Speed to Market 시장에서 스피드 높이기 위해: ZARA 사례

   

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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