising budget Zara’s retail stores are the face of their company. Zara’s prices
are usually set to be lower than their competitors and they provide limited designs for multiple
garments, meaning no two garments will have the same design.
Zara’s design principles are described by the company’s founder as “Instant fashions”
which describes the high volume of new clothing designs Zara is able to produce. Zara uses an
army of two hundred plus designers help constantly create new garment designs. Additionally,
Zara use a plethora of technology and field researchers to gather information on consumer
trends. Social media, film content, and TV are a few of the technologies that Zara uses to gather
information on consumer trends. Trend-spotters are Zara’s field researchers, who pay close
attention to trends on college campuses and the club scene.
In closing, Zara’s responsive supply chain has allows them to become the largest fashion
retailer in the world. The use of just-in-time systems they have been able to meet and exceed
customer expectations. Zara’s procurement processes, allows for maximum design flexibility and
creates significant value for their supply chain. Zara’s distribution system is second to none in
their industry and it allows them to quickly and economically move merchandise down the
distribution channel. Zara’s retail stores are the face of the company and customers are able to
reap the reward of Zara’s efficient supply chain. Zara’s two hundred plus design team are also
able to reap the reward of their company’s efficient supply chain. The efficient supply chain
allows them to create a high volume of new designs without having to deal with bottle neck
situations. Zara’s responsive supply chain allows them to differentiate themselves from their
competitors and have a competitive advantage.
Works Cited
CNN. Zara, a Spanish success story. 15 June 2001. webpage. 15 February 2013.
Ghemawat, Pankaj and Jose Nueno. "ZARA: Fast Fashion." Harvard Business School (2006):
10-14. PDF. 10 December 2012.