Let us first have a look at Zara’s background and the history for any fashion conscious adult, Zara is the only high fashioned retailer that incorporates modern supply chain techniques in order to deliver fresh customer inspired fashion designs at less than designer prices. ZARA is the flagship chain store owned by Spanish tycoon Amancio Ortega, he first opened his store in Coruna, Spain (1975) and after then there is no looking back.
The statistics of ZARA’s supply chain reveals that there are 12,000 designs per year, 30,000 stock-keeping units per year, it only accounts for 10% of unsold items which is less than other clothing companies average of 17 to 20% and also commits to 50 to 60% of production in advance of the season.
The supply chain of ZARA is extremely unique in itself, let us look at some of them in brief-
1. ZARA buys fabric in only 4 different colours.
2. Suppliers are all close to their factories so ZARA can order on a tailored need basis.
3. Clothes are ironed in advance and packed and hung on hangers, with security and price tags affixed.
4. Overnight trucks are used to deliver to European stores and airfreight is the other medium used to ship to other countries.
The Most surprising supply chain management technique that ZARA follows is to BUY LOW, SELL HIGH and BUY ON CREDIT, SELL ON CASH, it has low inventory and higher profit margins. ZARA doesn’t follow the obvious path which means it doesn’t have any VIP services or discounts instead show a sense of scarcity by displaying unfilled shelves, limited offer notes on certain items and deliberate undersupply impression to encourage customers to run to the counter. It believes in Short lead Time which helps ZARA to produce the ultimate fashion designs in the market and to be the best in the competitive fashion world. ZARA produces Lower Quantities that leads to scares supply and more craze and demand for the ZARA products.This seems to be an extremely clever technique because usually, ZARA stores are very spacious but the stock displayed is in limited quantity, it gives the customers a sense of originality and exclusivity.ZARA also keeps all major sizes in order to satisfy its customers.This company gives its customers more styles to chose from.The most surprising feature is that it understands the taste of its customers well in advance.It targets the young and urban females and acceptable prices are offered.Its strategy is being able to react quickly to all fashion trends and supply customers latest fashion outfits as soon as in few week’s time.
Above stated Supply chain strategy of ZARA surprises me the most as they are the ultimate king of the designer clothing and have unique ability to effectively deliver its supply chain strategy.