In an article in the “Sourcing Journal” (April 24 2015) John Thorbeck describes research with Warren Hausman on the persistent gap in the performance between Zara and other apparel retailers. Their results suggest a profit increase of 28% through adoption of fast fashion practices. They claim that close coordination of production and retailing, quick response to trends and ownership of retailing are key differentiators. Can other retailers and manufacturers similarly gain customer trend information and adapt production if they outsource production or is ownership of production a necessity ? Can technology i.e. smartphones and cameras and big data enable such insights?
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While it is possible for other fashion retailers and manufacturers to gain similar customer trend information, Zara’s ability to maintain the competitive advantage shows that it is difficult to apply in the fashion industry. If another company was going to try and imitate the strategy I believe that ownership of the production is a necessity because of the information visibility that is needed to postpone production for such a long time. Everyone in the process needs to know exactly what is going on at every step of the supply chain from production to customer demand. If you were going to attempt this Zara model through outsourcing, you would have to build a close partnership with a manufacturer and share a lot of information regarding customer demand and costs to be successful. It is unlikely such a strong partnership could be built. Newer technology could be useful to gain customer trend information insights quickly. However, if the information does not have high visibility throughout the entire supply chain it is unlikely that the Zara model would be successful, even with such information.
The quick response and coordinated supply chain are important in fast fashion. While, only outsourcing production or own the production is not enough to forecast the customer trend and do the fast response. The efficient supply chain management helps the company response quickly. The digital trend information updates daily which helps designers to create and modify. Also, the inventory management and procurement need to be coordinated to meet the demand. Zara always provide the trendy products at the affordable prices which is an important characteristic of this brand. In different industry, it will be a different way to figure out the trend.
Modern communication and coordination practices could help competitors shrink the gap, but they are unlikely to completely close the gap without complete vertical integration. Zara’s entire value chain is focused on quickly responding to customer trends, which is very hard to replicate. It is not just a matter of adopting new software, but rather an end-to-end alignment supported by a consistent culture. Zara itself has not historically focused on having the latest and greatest technology. Some competitors may be able to use technology to offer new services that would differentiate them vs. Zara (AI generated recommendations, 2 day delivery, etc.).
It is possible that future industry trends will hurt Zara. Historically, customers have focused on obtaining the latest fashions and trends, and Zara responds to these shifts very well. However, if customers increasingly care about the environmental and the social impact of fast fashion, or continue to migrate away from retail, Zara’s strategy may not respond well to these changes. Under such changes, competitor retailers with strong connections with high-quality suppliers with excellent working conditions could gain an edge over Zara.
Zara’s business model is unique. Fast fashion (including an understanding of fashion trends here and now, coordinated supply chains, the ability of capacity to generate just-in-time as much goods as the market demands, full control) is a competitive advantage for the company. And it is very difficult for others to copy it.
Other companies place orders 8 months in advance. Then they calmly follow the trend changes. And they make changes in four months. This only partially reduces forecasting errors.
Customer preferences, their behavior information can be collected. However, one need to have the skills and capabilities to use it. To develop the same skills as Zara, one need to change the company’s strategy, and develop this direction.
One doesn’t need to have a vertically integrated company to benefit from fast fashion. Success can also be achieved through highly coordinated supply chain. However, this requires an effort to adapt and build synergies between all the chains. For example, Toyota does not own all of its suppliers. And at the same time, on an ongoing basis, it fulfills customer orders on the principle of a supermarket.
With the help of technology, it is possible to obtain information about customer preferences. However, in my opinion, in the fashion industry, many clients themselves do not know what they want. And just follow the trend of fashion. Therefore, in this case, the experience and flair of professionals are uniquely important to determine future trends.
Gaining customer trend information should not be a big issue for other retailers but this is not the only reason Zara is so successful and have a competitive edge. Most clothing brands operate using a top-down approach, where their designs are based on what they predict will become popular next season. Zara, on the other hand, takes the opposite approach. They constantly collect information about consumers right from the source. Scouts go onto the streets and in the malls of cities to see what people are wearing. Store managers take note on what customer tastes are like, which are reported back to headquarters. With this approach, designs are created based on instant feedback, and is tailored according to regional preferences. Another reasons for Zara success are vertical integration, and super responsive supply chain. Instead of outsourcing its production in Asia or Eastern Europe, Zara source most of its materials from local suppliers. While lower cost production could be achieved in other regions, the faster time to market, reduced transportation costs and low exposure to changing tariffs outweigh that one factor. This reduces overall supply risk. Ownership of production seems necessary as it allows more information visibility and flexibility to adapt as per customer demand. Outsourcing would require a lot of information sharing with suppliers and not so fast responsive supply chain, which is opposite to what is required for implementing Zara business model.
Zara is well known for its unique supply chain. And since supply chains are composed of people, process, and technology, even the latest and greatest technology is not a competitive advantage all by itself. For the technology to be used effectively, first the competitors must learn about the mental models and the operating procedures used by Zara.
Strategic souring is always depending on every company’s situation and competence. In general, outsource production can let the company focus on the core competence. However, every company is different thus it is critical to make the decision based on the own situation. The companies should focus their own strategic decisions rather than copying competitors’ strategy as it might not work in different situation. In the article, Zara’s performance is more than higher turn and margin; its model reduces inventory risk in a highly uncertain business. Other companies should have other areas to work on to differences themselves. Technologies like cameras and smartphones can generate huge data to predict customers’ preference and demand. But the fashion industry’s demand is extremely violent and there are a lot of variables. More data can lead to more accurate prediction, but it might not be enough to enable such insights in some situations.
It’s definitely possible for other retailers who outsource their production to increase the speed of their production and knowledge of customer base for other fast fashion retailers, however Zara will always have an advantage over them by being completely vertically integrated. Zara has created their supply chain in a way that favors them considerably against their other fast fashion competitors in terms of turnaround time between products and styles and having them in their stores as soon as two weeks after developing a new style. This timeline regardless of technology (smartphones/cameras/big data), though it may be helpful to compete better with Zara does not have the capacity to live up the same speedy turnaround time with Zara is known for because of their vertically integrated supply chain. There will always be an advantage for them over their competitors who choose to outsource their production or do not own all of the links within their own supply chain.
Apparel and fashion is an industry that changes very quickly with time. Zara has been able to exemplify a successful model definitely due its rapid adaptability and having ownership of its production process unlike most of the large fashion labels in the US. However, I do believe it won’t be difficult for other retailers to emulate this strategy but the implementation can be tricky as they will have to work closely with the production units, communicate the needs, changes on time like Zara which is able to adapt as per changing customer likes and trends effectively sometimes within weeks. Having close visibility of the process can be definitely pose challenges in integration but is not impossible in today’s times with IoT taking over every industry. Utilizing customer data, application of forecasting models is one of the fastest and effective ways to incorporate business insights today and this can certainly prove helpful to retailers as well
One of Zara’s core strength is their ability to detect trends and top selling items and have a very short response to address the market needs. I believe the vertical integration Zara has is a key enabler of this fast response. Coordination among different parts of the supply chain is key and having visibility of the whole process can be a great advantage. Communication is key for a fast response and having less players with a complete alignment in goals can be a great advantage.
Given that Zara is willing to be “ahead of fashion”, they have to be very receptive to the latest products trends and have to align the supply chain to have the lowest amount of bumps possible on the way. In this case, being vertically integrated can be extremely helpful. If it were not the case, strategic, long term partnerships and co-creation of goals should be created to address this gap. Probably a good way to coordinate and align goals would be developing special agreements similar to what revenue sharing agreements introduced by Rolls Royce did with the US Air-force (but tailored to products).
I also believe that technology is facilitating how to get the information and a huge advantage will be provided to the one that learns how to use data to predict trends and demand. For example, If a fashion retailer were to sponsor a fashion event, they could offer to have an online platform to share the event and let people comment what they think, monitor their interests (like buttons), facilitate searches, among others. That could help getting information faster. This together with a close relationship with strategic partners could contribute to have a more responsive operation and reduce that gap.
Take a look of 4C of Zara supply chain-chain structure: All the steps, design, manufacture, shipping, sale to the customer, and feedback from the customer is all managed by Zara/ Capacity: staff, cutting and store inventory/ Coordination: Between store staff and what they learn from customers and the link back to the designer/ Competitiveness: Trendy product, Service level and retail location. I think what makes Zara so different is its capability to collect the customers’ feedback and rapid response to the market as well as its capacity. Outsourcing may be a means to improve the productivity however the cost should be taken into consideration. Furthermore, is there enough database and the technology to analyze and forecast the customers’ preference and demand will be challenging for a beginner to imitate Zara. The coordination and time to prepare is necessary.
There are many factors that go into Zara’s success outside of just their practice of fast fashion. Zara has an excellent coordination plan between their stores and the designers. Yes, it sounds like a great idea for other organizations to follow in Zara’s footsteps and join the fast fashion industry because they believe their profits will increase, but Zara’s process will not be able to be mimicked easily. If other organizations move to fast fashion, they will need to change the way they manufacture and distribute their products. Currently they have too large of a lead time for this system to be effective. Zara also reaches out so a very specific buyer to sell their product to enabling them to be successful with the implementation of fast fashion. If they have a product that isn’t selling well in the store, their store associates call the designers to have the production of that item halted to avoid any further losses. If other stores were able to adapt to customer trends as fast as Zara it would be thanks to the advancement in technology that they have placed in their stores. I believe it would be a great idea for stores to put a big kiosk in the store, and this kiosk would allow the customers to say what they wanted to see in the store and even design their own products. This would allow the designers to have a better understanding of what their customers are looking for. Zara is an industry leader, and this success will be very hard to replicate for other organizations.
Zara’s competitive advantage is difficult to replicate because it needs time. It takes time to gain the relationship they have with suppliers, it takes time to gain the trust of the customers, it takes time to educate the clients in the way Zara works. If a customer does not find what he or she is looking for a few times, then that customer moves on to other shops but it is not the case with Zara.
Customers know that if they don’t buy it now then it is gone and are ok with that. This commitment or brand loyalty takes time.
They deal with low inventories because they need to move it fast, and the information flow needs to be smooth and quick. That amount of coordination also takes time. I agree with some of my colleagues that a competitor for Zara does not need to be vertically integrated at the same level as Zara does, but coordination then must be carefully planned and executed.
Technology can be a big help in this coordination issue, as real time information can have a huge impact in this. It remains to be seen if the costs of adopting all these technologies as well as the coordination between the different stages in the supply chain do not affect the prices because that could hurt a potential Zara competitor from entering the market.
Zara is famous for quick response of fashion trend. It designs and manufactures fast and uses cheaper salvage price for the products that are not sold out. Other retailers and manufacturers can be hard to do that if they outsource production. Because outsourcing requires more shipping lead time and management of coordination which can’t compare to Zara’s fast path each week. Technology and big data can definitely help to forecast demand. But the sense of fashion and how the customers like their products are the key.
I think Zara’s success does not rely solely on technology. For other competitors, it may be feasible to imitate and learn Zara’s predictive models and management strategies. But Zara’s success is largely due to a bottom-up information gathering. Zara will collect the sales of all stores worldwide, and the store manager will summarize and report to the design department in a timely manner. At the same time, Zara will also let designers go to the streets to observe people’s clothes and draw inspiration from it. So I think that for Zara, it is ‘creating’ fashion trends, not simply predicting demand. On the other hand, Zara’s tightly integrated supply chain also provides it with a great competitive advantage. The two-way communication between information and products is very efficient, which can ensure that Zara’s lead time is greatly shortened, thereby ensuring the lead in the fashion clothing industry.
I believe the secret behind Zara’s success lies solely in the fact that it has leveraged its supply chain to align with its business model, where the supply chain creates value towards Zara’s strategic advantage. The question, if this model could be replicated by others needs a lot of other considerations like the business model & the strategic goals of the company. Zara’s success doesn’t guarantee success for other companies who are replicating the same without a thorough analysis of their internal & external business factors. Secondly, the replication process in itself would be difficult to achieve since its nearly impossible to have a cent percent coordinated supply chain in case of outsourcing from other suppliers. Coordination needs time, money, and exchange of information. What makes it even more difficult is the extent of information sharing with the supplier and how safe it is. Based on the above ideas, first, it wouldn’t be a good idea to replicate the model, and second, it would be nearly impossible to replicate the whole thing without vertical integration.
The success of Zara is mainly because of its efficient supply chain and ability to keep up with rapidly changing fashion trends. I think outsource production could help other retailers to gain similar customer trend information and adapt production as Zara. Zara does not only have fast production plan but also has many plants spread in Spain, Portugal, and Morocco while its most competitors’ supply chain is located in Asia, Thus as competitors’ new products are still on the Pacific ocean, Zara’s new product are selling in the store. The new technology will enable retailers and customers to get responses from the customers easier and faster, and the customer trend will be more precise because the information is sending directly to the design department without paraphrase of store employees. Instead company could post some pictures of new products on social media before sales to see the reactions of customers, then they can get more accurate customer trends and adjust their design before on sale.
Zara is one of the most, if not the most successful clothing brands in the world. One thing the company is noted for is their ability to adapt to customer trends and quickly release new clothing wear according to their customer’s preferences. They are also known for not relying too much on technological advancements such as A.I. or other information technology, which is surprising for the current environment. The company is a great example of how technology can only help you to a certain point, and the rest is based off of good business management, efficient operation practices and effective decision making. Because of this, technology or big data implementation will probably not be enough to close the gap.
With regards to other companies trying to close the gap with Zara, I think it comes down to how effectively they collect information and how they are able to use that information to adapt quickly to customer fashion demand. These companies must own production in order to reduce lead times and production times as much as possible, also to have more control over the product. There is a possibility that production could be outsourced, but the supplier relationship must be strong and they would have to be very responsive to your orders.
It is hard to close the entire gap while the retailers are only doing so much and there is no doubt that Zara has its own place in the fast fashion industry, and it makes even more difficult for others to copy its business mindsets. It is true that by adapting modern communication and coordination practice in some degree can help other retailers to close the gap, but if they want to further shrink the gap, there are more to do. For example, strategic sourcing can be a competitive point since outsourcing the production line to other countries can cut the lead time and increase the efficiency. Also, the latest technology can play a key role in the future prediction. However, putting up all the technology together might not solve the problem and be competitive enough to Zara since Zara has performed so well in the vertically integrated supply chain, it offers higher margin and less turnaround time. So It is a smart idea for other retailers to adopt their own critical business strategy by pursing further on the customer data colleting process.
It was possible for Zara because of the vertical business organization. It is easier for them to take and implement decisions for such a dynamic set up. Secondly, fashion industry is always changing and their product can be amended relatively easily. Instruments and technology on the other hand needs a lot of engineering and manufacturing R&D to make and produce in bulk. To get a suggested change into the market it would take at least 2-3 months at the earliest. Such products need to be standardized before getting into the market for mass production. A little customization offered by the company to the customers buying online is what makes the product as closer to the customer expectation as possible. So no I don’t think such a strategy can be implemented by companies selling technology.
Rome is not built in a day. Clearly for the fast-fashion industry, FAST is the key and this is why Zara succeeded. Zara built its fast-fashion empire with the use of vertical integration, gaining ownership of the whole supply chain. With highly integration for design, production, transportation, wholesale, and retail, Zara could always provide proper fashionable clothes in limited quantity at the right time with a quick response. What’s more, Zara has a deeper understanding of the entire value proposition it exchanges with customers, exposing shoppers to an environment that allows for high engagement. It would be pretty hard for competitors to replicate the Zara model without a more thorough overhaul of the way they design, manufacture, and distribute their products. Technology will bring some insights under the huge sample size, but it’s far difficult to learn how to change even if companies know what to change.
Zara can react very quickly thanks to their short lead time between production and sales. Indeed, their unique model of manufacturing locally close to their design team and customers enable them to react quickly to new trends. It is therefore very important for them to own their mean of production. However, it is not the only solutions for retailers to quickly react to news trends. Indeed, it is still possible to outsource your production with suppliers, but you need to invest and work with a company that can match the level of reactiveness that Zara achieve in their plants. Moreover, by shipping your goods by plan, you can also reduce drastically the lead time even though you increase your transportation costs.
The increasing accessibility of data offered by social media and smartphones are incredible source of information regarding trends for companies. Mastering the analysis of those data is critical for brands to have better insights about what the public want.
Zara has been successfully observed customers need and make quick responses, which enables a 28% profit increase. In the fashion industry, inventories are “perishable”. This does not mean the inventory will disappear but indicates that fashion products would lose much of their values in the next period when they are no longer popular. So, the ownership of products is necessary to make quick responses to trends possible. Outsourcing has great potentials to cut down the cost, however, it would also increase the time of this production process.
Technologies such as Big data enables retailers to predict customers’ preferences based on their historical purchase information. Retailers can take advantage of this information and customize their advertising strategy accordingly. This is very common nowadays. After you browse a fashion website, Google will pop up some ads when browsing other websites later, which will direct you to some relevant products.
Fast fashion targets at low level and mid level customer. Zara react quickly to customers because of its short lead time, effective supply chain and great coordination. I think other retailers and manufacturers can also similarly gain customer trend information and adapt production once they outsource production. Ownership of production is not a necessity but make crucial important part.
Technology enable good insights in boosting information and reaching out to customers so that can bring more exposure and connections.
The reason Zara is able to facilitate the fast fashion is because of its strong, built relationship with its suppliers. Through vertical integration, Zara takes total ownership of production, which has also facilitated their fast response and growth. Outsourcing the production can help other retailers and manufacturers gain customer trend information and adapt production, and also reduce lead times and increase efficiencies, but they may not be nearly as responsive as Zara’s supply chain, which takes a long time to build. Hence they won’t be able to match Zara’s fast fashion trend through outsourcing.
Yes, technology like smartphones and cameras and big data can generate and correlate data about current trends, tastes and demands. What sells in the fashion industry constantly changes as it is very trend based, so there are many factors and customer preferences to be considered during the data analysis. More data is bound to provide further insights.
There’s no denying that Zara is one of the most in-demand retailers of the past few years. This has been very well reflected on their sales outcome. They very well implemented all the latest technology and trends to have a better customer experience. One of the example could be introduction of self-service checkouts, enabling consumers to bypass the queue and purchase their products with do-it-yourself kiosks. Zara’s latest initiative – augmented reality could be another game changer and all the other retailers must be taking cue out of it. Zara has recently been one of the first major brands to introduce an AR interface intended to bring apparel to life in shops. Through aiming cameras at the sensors mounted in the screens, users of the app can see simulated fashion models strutting around their things. Other AR photos show mannequins moving about and showing the brand ‘s latest Studio Range. Influx of smartphones with well advanced camera very well contribute to such technologies and I am sure all the fashion retailers will be sooner or later implementing such technologies.
Conventionally, apparel industry works by forecasting the trend and its respective demand and then trying to fulfil that demand by pushing the brand and product out to the customer. But what if on top of that, one could “influence” the demand by pulling people/customers in and making them their brand evangelists? That would mean dictating the trend up to an extent, which would give one a first-mover advantage and increase sales. An article from Forbes says that this strategy is the game changer for Zara.
Although not a necessity, vertical integration does aid in aligning the business model and respond quickly to external stimulus.
Like Himanshu pointed out, Zara has introduced an AR experience which draws millennials into the store. With the advancements in technology, there are numerous ways in which one can create curiosity which makes for a powerful marketing strategy.
Each retailer has a unique business model and it is necessary that any changes in the model should be compatible with their vision. I believe it is possible to attain a similar level of success even through outsourcing if their model is customer centric instead of company and brand centric.
Zara is experiencing one of the fastest global expansions the retail industry has ever seen, launching one shop a day and hitting new markets around the world — so far seventy-seven countries. Its implementation of all the latest fashion technology. The Spanish apparel retailer has continued to outpace its immediate rivals by embracing new tools, including big data, virtual reality and artificial intelligence. Inditex, the parent firm of Zara, is still able to assist consumers. Helping its e-customers to find the best size of clothes is one of the problems that Zara needs to overcome instantly. Its not just important but now compulsorily required by other fashion retailers to take a cue from their rival like Zara but If the fashion industry doesn’t keep up, the tech industry will occupy the empty space in the future of clothing. In addition, tech firms are mindful of the potential for connected technology and are leading the way for advancement in this area. Microsoft and Google have also licensed patents for smart textiles technology. Apple is going toward haptic feedback designs, which would be key to the development of versatile touchable surfaces – aka smart clothes.
Everyone attributed Zara to fast fashion. Fast fashion is characterized by many styles, low prices, and small quantities, which can meet the needs of consumers to the greatest extent. The secret of Zara’s success has been interpreted by a large number of media. Bloomberg’s research analysis pointed out that the success of Zara’s parent company Inditex is mainly due to its centralized management structure and rapid response to big data.
At this point, the rapid response model shows its advantages, that is, it can respond to consumers’ changing tastes in real-time, which is difficult for many other Chinese apparel brands to do. Compared with other fast fashion brands, Zara’s corporate culture is not as easy to be copied as the latest fashion trends, which is also an important key to Inditex’s continued success. Also, about 70% of Inditex’s products are produced within short-term delivery, which means that Zara can flexibly design and produce according to market demand and avoid unnecessary inventory. Therefore, Inditex once again recorded the lowest inventory in the industry last year.
Richard Hyman, an independent analyst in London, pointed out that Zara’s production model has broken the traditional rules of the fashion industry and achieved true seasonal fashion. Although global fashion retail is sluggish, Pablo Isla is not surprised at the contrarian growth. He admitted to the outside world: “We can quickly respond to the latest data and market environment, adjust our strategy, and the design team has a high degree of product fashion trends. The power of control, the performance will naturally not be affected by the downturn of the general environment.”
Pablo Isla also emphasized that Zara’s speed is not entirely dependent on production speed. 60% of the brand’s products come from the supply chains of Spain, Portugal and Morocco. Compared with other brands’ supply chains in Asia, the transportation time is greatly shortened. While the new products were still floating in the Pacific Ocean, Zara’s new products had already been sent to stores and were on sale. Some analysis also believes that Zara’s success is also due to the recognition in the hearts of consumers. Compared with H&M’s annual revenue of 4% for promotion, Zara basically has no other advertising budget except for marketing activities on social media. For consumers, a product catalog that is updated twice a week is the best promotion.
The trend of fast fashion is difficult to forecast and it takes long from design to sell. But in Zara’s case, they respond very quickly to the customers’ demand and shorten the period of the total production process, which makes them outstanding among other competitors. However, it’s difficult to copy that business model because, first of all, it needs a close coordination of production and retailing. For some companies, they choose to outsource the production to reduce the cost, which leads to long lead time and slow response. But Zara is vertically integrated, which is a necessity for their business model and means that they have the whole control of the supply chain. If a new design plan is come up with, a prototype can be made very quickly to test. Besides, vertical integration means the ownership of retailing, which brings them full information about selling, thus enabling them to respond quickly to the trend. Nowadays, with technologies like phones and cameras, companies can easily get data about the newest trend. But just like I said, it’s difficult to predict the trend, they don’t know when the cloth is out of date. So, it’s important to put the products into market quickly. Coordination and ownership of production and retailing and quick response to trends are keys here.
Zara’s ability to maintain its competitive advantage is due to its unique business model that coordinate supply chains to apply just-in-time delivery, full controls on production and fast adaption to fashion trends. For fashion industry, to utilize all of these resources is hard that’s why it is very difficult for other companies to copy. Traditional fashion companies place orders average of 8 months in advance. The makes changes every 4 months accordingly to the market trends in order to lower the forecast error. However, it is not applicable for fashion industry anymore when customers preferences change quickly.
With the help of technology including smartphones and big data, it is possible to forecast and predict customer preferences to future trends and demands. Big data could be use to understand customers behavior and preferences, studying in many dimensions can help companies understand their fashion taste and respond accordingly.
Each year Zara launches A 10,000 new styles, this converts to nearly 1,000 new styles every month by the fast fashion giant. With new styles being developed and introduced frequently, each style would contribute only around 200k-300k sold items to the company sales, which is a far lower than other brands. The secret of Zara lies in its well coordinated and flexible supply chain, rather than forecasting the future trends as other competitors do, Zara quickly produces a small amount of what is hot with consumers, and move to the next trendy style fast. For instance their supply chain is so well coordinated and Robust that Zara only holds 6 days worth of inventory, whereas similar fast fashion retailers link H&M holds 52 days and GAP holds 94 days of inventory.
Thus i believe other fast fashion retailers cannot play catchup to Zara in the near future.
I think if the aim of the company is speed to market then outsourcing might have some challenges as this will increase the lead times if they are outsourced out of the country. Also because of outsourcing, a control over quality and product is in a way lost hence if the company is focussing only on getting earliest market share then outsourcing option must not be feasible.
I think technology can play a big role in understanding fashion trends. Sometimes after purchasing new clothing, people tend to use social network to post their outfit. Big data can really help in tracking such posts apart from the individual purchases being made. This shall help company to adopt to consumer needs much faster.
When we talk about retailers we have to be noted that not all retail categories can be treated as ZARA’s appeal line. For example, it would definitely be valuable for Walmart to catch the trend of pork sales – and if the production of pork can be adjusted accordingly it would be perfect. But no – pigs need time to grow and they need to be slaughtered at right time – meaning even Walmart controls pork farms they can’t alter production quick enough to “catch the trend”. However, for some retail stores focusing on a single product – like appeal, electronics, and household appliances, a deep dive into the supply chain and highly integrated production model would be beneficial – but this whole system takes time and capital to build, and the existing system needs huge investment to be shifted to git this new model.
Adopting a fast-fashion approach has become a necessity to be competitive, the introduction of new products encourage customers to visit stores more often, which means spending more, a win-win situation between production and retailing, and I believe other companies can be inspired from the Zara model by using technology to understand the trends, while Zara sells over 11,000 designs each year, their rivals only sell 2,000 to 4,000, the key to this huge difference is big data and analytics, gathering data using smartphones can describe what trends resonate with consumers by analyzing online signals and engagement with the research and images that they are checking to make more informed merchandising decisions.
Zara is able to introduce new styles in such speed because of the vertically integrated structure. The company’s expertise in understanding and recording customer feedback, designing and quickly translating it into an actual product is what ensures quick transition from ideation to liquidation. Most companies have one of the above areas as an expertise and depend on partners to provide their expertise on other areas and here is where the additional months get added. With all key areas in-house, the organization has its priorities set right. The flip side of the coin is heavy investment in building this expertise in varied departments. Crucially, lead times come into picture when supplier capacities are booked by competitors and skill sets need to be added to partner’s work force. With this inhoused as well, Zara saves time and is able to take advantage of the customer feedback immediately.
Zara’s strength in fast fashion is attributed to both its ability to rapidly-produce a potential product that their customer might like. Their focus on a wide variety of low runs for clothing dwarfs the number of lines that other clothing manufacturers put out in a year. I believe that it would not be wise for companies to try to leverage the new technologies that might give them better insight into customer interests to directly compete with Zara without having additional competitive advantages. Zara has developed a supply chain that is highly suited for how it does business as it is able to exert more control in its vertical integration and avoid losing margins to suppliers. Unless the competing companies are able to use the customer insights technology and their supplier contracts in a way that is tailored to magnifying the advantages in their own business model, the gap between Zara and its competitors would persist.
Zara’s stronghold in the industry is due to innovation and understanding of the customer’s mindset. Zara knows and has in-depth information about the upcoming fashion trends and previous customer patterns to be able to come up with robust designs that last for the season. This is possible due to control over the IP even though the manufacturing has been outsourced. Moreover, lower lead times add to the in-stock probability making sure that customers find their seasons favourites in stock. There are certain competitor brands like H&M who are trying to do the same along with incentivising customers with member plus plans to obtain more discounts. Zara’s ideology utilizes speed and market value.
Big data and technology can help other brands to achieve this level of competence. This can help to improve forecasting and understanding customer expectations with regard to their fashion choices, especially during the festive seasons.
Agility and quick response to industry trends is a coordinated strategy which required a high level of control. Also, this is information visibility is of high importance for the company. Information asymmetry, moral hazard and even potential hold-up or underperformance from the supplier might jeopardize the production adapting to the new market trend. Hence, it is best for any fashion company to have production in-house when deploying a quick response strategy. Technology can play a relevant role in the execution of this strategy, but it is not all in itself. A well developed agility strategy can leverage technology to understand social trends faster and analyze big amounts of data to take quicker decisions, but it still boils down to the ability of the company to adapt its capacity so as to reduce the production lead time.
Zara follows an agile supply chain strategy that has significantly impacted its ability to reach customers quickly and outsource its production capability. Almost 60% of the brand’s products come from the supply chains that are very close to its target European market. Compared with other brands’ supply chains in Asia, its lead time is significantly reduced.
Zara does not greatly utilize advanced AI capabilities to track consumer demand changes, but it effectively manages the trends and ensure coordination along the supply chain.
Outsourcing carries a high risk of losing control and competency, therefore, other retailers should be careful of choosing a strategy that increases its competitive advantage and improves agility.
Every business has its unique point of selling. For Walmart its EDLP, for Zara it is Fast-Fashion. Zara’s clothes are limited edition, high ended and low on durability. There is a segment of consumers for which Zara caters to. It wouldn’t be smart for another retailer/manufacturer to replicate the same model. Zara has done outstandingly well in the fast turnarounds of implementing what the customer wants. Zara is a perfect example of the benefits this can bring.
So I would say every business needs to understand the pulse of the consumers and stay with it. Technology definitely makes things simpler in terms of faster communication. Customer feedback plays a key role. There are bits and parts of Zara’s story which other brands can implement. But as a whole everyone needs to concentrate on their uniqueness in selling and play it strong.
Zara’s another strength is integration along the production line. Own manufacturing provides better control and flexibility on the supply chain. But it need not apply across all brands. Zara creates a lot of new products to sell. This uniqueness requires them to have the flexibility to manufacture them. If the business model is a standard product for example the standard Purdue T-shirts sold at book store. It has remained the same over the year and people like to wear it no matter what. If we have a decent outsourcing agent to do it, the store can save a lot of money leveraging the outsourcing agents experience and expertise.
I strongly believe that what Zara does is an out-of-box approach in which it is extremely proficient in. The risk is super high and the returns are only good if the implementation is good. I believe that this is not something that is supposed to be copied. Other companies should not follow such a business model as it is not a cake walk for most of them. Also, Zara follows a vertically integrated approach and since it has been doing the same for a few decades they are proficient. This business model is very complicated and not easy to replicate. Also, technology could be used to get data and try to forecast, but Zara has efficiencies in the implementation as well which is unmatched. Therefore, businesses shouldnt risk their companies and run after pros to copy their model.
Apparel industry is known for highly volatile and uncertain demand with high rate of obsolescence driven by current trends. Inventory in pipeline can turn obsolete within weeks and companies lose their margin when they have to sell it off at markdowns. Local production may incur high labor costs but the degree of control over operations and rapid response to changes in demand, especially in such uncertain markets, is a leverage over others sourcing it from outside because of their dependency. If a company wants to outsource, because of reduced labor rate or availability of material, air freight can be employed to have a quick response. But it too has its own costs and complexities related to lead time, coordination and import transactions.
As the article rightly suggests, any trend driven market with highly uncertain consumer demand will be hugely benefited with an integrated value chain with high degree of supply flexibility. Close coordination and information visibility play a crucial role in such scenarios. Postponement allows or greater flexibility as some portion of the uncertain demand becomes deterministic and helps in adjusting forecasts. Other manufacturers like Dell also follow a similar postponement model with their assemble to order model. It gives them high level of customization opportunity at high speeds. This surely should be considered with other factors like costs, core competency, lead time, demand uncertainties, product lifecycle and expected benefits before making any decision.
It is difficult to implement Zara’s approach cause it involves risk of capital investment and increased costs. Zara’s competitors can try this approach on a sample basis to see the results they get with this approach. To implement such fast paced approach with outsourcing is difficult because even with the latest technology, demand projection and communication, suppliers may not also have the same vested interests to meet customer demand. Having a strict contractual obligation and fines for unmet demand can solve this problem to an extent but dependency will be there on a third party supplier which entails risk. Companies can work on pilot projects to implement this strategy and I believe Tata’s Westside brand in India is trying to emulate this business design. I have read and talked to few people working in Westside and the feedback received from them is that they have started gaining traction among all customer segments.
Had it been an easy business model to emulate, many other retailers would have adopted Zara’s fast fashion model by now. Tremendous amount of supply chain coordination is required to implement it in the fashion industry. Customer trend information can be collected quite easily. However, it is difficult to have the required coordination among all the entities involved in the supply chain.
Zara has a vertically integrated supply chain which I believe gives it a competitive advantage. They have a direct control over production and sourcing which other retailers lack due to outsourcing. Technology plays an important role in obtaining and analyzing data to predict market trends. This indeed helps the retailers to plan in advance and push its products to the customers.
For Zara, they use some technologies such as RFID to track information so that Zara is able to track sales. At the same time, Zara has a cutting edge system that intergrate the whole supply chain to let Zara determine their invnetory policy and how they respond to the market. Therefore, the key for Zara to be successful is about the technology. Of course, no matter outsourcing or in-house production, if companies have ability to track every situation and are resilient to adjust their strategy, they can gain more trend information and make a quick response. However, if retailers simply outsource production part without a system to track every details, they will lose the opportunity to the trend because they can’t understand how sales trend is or even they now it, they still lack capability to respond to the actual demand. In addition, smartphones or big data are tools that can help companies be more reponsive to the situation, because nowadays everyone has a smartphone. People also are favor of convenience things. Big data can show people how market change by these numbers variation.
1. In a fast fashion practice information flow becomes the most important flow along with financial and physical flow. Outsourcing a production can be a challenge as here you are relying on capabilities of the supplier and only a robust and integrated system could provide a proper flow of information. Outsourcing can save many costs to retailer as compared to ownership but for analyzing trend it can be difficult with third party suppliers. Conversely, with ownership of production a retailer is more likely to gain proper customer data on a regular basis that can help in analyzing the trend. However, ownership is a long term and expensive strategy and might not fit for many retailers and manufacturers.
2. Looking at the technical solution to this problem, smartphones and camera’s can be used by retailers to gather real time data of customers and understand how they shop. Big data can be used to analyze the correlation between the products as well as anticipate the trend.
First of all, the degree to which Zara is vertically integrated is unparalleled. Having control and flexibility in bringing trending fashion has set a different genre for Zara in this industry. With this is mind, a major reason for Zara to have maintained this competitive advantage is in its ability to bring clothes at a very short time. In other words, Zara maintains an unique niche with regards to lead time. This advantage has not only been exposed but also tried upon by the whole industry in general. A constant shift in localizing suppliers close to customers within apparel industry is an indication of that. However, so far none have been able to replicate what Zara has.
In terms of technology, I am not sure how this might help in this industry. Fashion is extremely seasonal and varies rapidly with time. Suppose we get the data and analytics to find the current trend. Unless we’re able to fulfill the demand suggested by this trend, there’s hardly any point for using such technologies. For example, let’s say an analytical study suggests that a particular fashion be in trend for next five months, so the companies have less than 5 months to bring in the product. The average lead time in the industry is 4 months, which gives very little, if any, window for the company to capitalize. So unless the industry can fix its flexibility and agility issues, I don’t think big tech can bring much value. To be clear on one part, I think the process can bring at least some value with ecommerce platform or omnichannel presence.
As we can see from the article, Zara’s model reduces inventory risk in a highly uncertain business. Zara’s incredible speed and flexibility are due to the fact that, whether vertical or virtual, it’s important to have the mindset of sharing full inventory risk rather than transferring them. In addition, getting to market quickly is a merchant and financial mindset that requires a cultural commitment to be competitive in the international retailing. Therefore, I don’t think that retailers and manufacturers must have ownership of production. At the same time, simply outsourcing production is just not enough. But what is certain is that there will be tremendous opportunities for businesses that sell in increasingly shorter cycles.
I believe that technologies such as smartphones, cameras, and big data can help deliver this insight. As the author mentions, in the world of tech, the answer is always, how fast can you do it? These technologies clearly help to facilitate faster access to information, which can lead to increased responsiveness and reduced risk.
Zara’s competitive advantage lie in their supply chain flexibility and their time-to-market. Zara focuses on fashion to order production policy which helps Zara produce apparel with short lead times. Zara even holds a few days of inventory to facilitate their time to market policy. The trade off here is the more expensive capacities Zara need to maintain to ensure that fast fashion is successful.
The expensive capacity investment may be a trade off that other companies may not be willing to make. Most companies rely on placing replenishment orders months in advance. To replicate Zara’s success will require a complete change in the business model which most companies will not be eager to implement.
Technology can help provide more insights into customer trends, improved forecasting, etc. which may help bridge the gap a certain degree.
Fashion industries introduce us to an interesting dimension of demand forecasting, where these prominent fashion luxury brands first create the demands by psychologically appealing the consumers, and then they tend to forecast on the basis of the reaction of various segments of the market. Zara stands out as an epitome of an efficient supply chain and it demonstrates how better management of the supply network can do wonders for companies in terms of revenue, profit, and goodwill. Zara’s strength lies in their potential to respond quickly to market demand as a result of shorter lead times, courtesy of their closely located yet relatively expensive manufacturing facilities. This results in them always being the first influencers in the fashion sector, which greatly affects their reputation and, maintaining lower inventory levels affect their profit calculations. Other companies, even though are able to reap profits from their cost-efficient manufacturing and sourcing strategies, they still are not able to stand up to Zara’s level, maybe due to the fact that when consumers purchase fashion products, they do it with a very different mindset, where the priority is not just satisfactory prices but it’s more about creating a statement. People relate their fashion sense to their individuality and therefore, the reputation and innovation of companies matter more than anything else. And Zara has very well analyzed the consumer’s mindset to design their entire company’s business structure. There is no generalized method to achieve supply chain profits, both outsourcing and vertical integration can result in better management if the model of the supply chain ensures good coordination and visibility to deliver flexibility and quick response to market uncertainties by designing strategic supplier contacts. Taking the consumer mindset at every stage of strategizing is of utmost importance for the fashion industry to thrive.
One important characteristic of the fashion industry is its timeliness of products. A design can reach the market and be popular for less than a month yet still bring great profit. Most of its core values come from the brand or designer themselves because of the public or some elites’ recognition. Similar industries can benefit from learning the Zarya model such as luxuries and arts. Yet similar industries usually do not need to outsource manufacturing because their need for labor is not as strong as the fashion industry, therefore the ownership of production is usually held at hand. Technology and big data can defiantly help companies gain insight to trends and better forecasting by analyzing customer behavior and defining product life cycles. It is a strong tool for above industries.
Just by looking at Zara supply chain we could say that ownership has been a very important factor for them to be able to have and an immediate response to the information received from customers and control of their production, this does not mean that the production by outsourcing can’t be competitive as well, but the factor of having your production locally plays an important role for how fast the new products can place in your store.
Technology it’s already involve in the way businesses are obtaining information and immediate feedback from their customers. Smartphones especially are able to collect data from searches in their web sites, purchases online, even they can track parts of the store that are visited the most thanks to GPS’s or sensors that already exist inside stores, it’s just a prove that all the interaction customers have with technology is helping the industry to obtain data from them.
In order to achieve a model similar to that of Zara’s, one which embraces “fast fashion,” the company would likely need to own its productions. The biggest drivers of outsourcing are usually cost reduction or expertise gain, with the fashion industry especially relying on low labor cost production in southeast Asian countries. In order to have a fast response to fashion trends, the company must have a highly integrated and fast design and manufacturing system. This could not be achieved through outsourcing half way around the world. Both long lead times and communication between the company and the contractor would be difficult. Technology could mitigate some of the communication issues, however there are still challenges to working across different cultures, especially when you are trying to compete on such a short timeline as Zara does. Often times, what enables companies to take advantage of outsourcing is their ability to forecast far enough in advance to utilize shipments by sea. These are cheap and, unlike air shipments, would not cancel out the savings from lower labor costs.
Zara can react very quickly thanks to their short lead time between production and sales. And using salvage to reduce their cost. Other retailers and manufacturers can be hard to do that if they outsource production. Thus, utilizing customer data, the application of forecasting models is one of the fastest and effective ways to incorporate business insights today and this can certainly prove helpful to retailers as well.
Other retailers and manufacturers can gain customer trend information as quickly as Zara. I believe that these retailers and manufacturers do, but the difference between them and Zara is that Zara can act far faster. Why? Zara has a fabulous vertically integrated system. The amount of coordination effort is far less than if separate entities needed to work together to make customer trend data into tangible goods. The ownership of production is vital in this instance. For example, suppose there is a runway show that showcases a uniquely designed t-shirt, which Zara believes it can create, produce, and sell for a 1/3 of the cost. In this case, Zara needs to quickly coordinate with the manufacturing and supply chain to make and sell the product. From a planning perspective, Zara knows its current production. It can coordinate internally to make the new shirt. While, competitor retailers and manufacturers would need to coordinate production, which could take up to eight months to develop the same t-shirt that Zara could develop in as little as two.
While technology and big data can enable these insights, a more pressing issue is how quickly they can be made once the insights are found? This is when Zara’s vertically integrated supply chain shines brightest.
The difference between Zara and other apparel is that Zara has established itself as the “fashion” of the industry. Looking into Zara’s production strategy, its clothing only lasts 8 to 10 times. Then the clothing material will start to deteriorate so that customers will have to purchase new ones. Given the cheap pricing from Zara, customers are receptive to buy a new one from them. However, its supply chain coordination of production is not easy to imitate because those apparel retailers do not run the same as Zara. Zara has already established a long-term relationship with its suppliers, and its system in place allows them to have close coordination for production; therefore, it can satisfy customers’ demands. Technology and big data can facilitate apparel retailers; however, depending on their pricing, marketing, and strategy, it’s hard to say if other apparel retailers should outsource their products or develop their production ownership. Therefore, other apparel retailers should not imitate Zara but use big data and technology to find their methods to satisfy their customers’ needs.
Data Collection ==> Analysis and Insight Generation ==> Recommendation ==> Implementation
Smartphones and cameras can help with Data collection about different factors. Big data and Analytics help with the Analysis and Insight Generation. Prescriptive analytics, optimization etc. help with presenting recommendations. All apparel companies have all the above capabilities and their capacity for these might be much greater than Zara’s.
Why the ZARA Gap? Implementation.
Zara maintains tight control over design, communication between design and manufacturing as well as the contracts for manufacturing garments which essentially is a vertically integrated system. One of the big advantages for Zara is that it deals with lesser quantities per SKU and offer more variety and hence the manufacturing can be split across various contractors with lower lead times. Since the design team is able to communicate with the manufacturing team and the manufacturing team has a full schedule of production along with provisions to alter the schedule depending on a priority metric assigned to a particular order. Other retailers have assigned manufacturers who have their own scheduling and they are not able to maintain flexibility in production schedule which is pivotal for pushing product faster.
Hence, Zara is able to reduce the introduction of new product to about 2 months while for other retailers its about 8 months.
Yes, other retailers and manufacturers can gain customer trend information and adapt production by using different information sources. There will be two directions for other players to close the gap with Zara. First, build up better coordination with the supplier, to shorten the lead time, not planning for a product made for the next 8 months, making the product for the next 4 or 2 months instead. Also, develop a supplier development program to improve the efficiency and productivity of suppliers, so that the supplier would be capable to cope with urgent orders.
Second, have a technology team to develop information collecting data to gather information from potential customers, with the information from the customer, the retailer would know better about the customers’ feedback and opinion on the products.
I think ownership of production is the best way to maintain a fast fashion business model. It will ensure more control over the products and will have better supply chain transparency. Even the coordination aspect will become easier by owning the production. Big Data definitely has a great potential to develop such insights that can allow retailers and manufacturers to develop a fast fashion model like Zara without even training their employers. Big data can revolutionize the fast fashion industry if implemented and coordinated correctly.
I agree that close coordination of production and retailing is the key to success for Zara’s supply chain. Looking from the 4C framework, the first C of Chain-structure, having multiple entities in the supply chain network adds resistance to the efficient flow of goods and information throughout the chain. That is because, with different owners, the decision-making is fragmented. With Zara, since they own the manufacturing to downstream retail stores, their coordination throughout the chain structure is smoother.
This can also be viewed from the fourth C of the 4C framework – Competition. By owning the entities of the supply chain Zara has created new metrics for competitive advantage. It is an entry barrier for other players trying to replicate Zara’s supply chain efficiencies. Outsourcing production will still have multiple decision-making entities in the chain structure and therefore may not yield the same supply chain performance as Zara.
Mobile health (m-health) is the term of monitoring the health using mobile phones and patient monitoring devices etc. It has been often deemed as the substantial breakthrough in technology in this modern era. Recently, artificial intelligence (AI) and big data analytics have been applied within the m-health for providing an effective healthcare system. Various types of data such as electronic health records (EHRs), medical images, and complicated text which are diversified, poorly interpreted, and extensively unorganized have been used in the modern medical research. This is an important reason for the cause of various unorganized and unstructured datasets due to emergence of mobile applications along with the healthcare systems. In this paper, a systematic review is carried out on application of AI and the big data analytics to improve the m-health system. Various AI-based algorithms and frameworks of big data with respect to the source of data, techniques used, and the area of application are also discussed. This paper explores the applications of AI and big data analytics for providing insights to the users and enabling them to plan, using the resources especially for the specific challenges in m-health, and proposes a model based on the AI and big data analytics for m-health. Findings of this paper will guide the development of techniques using the combination of AI and the big data as source for handling m-health data more effectively.
Zara is one of the most reactive retailer in the fashion industry because of their well managed vertical integration. Other retailers could follow Zara’s step even if they outsource but it would require a lot more coordination and assessment of risks such as long lead times and quality improvements along with better demand forecast. Because Zara owns their own production, they can operates with no outside bottlenecks, while other retailers have to continously work with suppliers, or find different ones in order to stay in line. I think that technology can definitely enable such insights as it better helps to assess future trends and act on it in order to reduce uncertainty.
There are many things that needs to align well to replicate the Zara’s Model. Theoretically, if other retailers and manufacturers can create that ideal “coordination” to understand trends and deliver in quick time it is possible. However, we know from various examples is not that easy to develop that kind of coordinations. Only if a company own end to end process and oversees it to deliver it has a high chance of being successful. Although, we have seen that in South Korea Zara like model was successful but we know that this system has high level of cooperation and coordination which are more of an attribute of region and culture.
Zara, has never emphasized on high tech or help of huge data to come up with insight. Most of the time their employees would look around to collect data and generate insights, working live on the store. This has worked well for Zara and they have never felt the need to replace the current system with newer technology. Be it as it may, we cannot say that such a system cannot be replicated with big data and tech. It is up to the business if they can use the supply chain and AI to understand the trend and keep up with fast fashion
I think other retailers and manufacturers have the same opportunity to gather customer trend information but being able to quickly incorporate it into production is much more difficult. Unless there is a very close relationship with an outsourced producer, ownership of production is likely a necessity to make this happen. Zara has to use really close communication chains from store to design to production and needs to be able to produce at a moment’s notice. Most outsourcers have other customers and need more lead time to produce for them, they can’t just do it at the drop of a hat. So, to be able to replicate Zara model, ownership of production and finding a way to know customer trends are both critical. Technology can definitely be a resource in this process. Monitoring trends as they occur in store and adapting based on that, or tapping into social media to hear more about what can help this process.
The close coordination that ZARA has built with its suppliers/outsourced manufacturers is a competitive advantage that allows ZARA to be profitable. The closed chain structure is through years of information sharing and coordination, and trust built over the years. A competitor cannot imitate the ZARA network of activities. ZARA has successfully captured the Voice of the customer at the point of sale and made it immediately available to customers.
But with advancements in manufacturing technology and automation, apparel manufacturing can be brought closer to the end customer. With customers increasingly hooked to the digital world, there is so much data available – right from what customers are searching for to which celebrities they are following. This real-time data can be easily translated to knowledge.
What made Zara successful in the past might not necessarily make them successful in the future. So there are opportunities for Apparel brands to play catch up and compete with established brands such as Zara.
Duplicating what Zara has done will be difficult if the retailers do not own production. The congruent vertical integration at Zara enables it to identify trends with direct customer feedback and report back promptly to allow production to take place quickly. If other retailers were to replicate Zara’s approach, and they have to communicate very well to catch up to the speed with what Zara has in place. Smartphones and cameras and big data can identify what consumers are looking for, their search patterns, and browsing history. These data help in making decisions by indicating the future trends and what should be manufactured.
In my opinion, Zara’s competitor can easily gain customer trend information whether outsourcing production or in-house production. However, the success of Zara is not based on gain customer trends or technology solely. Zara built up a whole fast-fashion empire by collecting customers’ information constantly in every aspect rather than a top-down approach, the policy where most clothing brands used. For instance, each Zara store manager will collect notes of preferences of customers who came to the store and send them back to headquarters. However, most clothing brands use sales history to predict future demand. Therefore, Zara can get customer feedback and design based on actual market trends.
Another success of Zara is the fast response supply chain system with vertical integration. Take Zara’s logistics and distribution strategy as an example, instead of having different distribution centers in different regions in the world, Zara uses “Proximity Sourcing’, which handles all distribution from Spain, where headquarters is located. This strategy helps source 60% of products in only a few weeks. Thus, the lead time and inventory can be lower and quickly respond to what customers want.
The popular giant wheel is pushing the global fashion industry into fashion. Look at “Fashion” led by ZARA. It can also be easily and readily available like fast food. The mid-priced ZARA and the low-end H&M interactive global apparel consumer throne. And their success is not only because designers can gain insight into fast fashion trends and customer needs, but they can also collaborate with upstream and downstream supply chains. Zara can vertically integrate upstream manufacturers and suppliers to facilitate Zara to provide itself with fast fashion services. It sounds like some manufacturers and retailers can get fashion demand through the same method and generate more profits for themselves, but Zara has been familiar with his fast fashion method for many years of experience.
I think mobile phones and high-tech products are not suitable for this method, because high-tech is not like fast fashion, and fast fashion has no technological barriers. In addition, products such as mobile phones have a relatively long service life and relatively high prices, and the company has a relatively long R&D and production cycle.
Zara’s model is unique, I personally shop at Zara, and I enjoy how fast they are able to change items and maximize profit at the same time. Capturing different demand each week requires to understand the voice of customer. In their model they can recognize items that are wanted more from others. They gather information and send it to their manufacturing facility where production is initiated for next batch of season items. To adopt this model one company cannot just integrate the voice but rather it needs to come from the strategic point of view. It would take a huge amount of effort due to training employees to listen and how to react, from manufacturing perspective, it would require an individual too much time. Zara is known for their vertically integrated supply chain where companies lack the capacity. Competing with Zara is hard and it requires adoption of technology and people.
Other retailers and manufacturers can gain customer trend information and adapt production, but it is a matter of how fast they can start production. Zara is known for acting fast of trends, and changing their inventory very often, this method pretty much ensures regular traffic (like a grocery store) from their customers, since they want to purchase the new fashions. Based on Zara’s clothing prices and quality of clothing, those clothes do not last super long after so many washes, which makes the customers come back in and purchase more. Coordination is very important along with ownership of production. For Zara, they can see or think of a new clothing to manufacture, and they can notify their internal manufacturers right away and have it ready for the shelves very quickly, and then be ahead of their competitors and retailers. Retailers need to coordination production, which requires many months of planning. But Zara would already have those trends on their shelves, and customers will buy from them before even seeing the styles at other retailers’ stores.
Technology and big data can enable insights that tell retailers and manufacturers the current trends and styles customers are interested in. This will help them predict future trends and start planning for what is to come. Especially as online shopping is growing, many people voice their opinions/reviews and rating about the products they purchase, and potential customers look at those reviews to decide whether to buy the product or not, this type of information allows the manufacturer to decide how to continue in the process and adapt.
Zara has proved to be a top competition for other retailers in the fast fashion business. The company can design, produce and deliver a new garment and put it in its stores worldwide in a mere 15 days. This is something unique in the fashion world where designers typically spend months planning for next season. If other retailers and manufacturers want to emulate this trend, ownership of production might be a necessity, although outsourcing might work well if the company can help with proper coordination of the process, for example being able to gather timely information from consumers. Zara is building on a vertically integrated demand and supply chain. A company that operates in a vertically integrated strategy has total control of all of its business activities from designing, manufacturing, sourcing, distribution to retail stores. It enables company to short turnaround times and achieves greater flexibility.
Information travels from the stores to the designers, transmitting the demand and concerns of the customers. Zara’s shops use Information Technology to report directly to its production centers and designers in Spain. Designers check the database for these dispatches as well as daily sales numbers, using the information to create new lines and modify existing ones thus, designers have access to real-time information when deciding with the commercial team on the fabric, cut, and price points of a new garment. With all these being said, smartphones and cameras can help bring this reality as it is a means to quickly transfer and connect real-time information.
I don’t believe ownership of production is a necessity to gain some of the benefits Zara has from the close coordination of production and retailing. Although Zara is vertically integrated across production, another retailer could see similar advantages by entering into contracts with manufacturers to better coordinate the supply chain. These risk-sharing agreements could have terms that allow retailers to make modifications to production orders faster and manufacturers could have guaranteed volume and/or payment terms. The fashion industry is very risky in terms of accurately predicting which items will become favorites of shoppers, so risk-sharing agreements can help coordinate the supply chain to hedge against these risks.
In terms of understanding customer trend information faster, I think technology can be a component used to learn the information quicker and adapt production plans more effectively. Smartphones and cameras can allow consumers to lookup different items of clothing they may see in store or online, which can help retailers understand demands for different sizes and colors in real-time. This would allow them to react faster to which styles are popular and then increase production of those items.
While it is possible for other fashion retailers to get the information that Zara is getting, it is clearly not as easy as Zara makes it look. The reason you can come to this conclusion is the fact that Zara is still on top of the industry when it comes to this. There could be a couple reasons for this as well. The first and most obvious reason is that other companies are getting this data but are not using it as well as Zara is. This could be because of a lack of understanding of the material that they collect. Another explanation could be that they are not able to get the information that Zara is getting. The fact that Zara is getting the material means it is possible for other companies to get it. However, other companies might not just be pursuing this information like Zara is. However, if they are not, I think it would be good for them to start because the information that Zara is getting is helping them stay ahead in the market as well as making more profits than all of the other companies.
By outsourcing the production, retailers and manufacturers may spend lesser costs on rentals and maintaining the infrastructure, and achieve more kinds of apparel in a shorter time. They can gain different apparel from the different production plants, and introduce the pooling method whenever one of the plants malfunctions. Risk in delayed production and contingencies would be reduced. However, they may also experience difficulty in coordinating all these factories and allocation of time and sources within them.
On the other hand, having the ownership of production can secure the qualities of apparel, and manufacturers can better control the production schedule, procurements, and sources. As a customer, I would prefer buying a brand of clothes from this kind of operation, since I do not want to bear the risk of buying clothes of different qualities and too various of designs.
But with the help of innovative technologies, outsource production seems to be an option to consider adopting. Smartphone applications allow more precise monitoring of every step and collect big data to analyze for a better operating strategy. The Internet of Thing also grants people the ability to more easily access machines and panels, and the communication time would be greatly reduced to allow more real-time production. Cameras can help supervise the process happening in the factories in the bigger picture. With these being applied, outsource production seems to be less risky and has a higher possibility to build a production network and gain more profits for retailers and manufacturers.
Zara’s past success has been largely due to its ability to quickly change its fashion offerings at their stores. On average, they change the stores’ entire stock every two weeks. Data and having production close by allow them to easily keep up with customers always changing demands. I believe it is vital to have ownership of production to be able to keep up with the data. Outsourcing would be an option if the company is willing to pay a high premium for shipping via air. Technology is key to any of this being successful. Zara uses in store data and has people in major cities watching the shifts in fashion. Today, social media could be used to follow the trends and click counting systems can show what the current color, style, etc. that is being looked at the most. The ability of machines to quickly produce clothing locally would have the biggest impact.
Zara has disrupted the pace at which the new products enter the store, the coordination among the entities in their supply chain is very efficient which helps them to reduce the cycle stock time. The customer feedback system was well designed to get crucial information on trends.
It might not be easy for an Apparel retailer to follow the exact footsteps of Zara as it requires a complete revamp of the Supply chain to accommodate the trends. It is not feasible to catch the pace at which Zara introduces its new merchandise if the production is outsourced.
Technology like smartphones and cameras might be used to acquire access the information changing trends at a much faster rate but considering the lead time if the manufacturing outsourced it might not be easy to implement. It worked out for Zara because all its major points of Supply chain like Design, manufacturing are located close by so it’s easier for them to introduce a new style within no time.
Not every company needs to imitate Zara or H&M, there is a market opportunity for Quality, comfort, long life, cost, and sustainability rather than trends. Retailers could modify their supply chain to accommodate these requirements.
Coordination of production and retailing let Zara achieves a way to make quick response and makes more profit. Although it is possible for other retailers and manufacturers who outsource production to gain similar benefits by some of the methods, such as information sharing agreements or partnerships, it’s hard to make a big profit as Zara. The reason for this difference is that vertical integration can minimize the friction between each entity in the supply chain, such as quick production adjustment and communication. As for outsourcing, since each entity is its own profit center, the coordination or partnership couldn’t be strong enough to reach that efficiency.
However, ownership of production isn’t necessary for all kinds of products. For example, the slow-moving products, standardized product, or even basic apparel, they don’t need such quick response. Ownership of production might be redundant for them because it will cause more costs.
Besides, if a retailer doesn’t have that many resources for owning the production, it can get some of the benefits from technologies. As technology improves, companies can understand customers’ preferences through the data on smartphones, or maybe, through cameras and sensors, they can know what is now popular and then adjust their manufacture and marketing plans.
Zara’s vertically integrated model plays a crucial role in bringing fast fashion to its stores. At the same time, Zara uses stock-outs to get customers to make buying decisions as soon as they see the products. Zara’s business model is unique in the fashion industry, where outsourcing plays a dominant role. For other companies to adopt this business model, they need to entirely revamp their supply chain infrastructure, which comes at a significant investment. Still, they can use technology to predict fashion trends faster and near-source manufacturing to decrease lead time and demand uncertainty.
In my view, owning production is not a necessity to have the same advantage that ZARA has built with its suppliers through close coordination. ZARA has been successful in making customer choices available to them through the fast execution of customer feedback. Retailers and manufacturers can enter into a contract where they share the risk of costing through which the manufacturers and retailers can react fast as per the need. Through proper coordination in the supply chain entities have the advantage to make the whole supply chain more reactive.
Data sharing can be very powerful in the apparel industry as it can help in understanding trends. Customers are using a smartphone to go through the online site that provides a ton of information for the apparel industry. So, Companies should make use of new technologies to have faster real-data sharing that can be transformed into insights.
Rome is not built in one day. Zara’s success story can be duplicated but not in one day or a simple decision to outsource production. The supply chain needs coordination that every stakeholder should trust other parties. Replated supply chain officers are required to be very professional and responsive to any fashion trends timely to gain competitiveness in the market. If a company only has the information but doesn’t have trained workers and an associated high-efficiency supply chain management network, The information advantages or the ownership of production won’t make any changes to the business.
The use of modern technology such as big data or cloud computing will make the apparel company get market feedback in a very short time. The implementation of big data is the trend of future advertising and market analysis. However, as I introduced before, big data or other technology is only critical to the information flow of the supply chain. More developments cannot be reached if no improvements are applied to the material flows and cash flows process.
I think that constant flow of information is essential for this process to be successful. For competitors to be able to understand customer feedback, they need to ensure that all information is conveyed in the correct way and not be lost in translation.
I think that technology and smartphones can assist in data mining, however, regulations and privacy policies can prevent companies from getting the data they require. Companies can use big data to learn more about insights, but I don’t think that this is where the industry is moving forward. I think that the industry is moving into mass customization methods and limited edition items, so this might be irrelevant in a few years.
As per my suggestion, copying Zara’s strategy is not an easy task, it requires proper coordination between retailer, distributor and manufacturer, if it’s an easy task every other retailers would have already implemented that strategy to enhance their profit margin. Thinking of adopting Zara strategy with outsourcing partner would be extremely difficult and controlling the outcome will be challenging task, Zara is successful because they have better vertical coordination over their supply chain, but leveraging advance technology to capture customer demand and make more accurate Demand Forecast will help other retailers to increase their Profit Margins.
Zara’s model has been a huge success mainly because of their robust supply chain which can react to the fast changes in the fashion trends. They have got immense vertical coordination. The frequent replacement of the instore stocks gives customers a great incentive to make purchases as soon as they see an item because they might not be available to find it when they visit next time. Replicating similar business model by other retailers will be a big challenge. Ownership of the manufacturing is not necessary until a good coordination is maintained with the manufactures where a continuous flow of demand and fashion trend information needs to be shared across. Moreover, it requires a lot of investment to completely revamp their supply chain model since retailers trying to replicate Zara’s model should have to work backwards I,e Observing the current fashion trends among the customers and quickly producing them rather than coming up with something new items. Internet, smartphones and big data analytical capabilities can definitely speed up the process of getting the insights related to the fashion trends among customers.
Other retailers and manufacturers could, similarly to Zara, gain customer trend information and adapt production if they outsource production; the issue is that this presents infinitely more potential snags than if the company owned their production. They would have to incentivize the production company well in order to get the system to run as a smooth machine, with all customer feedback being recorded and quick turnarounds in production, which would cost a lot of money and involve less options for recourse if expectations weren’t met. There would be more guarantees and control over the process if the company owned their production, so I would recommend this option. Technology, like smartphones and cameras, can certainly enable customer insights. From tracking stores that customers frequent, to leaving cookie trails for internet searches, retailers can learn an immense amount about their customers using big data.
Fast-fashion industry builds its business models on speed and agility. In an ever-changing industry like this, even well-targeted fashion can get obsolete by the time it gets produced and hits the store shelf. Following its unique business model, Zara has done a spectacular job there.
Understanding the importance of information and its coordination, Zara has been successful in leveraging its store managers’ proximity to the local crowd and the ability of its organizational structure to communicate the findings to other parties involved in its supply chain, resulting in a distinctive design on-demand model.
In my opinion, other retailers and manufacturers would need to undergo restructuring of their entire organization to be able to achieve the well-defined structure at Zara. Ownership is definitely the key to ensure that the coordination efforts are realized quickly.
Further, regarding technological innovations, I believe business decisions should drive the need for technology and not the other way round. Therefore any retailer would first need to identify the shortcomings in their current process and then see if any technological product can help in elevating the pain point. Starting with the implementation of technology with no plan in mind will not be as beneficial. Retailers would need to ensure that their organization is suited to consume the data collected from the technology innovation used.
The Zara’s gap is the information gap which is being effectively leveraged by Zara to gain competitive advantage. The Zara’s gap may not be attributed to close links or vertical integration of production and retailing. The lead time in retailing existed in the design phase and then moving to production. Considering the lead time in finalizing the designs is being shortened with customer feedback dictating the designs and incorporation of feedback into design phase helps Zara make quicker decisions to move into production. As the people involved in the process accumulate the capacity to process this customer feedback information, the lead times to deliver have reduced over time. This absence of closed feedback loop is the key factor contributing to Zara’s gap for other market players.
As we progress with technological advancements, the decision making in design phase will be driven by interfaces for consumers to design their own clothing and brands will be limiting to production and quicker deliveries.
Having open data in an organization is important because data governance allows companies be more efficient in making decisions regarding logistics, demand, and so on. In order for competitors to utilize data, they need to ensure that master data governance is correct because data can be very messy and be misinterpreted if the right parameters are not taking place. I believe the use of technologies and big data will help enable these insights because they will help clean the data and data analysts will be able to better review and make recommendations based on increased knowledge of what is available to them.
Compared with the supply chains of other companies in the apparel industry, Zara’s supply chain has better coordination. Zara’s salesperson constantly recorded the customer’s needs and gave feedback to designers so that the products they designed have always been favored by customers. If other retailers and manufacturers are willing to invest more to get to know their customer’s needs, they can also gain customer trend information timely. In addition, technology plays a critical role when investigating and collecting customer trend information.
Delaying the point of product differentiation will enable retailers and manufacturers to postpone finished good commitments, reducing lead times and finished goods inventories.
In my opinion, Zara already has its mature supply chain and information system to face the fast-changing fashion trends. By analyzing fashion trends, Zara can immediately arrange design and production. As well, trends change quickly quarter to quarter, or even month to month, which determines the demand will not last long. To own its own production line, Zara can respond quicker and control better. Will this model suits to all other retailers and manufacturers? My answer is no. It is not necessary for retailers to have ownership of production. Although the development of technology, like smart phones, cameras, and big data, enables the retailers and manufacturers to analyze fashion trends and customer preferences more accurate and quicker, it is still a big difficulty for them to build a supply chain and production line. Too much cost invested may influence the balance and break their cash flow.
In my opinion, the ownership of production for companies in the fashion industry is important and necessary, as these companies are selling their products by creating the product scarcity. As the author mentioned in the article, supply chain performance is the key factor for these retailers to compete against others. It is the ownership of production that would enable them to adjust their products according to the customers’ demand or feedback in time. To a certain level, new technology allows these retailers to acquire such insights, as how customers react to companies’ sales strategy could be collected in time, and companies could further adjust their supply chain strategy based on these data. However, one thing to notice is that companies could only benefit from data analytics if they have the capability of analyzing the data they collected real quickly in a short time, because customer demand in the fashion industry is shifting so dynamically.
According to the article, it is introduced that ZARA was founded in 1975. It has become the third-largest clothing retailer in the world and the first in Spain. At the same time, it has been rated as the most valuable brand in Europe by Harvard Business School. Its self-made founder once surpassed Warren Buffett to become the third richest person in the world. ZARA, which has 2,259 stores in 96 countries and regions, was once described by Louis Vuitton as the world’s “most innovative and scariest” clothing retailer. What makes the brand so competitive is “speed”. Their supply chain is impeccable so that they can satisfy customers’ demands quickly. Many manufacturers want to follow ZARA’s pace. But they can have the trend information perfectly. They need to forecast and make experiments for the market. It doesn’t mean only innovative products. After doing some research, ZARA focuses its production on Spain, where the labor cost is 5-7 times higher than that of developing countries. About 50% of its products are completed by its own production base in Spain every year Within 200 miles of production base in Spain, ZARA focused on 20 highly automated cutting and fabric dyeing and printing center, as well as 500 manpower-intensive foundry terminal factory, compare the competitors have to at least 6 months in advance and are subject to overseas manufacturers get an order, ZARA has its own supply chain, from market research to design sheet. very link of sample mass production, transportation, and retail can be controlled independently and flexibly. Of course, the collected data by smartphone or laptop can also have such insights to help their quick responses.
From my perspective, the answer is absolutely yes, because quick response to the changing trends is one of the most key factors in fast fashion industry. Every retailers are struggling with demand forecast, because they do not know will the end product the spent lots of time designed, discussing and manufacturing would hit on customer preference, or just become the excess stuffs on the shelf. Zara is a good example, because it built the business model, which is vertically integrated and waits for a fashion trend to appear and then respond quickly. Another unique feature of their operations is that they only produce limited quantities of each SKUs.
Besides, with the help of technology, we can better know about customer preferences. One example is when I am browsing Zara official website, and here always comes a widow asking me to provide the location, and then several stores around me will pop out in minutes. I can easily search any item that I am interested in and know which store I should go with. I think technology will help segmenting customers a lot, and improve the business strategy based on the result of all the data.
The analysis from the article about factors for Zara’s success is very much accurate. The fashion industry is a fast-moving industry, lets adopt such reality and strive to be as fast as the industry if not faster. Some of the things Zara have done well, is creating a system for quick feedback from customers, for instance the company has ownership of its’ products retailing. They invested in an optimal way to collect and make efficient use of their data; focus is made on the right kind of data, so limited resources are well spent on what is really needed and is quick profitable. Also, the fact that their customers understand that product offerings are available for limited time, ensure that inventory flow (cycle turn) is steadfast. Emulating Zara’s success by outsourcing production may be perhaps possible but, it would likely require a lot of investments and a very meticulously crafted contract with partners to ensure a certain level of control and free flow of information. Otherwise, ownership of production, in fact of good size of the chain structure, (manufacturing, retail, and information system) would the best way to achieve success. Today’s world is increasingly dominated by technology (smartphones and cameras, social media, and big data) and such would certainly enable to collect and access a great deal of insight.
Like most retail clothing stores, Zara operates on a business-to-consumer model but differentiated itself. Zara distinguished itself by delivering to stores quickly and staying updated on the latest trends. Firstly, High Vertically integrated manufacturing operating system. Zara’s main competitive advantage was its mastery of fast fashion. They established three cyclical processes – ordering, fulfillment, and design, and manufacturing to quickly and accurately responding to shifting consumer demands. Secondly, Zara’s decentralized decision-making management. The front-line personnel like store managers made decisions on what they wanted to carry in-store, placed orders as they saw fit, place garments on sales, etc. Lastly, Zara, unlike its competitors does not run huge advertising campaigns. Marketing expenditures averaged 0.3% of the revenue, compared to the 3% – 4% for competitors. With the latest advancements in technology, in addition to having individuals at the store gathering the customer’s requirements retailers can get an estimation of the demand using big data as well. This will give insights for better planning. But to achieve an efficiency like Zara, the manufacturers should have a vertically integrated supply chain with the ownership of production. With the data of delays along the supply chain, having the tight control from production to delivery in a timely manner.
Zara’s approach to technology was consistent with its preferences for speed and decentralized decision making. Gaining information won’t be an issue for a retailer in this era but how will it be used is what differentiates the companies. Zara has a decision maker right at the customer level as the store representatives collect information and convey it directly to the designing and manufacturing. Replicating the speed of manufacturing is possible with outsourcing the production and is being done in various parts of the world for example Dongdaemun market is already producing clothe at a much faster rate than Zara but Zara’s competitive edge lies in its effective vertical integration and efficient communication across the supply chain. Although other companies can try and adopt Zara’s methodology it would still take them a significant amount of time to perfect the system and create a solid customer base.
Coming to the use of technology. In this era of fast flowing information. Using the technology to aid the decision-making process and having the feedback sent across faster plays a significant role in being competitive
I don’t think it matters whether outsourcing production or owning the production. The critical success Zara achieved is the coordination of production, retailers, and fashion market trend. Generally, companies emphasized cost minimization and ignored the cost of markdowns and lost sales. Moreover, it is not beneficial for the entire supply chain if a single company transforms the risk and gains the most profit. The partners involving in the supply chain should share the risks to optimize the total supply chain profit. Especially in the fashion industry, supply flexibility is the top priority. In addition, the market trend is vague before manufacturing planning, but with more market surveys and analyses releasing, the forecast error will decrease dramatically. Therefore, postponement techniques will help forecast more accurately, but it requires high extend coordination among all the partners.
As customers, we constantly search for what we are interested in. Now is a big data era, and any information will be captured by devices we use every day, such as smartphones and cameras. Then collected data will be analyzed immediately and transmitted to decision-makers and help adjust manufacturing and inventory plans.
Zara’s capability of learning from the market and its capacity makes Zara standing out in the fast fashion industry, especially lower the forecast error and make a response to the next trendy style fast.
From the fashion apparel industry perspective, collecting and learning from customer is one of the most important factors for Zara to see the next trendy, which means another business opportunity. With the help of technology including smartphones and big data, it is possible to precisely predict customer preferences. Regarding current technology, big data could let the apparel company to have better understanding on their customers. In this way, quick response, and lower forecast error are expected which could bring positive impact on its business.
The competitiveness of Zara is a result of strong coordination between its production and retailing. I don’t think outsourcing production is the specific solution to gain customer trend information and adapt production. As we know, Zara gains its competitiveness by producing and delivering the highly demanded products to the customers in around 10 days. Since they are able to analyze what their customers demand based on the feedback that they receive from the customers (or based on what their customers are looking for when they enter the ZARA shops), it helps the company to start the designing and production process as soon as possible and deliver it to the customer or to ZARA shops in less than 10 days. Since the company is following a vertically integrated strategy, it helps them to effectively coordinate its supply chain and minimize the lead time for the products that are highly demanded by the customers. That doesn’t necessarily mean that this strategy would also be a good fit for other retailers because not all retailers have effective feedback or demand analysis system like ZARA. I think it is better for some of the retailers to analyze the demand before the new season by collaborating with the fashion designers or using historical data. So, it can help them to get a better prediction about new season trends and plan the production of these items beforehand in order to serve the customers at the highest level in the new season.
Technology is definitely an effective way to get some insights about the trends and demand. As I mentioned above, Zara is using technology to analyze the demand and the company is being more competitive by reporting this information directly to the production centers and delivering these products to their shops as soon as possible. Using technology, both for in-store or online shopping can help retailers to have better insight about the demand and thus, serve the customers at the highest level. I think it is better and more effective to create a supply chain that can produce the demanded product in the shortest time possible (i.e. Zara) rather than trying to predict the whole season’s trend at the beginning of the year.
Comparing with other apparel retailers, Zara is more focused on quickly responding to shifting customer demands. It links customers’ demand, manufacturing, and distribution closely together. It’s possible that other retailers and manufacturers adapt to customer demands more quickly by synchronizing more closely with the latest customer trends. New technology can surely help apparel retailers to access customers’ trends, especially for retail e-commerce. Retailers can get a picture of the new apparel trend by analyzing the front-end sales data. However, the key question is: how quickly can the retailers respond to the identified customer trends? Without a doubt, without integrating vertically and owning their own production capacity, the production process will be less flexible. Therefore, it’s unlikely that they can respond as quickly as Zara does if they don’t own their production capacity. However, it’s still possible that the retailers can improve their response of time in some ways. For example, they can reserve the production materials and capacity in advance but don’t decide completely what to manufacture at the very beginning of the time. Some of the apparel can be manufactured after they have a better understanding of the trend.
First of all, Zara is a strong brand for the fashion market. They have wisely created an interesting business model for the fashion industry, where customer trend information flows quickly in order to generate production immediately and to satisfy customers. Zara’s success comes from their capacity of reaction, their supply chain management, they are also vertically integrated which makes that production will be on shelves faster, and their affordable prices. With all of these factors in mind, Zara also produces constantly new items without repeating any previous season’s clothes.
Based on what Zara represents for fashion industry, they have a brand that is already printed in customers’ mind. If another fashion competitor wants to replicate what Zara is doing, they can; nowadays there are tons of ways to generate information from customers, however, it would be challenging. Other retailers and manufacturers should take a look to all these factors: affordable prices for customers or low costs, supply chain management (if a company is not vertically integrated, probably it would cost more to produce by outsourcing), but the most important is right and fast flow of fashion trends.
The most differentiating factor of Zara is their fast fashion. They manufacture smaller quantities of each item and they do not replenish once they are stocked out. This creates an urgency in the customers to buy a piece as soon as they see it. Zara also understands customer trends faster since the store managers directly communicate with designer about what the customers are looking for. This efficient supply chain design takes lesser time for demand understanding to translate into manufacturing. Other retailer can try outsourcing their production to improve speed of manufacturing, but the key lies in how fast they are able to translate the demand into a finished product. So, their customer trend information gathering should also be optimized like Zara to succeed.
Technology can definitely be used to understand the customer trend better. Sensors can be installed in the store to understand in which aisle people are spending more time and which item they are looking at. At the same time, mobile apps can be developed, which enable the user to check which products are there in stock and what colors or sizes are available. These apps will give more detailed data like which sizes or colors are being browsed more. This will give an idea of which items are most attractive for the customers and in turn conveying the demand for each product. This trend can be understood even without the apps or cameras but this data from the apps or sensors provides the trend much faster.
It is definitely possible for the other retailers and manufacturers to adopt the close coordination of production and retailing and the quick response to trends and ownership of retailing. Zara’s method provides new incentives for businesses with a need or quickly respond to customer trends, which means retailers and manufacturers should adopt such methods selectively according to their own business characteristics. Within the fashion industry, retailers such as H&M and Hollister may be able to adopt a similar method, but for designer fashion lines where is more suitable for designers to express their ideas, customers’ ideas may not be valued as much.
I believe that technology and big data can definitely help businesses understand customer trends. For Zara, when customers search up certain styles or fits, data can be collected for Zara to better understands the fashion trends and to use in designing newer products.
If a company was able to establish a long-term agreement with certain manufacturers that can help them quickly respond to fast fashion trend, then I would say that outsource the manufacture would be a way to go. But, if the company do not have that kind of long-term suppliers that always keep the company as their priority, then have the ownership of manufacture should be the way to go. The key criteria here is the responsiveness and efficiency. It is all about catching that fast fashion trend as they faded away fast. Technology should not adapt this insight without careful consideration as typical technology trend can go on for quite a long time. Plus, the manufacturing of technologies is a lot more complicated than apparel manufacturing, such insights needs to be combined with the industry characteristics for better adaptation into business operations.
There are two key differentiators that make Zara perform better than other competitors. One is the ability to collect and respond to the changing trend; another is the integration of production. Though the setting up cost for vertically consolidating supply chain is extremely high, as the technology evolves, other competitors will gain similar ability by adopting new technologies.
I do believe that other manufacturers and retailers can similarly gain customer trend information and adapt production even if they outsource production. They do not need to have their own productions to make use of the trend information available from the consumers, perhaps more coordination between the retail stores and the production houses would hasten the roll out of new designs to pull in the customers who in turn bring in more revenue when they spend in those retail stores. On the same note they could go a step higher and integrate the use of technology like smart phones and big data to have a more clearer analysis of their customer base and their needs and wants which would go a long way in helping them to forecast future possible trends.
Zara has a unique business model in the fashion industry. This dynamic supply chain strategy allows them to react to the trends quickly and satisfy customers. Other retailers have other strategies which demands a high forecast accuracy with higher lead times. Outsourcing will increase lead time taking away one of the competitive advantages of Zara which is adaptability and quick response to the market. Big data could help analyzing forecast, but it will again decrease their response. Other retailers should analyze their options but should consider creating a competitive advantage that would enhance their position in the market.
Zara has different approaches to making clothes than other companies. Their designers place the other for the fabric before they get approved for their design, which reduce the lead time. In addition, their POS system and trained sales team, capture the demand and will send it to upper chain. Their biggest advantage is to know how to categorize data and use it on their advantage. I believe any other companies can do the same thing, if they are okay to have the same mentality and openness such as give authority and power to the designers to get things done.
What Zara has produced with end-to-end communication throughout their whole supply chain is extremely difficult to replicate. I believe ownership of production is a necessity unless there is established agreements with the suppliers they are outsourcing to. If there is clear data visibility of customer trends and they utilize new technology it would be possible. However, it still will take years to implement because the companies have to establish those relationships and trust.
Zara’s success comes from their ability to coordinate. The sales team has to note the changes or inputs customers suggests in order for them to submit it to the designers. No other business has been able to replicate Zara’s business model. I think it would be difficult to replicate this because they are vertical integrated and have complete control in the end product which allows to save time when making decisions.
Zara is a successful and leading firm in the fast fashion apparel industry for its well-managed vertical integration. Other retailers and manufacturers can gain customer trend information similarly, but undoubtedly it would require far more efforts for them to coordinate closely in order to keep up with the changing trends to the real-time level. As for outsourced production, the lead time would definitely increase because both parties would need more time in communication, data transmission, quality assessment for their own company interests. However, Zara owns its production, and internal communication is more efficient in terms of decision-making on manufacturing. With the help of technology, customer preference and fashion trend can be obtained much quicker and easier. Big data can enable such insights and help forecast more accurate demand, which is crucial to plan ahead for production, especially for the fast-paced apparel industry.
The biggest hurdle in adopting the Zara model is the transition cost, including infrastructure, personnel, and training. Beyond that the model can be easily followed by other retailers if they exactly mimic their structure. If a company wishes to model the Zara structure but retain its offset production, they need to assess the effects of potential increased lead-times and supplier proximity. If a company based in Europe, with a producer in japan, wanted to adopt the Zara model they would need to account for the increased shipment time from Japan. If they want to maintain a rapid response to their customer feedback, any product manufactured in Japan would need to be transported by air to guarantee any medium of speed. Similarly, if production is outsourced, the material supply chain could also be unfit to react to rapid customer feedback. Smartphones could be used by consumers to directly input their feedback or desires of a certain product which could be immediately received by the manufacturer, thus eliminating the mediation phase of the chain.