Zara, part of the Inditex Group, is perhaps the most successful fashion retailer on the planet, founded by Amancio Ortega, himself one of the most successful and richest businessmen in the world (second only to one Mr William Gates). Zara’s remarkable history is founded on the fundamental concept of being a leader in business strategy and execution, standing head and shoulders above its peer group in terms of forward thinking.
The first Zara boutique was opened in 1975 in the Spanish town of A Coruña. Originally called “Zorba” after Zorba the Greek, the fledgling fashion outlet was forced to change its identity thanks to a nearby restaurant with the same name; since those humble beginnings, the Zara chain has grown to over 2100 stores across 88 countries under the leadership of Ortega, incorporating a highly agile supply chain. Whether male or female, young or old, contemporary or classic in taste, Zara's customer base is as broad as it is fashionable, and kept constantly on its toes by the high level of flexibility and responsiveness that the store is able to achieve through a sophisticated system of constant feedback from its retail outlets to its 200 designers. As such, customers can't get enough; on average, a customer will visit a Zara store seventeen times a year compared with a measly three times for most other fashion retail outlets.
This is a remarkable achievement, made possible only by the implementation of a strategy first employed in the automotive industry at Toyota; that of Just In Time manufacturing and the associated concepts of lean production. While other retail stores naturally tend toward a repetitive production strategy (the assembly line approach) due to the would-be typical timelines involved in fashion design and the drive to reduce manufacturing costs by outsourcing to Asia, Zara began to shift gears starting in the '80s to a mass customization approach where customers’ desires are rapidly catered to.
It has done this in several ways using the fundamentals of the lean manufacturing model. Firstly, it has kept its supply base close. As others moved to Asia for production, Zara maintains suppliers in Spain that use high levels of automation in order to create unfinished or “greige” (pronounced “grey”) goods, and a network of finishing shops in Spain, Portugal, Turkey and Morocco, to which the greige goods are sent in order to produce the final designs (suits, shirts, dresses, pants etc). Zara’s inventory is kept remarkably low, with the majority of designs for the season unknown. Whereas a typical fashion store would tie itself into a certain style, Zara will not. As brave as it is ingenious, a Kanban approach is adopted to pull (rather than push) from the designer’s wardrobe, as it were, and using complex information technology systems such as RFID tags it is able to keep a close track of its inventory. Small orders are placed frequently so that customers are not kept waiting and do not lose interest – in this way, Zara can deliver brand new designs to its retail outlets in as little as 15 days; designs which until 3 weeks before had not been thought of previously.
This compares to the 6 months or more that it takes its rivals, and is obviously an incredible example of waste minimization and competitive advantage. A constant stream of data regarding which products are most popular can also help analyze current and future trends, and allow for better predictions of demand for more popular products. At the end of every day, store managers electronically impart customer driven feedback including returns, complaints, advice etc, to develop a process of continuous improvement to aid the distribution and design centres quickly correct any problems and ensure on-going customer satisfaction. Zara’s online presence is also highly impressive and fits directly into the mass customization model; the array of clothing available is second to none.
On top of all of this, Zara has managed to incorporate sustainability into its business model, partnering with Greenpeace to eliminate the use of toxic substances in its production, and ensuring that its manufacturers and suppliers meet their code of conduct and environmental sustainability standards.
This incredibly effective business model, based on the principles of lean manufacturing developed in the factories of Toyota, has resulted in high fashion being available to the general public at very reasonable prices, despite locating in some of the most highly sought after and expensive real estate locations in the world. According to its website:
Zara is always striving to meet the needs of its customers at the same time as helping to inform their ideas, trends and tastes. The idea is to share responsible passion for fashion across a broad spectrum of people, cultures and ages.Today, Inditex, Zara’s parent company, reaches a valuation of over €100 billion, operating over 7,000 stores in 91 markets worldwide. Given the dedication and the expert application of the principles of lean manufacturing, and the courage of its founder Mr Ortega (and his former wife Rosalía Mera), this incredible success is perhaps not unsurprising.
References
1. https://en.wikipedia.org/wiki/Amancio_Ortega
2. http://www.inditex.com/en/home
3. https://successstory.com/companies/zara
4. http://www.forbes.com/sites/gregpetro/2012/10/25/the-future-of-fashion-retailing-the-zara-approach-part-2-of-3/#1c72e36a39a0
5. https://theleadershipnetwork.com/article/lean-manufacturing/zara-lean-fashion-retail
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