


Increased speed leads
to less inventory at risk, since there is quick turnaround to chase sales
Mitigate consumer
risk by having product closer to consumer making a fashion buy
Seasonal / “hot”
colors
News / social event
Time
Accuracy
mitigate forecast
risk by making buy and deployment decisions to the latest possible moment Longer the time period, the
more inaccurate the forecast
How accurately can
you predict the weather six months from now?
Make sourcing
decisions based on what is actually happening in the market versus what you
think may happen in the market 6 to 9 months from now
Decreasing the length of the supply chain is
directly correlated with reduction of safety stock
businesses typically
build inventory to offset the risk of a stockout
however, higher
inventory levels limit a company’s ability to react to the market place
too much inventory of
one item, while others are stocked out, but resources are allocated

Zara is a vertically
integrated retailer. Unlike similar apparel retailers, Zara controls most of
the steps on the supply-chain: It designs, produces, and distributes itself.[6] Zara set up its own factory in La Coruña (a city known
for its textile industry) in 1980, and upgraded to reverse milk-run-type
production and distribution facilities in 1990. This approach, designed by
Toyota Motor Corp., was called the just-in-time (JIT) system. It enabled the
company to establish a business model that allows self-containment throughout
the stages of materials, manufacture, product completion and distribution to
stores worldwide within just a few days. [7]
Regarding the design
strategy, an article in Businessworld magazine[8] describes it as follows: "Zara was a fashion
imitator. It focused its attention on understanding the fashion items that its
customers wanted and then delivering them, rather than on promoting predicted
season's trends via fashion shows and similar channels of influence, which the
fashion industry traditionally used.
Zara on Briggate in Leeds, England
50% of the products
Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in
Asian and African countries and the rest of the world.[9] So while some competitors outsource all production to
Asia, Zara makes its most fashionable items—half of all its merchandise—at a
dozen company-owned factories in Spain and Portugal, particularly in Galicia and northern
Portugal where labour is somewhat cheaper than in most of Western Europe.
Clothes with a longer shelf life, such as basic T-shirts, are outsourced to
low-cost suppliers, mainly in Asia and Turkey.[10]
Zara can offer
considerably more products than similar companies. It produces about 11,000
distinct items annually compared with 2,000 to 4,000 items for its key
competitors. The company can design a new product and have finished goods in
its stores in four to five weeks; it can modify existing items in as little as
two weeks. Shortening the product life cycle means greater success in meeting
consumer preferences.[11] If a design doesn't
sell well within a week, it is withdrawn from shops, further orders are
canceled and a new design is pursued. Zara has a range of basic designs that
are carried over from year to year, but some fashion forward designs can stay
on the shelves less than four weeks, which encourages Zara fans to make repeat
visits. An average high-street store in Spain expects customers to visit three
times a year. That goes up to 17 times for Zara.[12]
On September 6, 2010,
Financial Times reported that Inditex has launched the
first online boutique for its best-selling brand Zara. The long-awaited website
will begin in Spain, the UK, Portugal, Italy, Germany and France – six
countries that are among the most important of the company's 76 markets. When
asked about the company's late arrival to internet retailing, Pablo Isla, chief executive,
said they have been waiting for online demand to build before launching into
cyberspace. All items on sale at its Zara outlets would be available online and
at the same prices. Customers can choose from the usual range of paying methods
and opt either for a free store pick-up or paid-for postal delivery. The online
return and exchange policy is identical to the store system, with shoppers
given 30 days to change their minds. Queries will be handled by customer service operators or via
e-mail or chat messaging. Inditex said that iPhone and iPad applications that allowed purchasing would soon be
available.[13]
On November 4, 2010,
Zara Online extended the service to five more countries: Austria, Ireland, the
Netherlands, Belgium and Luxembourg.[14] Online stores will
begin operating in the US, South Korea, and Canada in 2011.[15] The simple website allows shoppers to filter a search
for garments by; type of garment, colours, sizes, prices, reference number,
etc. Customers can view products in precise detail from different angles and
use a SuperZoom feature to get an exceptional close-up look at the details of
each item.[14] In 2011, Zara is entering into the Australian market with a three
storey,1830sqm store to open in Sydney's Pitt Street and a
second in Melbourne.[16] [17] [18]
Zara's secret? It
moves fast. With an in-house design team based in in La Coruña, Spain, and a
tightly controlled factory and distribution network, the company says it can
take a design from drawing board to store shelf in just two weeks. That lets
Zara introduce new items every week, which keeps customers coming back again
and again to check out the latest styles.
Zara's success is all
the more surprising because at least half its factories are in Europe, where
wages are many times higher than in Asia and Africa. But to maintain its quick
inventory turnover, the company must reduce shipping time to a minimum. The fast-fashion
approach also helps Zara reduce its exposure to fashion faux pas. The company
produces batches of clothing in such small quantities that even if it brings
out a design that no one will buy -- which happened during an unseasonably warm
autumn in 2003 -- it can cut its losses quickly and move on to another trend.
BASIC
BLACK.
Zara's fast pace
means that some popular items appear and disappear within a week, creating an
image of scarcity that many shoppers find irresistible "They've built up
an excitement around snapping up new clothes before they go," says Kris
Miller, a New York-based retail analyst with Bain & Co. "As well as
keeping sales high throughout the year, it also keeps margin-stripping
markdowns to a minimum," Miller says. That helps explain why Inditex
profits soared 26% last year, to $973 million.
H&M uses a
slightly different strategy. Around one quarter of its stock is made up of
fast-fashion items that are designed in-house and farmed out to independent
factories. As at Zara, these items move quickly through the stores and are
replaced often by fresh designs. But H&M also keeps a large inventory of
basic, everyday items sourced from cheap Asian factories.
To add pizzazz to its
lineup, the Swedish retailer has also struck deals with high-fashion designers
Stella McCartney and Karl Lagerfeld to create limited, one-time collections,
which generally sell out within days. H&M is a strong financial performer
too. Sales during the first three months of this year were up 20%, after rising
14% in 2005.
Revenue €7.071 billion (2009)
time a clear and
modern ambient. More costly than the group's other brands, except Massimo
Dutti, it still aims to be price competitive with the big brands in the market.
Watts cites the
success of Zara, a Spanish clothing retailer. Rather than trying to anticipate
what shoppers will buy next season, the company observes what people are
already wearing, creates a portfolio of styles, fabrics and colors, and tests
them in small batches to see what sells and what doesn’t.
Using a very flexible manufacturing and distribution operation that can react
quickly to information coming directly from consumers, Zara is able to design,
produce, ship and sell a new garment anywhere in the world in just over two
weeks.
ZARA
save topic
Zara is the flagship
chain store of Inditex Group, owned by Spanish tycoon Amancio Ortega. The
company is known for needing just two weeks to develop a new product and get it
to stores, compared with a six-month industry average, and launches around 10,000
new designs each year. Zara has resisted the industry-wide... moreZara is the flagship
chain store of Inditex Group, owned by Spanish tycoon Amancio Ortega. The
company is known for needing just two weeks to develop a new product and get it
to stores, compared with a six-month industry average, and launches around 10,000
new designs each year. Zara has resisted the industry-wide trend towards
transferring fast fashion production to low-cost countries.

Zara is a vertically
integrated retailer. Unlike similar apparel retailers, Zara controls most of
the steps on the supply-chain: It designs, produces, and distributes itself.[6] Zara set up its own factory in La Coruña (a city known
for its textile industry) in 1980, and upgraded to reverse milk-run-type
production and distribution facilities in 1990. This approach, designed by
Toyota Motor Corp., was called the just-in-time (JIT) system. It enabled the
company to establish a business model that allows self-containment throughout
the stages of materials, manufacture, product completion and distribution to
stores worldwide within just a few days. [7]
Regarding the design
strategy, an article in Businessworld magazine[8] describes it as follows: "Zara was a fashion
imitator. It focused its attention on understanding the fashion items that its
customers wanted and then delivering them, rather than on promoting predicted
season's trends via fashion shows and similar channels of influence, which the
fashion industry traditionally used.
Zara on Briggate in Leeds, England
50% of the products
Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in
Asian and African countries and the rest of the world.[9] So while some competitors outsource all production to
Asia, Zara makes its most fashionable items—half of all its merchandise—at a
dozen company-owned factories in Spain and Portugal, particularly in Galicia and northern
Portugal where labour is somewhat cheaper than in most of Western Europe.
Clothes with a longer shelf life, such as basic T-shirts, are outsourced to
low-cost suppliers, mainly in Asia and Turkey.[10]
Zara can offer
considerably more products than similar companies. It produces about 11,000
distinct items annually compared with 2,000 to 4,000 items for its key
competitors. The company can design a new product and have finished goods in
its stores in four to five weeks; it can modify existing items in as little as
two weeks. Shortening the product life cycle means greater success in meeting
consumer preferences.[11] If a design doesn't
sell well within a week, it is withdrawn from shops, further orders are
canceled and a new design is pursued. Zara has a range of basic designs that
are carried over from year to year, but some fashion forward designs can stay
on the shelves less than four weeks, which encourages Zara fans to make repeat
visits. An average high-street store in Spain expects customers to visit three
times a year. That goes up to 17 times for Zara.[12]
On September 6, 2010,
Financial Times reported that Inditex has launched the
first online boutique for its best-selling brand Zara. The long-awaited website
will begin in Spain, the UK, Portugal, Italy, Germany and France – six
countries that are among the most important of the company's 76 markets. When
asked about the company's late arrival to internet retailing, Pablo Isla, chief executive,
said they have been waiting for online demand to build before launching into
cyberspace. All items on sale at its Zara outlets would be available online and
at the same prices. Customers can choose from the usual range of paying methods
and opt either for a free store pick-up or paid-for postal delivery. The online
return and exchange policy is identical to the store system, with shoppers
given 30 days to change their minds. Queries will be handled by customer service operators or via
e-mail or chat messaging. Inditex said that iPhone and iPad applications that allowed purchasing would soon be
available.[13]
On November 4, 2010,
Zara Online extended the service to five more countries: Austria, Ireland, the
Netherlands, Belgium and Luxembourg.[14] Online stores will
begin operating in the US, South Korea, and Canada in 2011.[15] The simple website allows shoppers to filter a search
for garments by; type of garment, colours, sizes, prices, reference number,
etc. Customers can view products in precise detail from different angles and
use a SuperZoom feature to get an exceptional close-up look at the details of
each item.[14] In 2011, Zara is entering into the Australian market with a three
storey,1830sqm store to open in Sydney's Pitt Street and a
second in Melbourne.[16] [17] [18]
Zara's secret? It
moves fast. With an in-house design team based in in La Coruña, Spain, and a
tightly controlled factory and distribution network, the company says it can
take a design from drawing board to store shelf in just two weeks. That lets
Zara introduce new items every week, which keeps customers coming back again
and again to check out the latest styles.
Zara's success is all
the more surprising because at least half its factories are in Europe, where
wages are many times higher than in Asia and Africa. But to maintain its quick
inventory turnover, the company must reduce shipping time to a minimum. The fast-fashion
approach also helps Zara reduce its exposure to fashion faux pas. The company
produces batches of clothing in such small quantities that even if it brings
out a design that no one will buy -- which happened during an unseasonably warm
autumn in 2003 -- it can cut its losses quickly and move on to another trend.
BASIC
BLACK.
Zara's fast pace
means that some popular items appear and disappear within a week, creating an
image of scarcity that many shoppers find irresistible "They've built up
an excitement around snapping up new clothes before they go," says Kris
Miller, a New York-based retail analyst with Bain & Co. "As well as
keeping sales high throughout the year, it also keeps margin-stripping
markdowns to a minimum," Miller says. That helps explain why Inditex
profits soared 26% last year, to $973 million.
H&M uses a
slightly different strategy. Around one quarter of its stock is made up of
fast-fashion items that are designed in-house and farmed out to independent
factories. As at Zara, these items move quickly through the stores and are
replaced often by fresh designs. But H&M also keeps a large inventory of
basic, everyday items sourced from cheap Asian factories.
To add pizzazz to its
lineup, the Swedish retailer has also struck deals with high-fashion designers
Stella McCartney and Karl Lagerfeld to create limited, one-time collections,
which generally sell out within days. H&M is a strong financial performer
too. Sales during the first three months of this year were up 20%, after rising
14% in 2005.
Revenue €7.071 billion (2009)
time a clear and
modern ambient. More costly than the group's other brands, except Massimo
Dutti, it still aims to be price competitive with the big brands in the market.
Watts cites the
success of Zara, a Spanish clothing retailer. Rather than trying to anticipate
what shoppers will buy next season, the company observes what people are
already wearing, creates a portfolio of styles, fabrics and colors, and tests
them in small batches to see what sells and what doesn’t.
Using a very flexible manufacturing and distribution operation that can react
quickly to information coming directly from consumers, Zara is able to design,
produce, ship and sell a new garment anywhere in the world in just over two
weeks.
ZARA
save topic
Zara is the flagship
chain store of Inditex Group, owned by Spanish tycoon Amancio Ortega. The
company is known for needing just two weeks to develop a new product and get it
to stores, compared with a six-month industry average, and launches around 10,000
new designs each year. Zara has resisted the industry-wide... moreZara is the flagship
chain store of Inditex Group, owned by Spanish tycoon Amancio Ortega. The
company is known for needing just two weeks to develop a new product and get it
to stores, compared with a six-month industry average, and launches around 10,000
new designs each year. Zara has resisted the industry-wide trend towards
transferring fast fashion production to low-cost countries.





Moving up the supply chain from end-consumer to
raw materials supplier, each
supply chain participant has greater observed variation in demand and thus
greater need for safety stock. In periods of
rising demand, down-stream participants increase orders. In periods of falling
demand, orders fall or stop to reduce inventory. The effect is that variations
are amplified as one moves upstream in the supply chain (further from the
customer). This sequence of events is well simulated by the Beer Distribution
Game which was developed
by Prasad Ligade MIT Sloan
School of Management
in the 1960s.
The causes can further be divided into behavioral and operational causes:
In addition to greater safety stocks, the described effect can lead to either
inefficient production or excessive inventory as the producer needs to fulfil
the demand of its predecessor in the supply chain. This also leads to a low
utilization of the distribution channel. In spite of having safety stocks there
is still the hazard of stock-outs which result in poor customer service.
Furthermore, the Bullwhip effect leads to a row of financial costs. Next to the
(financially) hard measurable consequences of poor customer services and the
damage of public image and loyalty an organization has to cope with the
ramifications of failed fulfillment which can lead to contract penalties.
Moreover the hiring and dismissals of employees to manage the demand
variability induce further costs due to training and possible pay-offs.
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