Zara excels at the concept of fast fashion. Located in Arteixo, Spain, Zara designs, manufactures, and delivers garments to stores within 48 hours. This allows them to respond quickly to custom demand and keep inventories and waste low. They centralize and control their supply chain and specialize in small batches and agility. Since they manufacture-to-order most of their garments to meet demand from stores, they do not have excess inventory that they are unable to sell (Berfield & Baigorri, 2013). Since their supply chain is mostly based in Spain and surrounding countries, stores in countries that are further away, like China, are faced with logistical difficulties in receiving ordered product as fast as more local countries. Zara does have an opportunity to have a manufacturing hub in China, but the fear is that localization will create two different Zara companies with unique cultures.
Since Zara is using the pull method, in which the supply chain is activated by demand or orders upstream, so that Zara is able to produce product in a just-in-time manner. The pull method, which encourages the company to have streamlined processes so that they can pull the order through the supply chain and ship it quickly. The pull method is an attempt to get as close to single-piece flow as possible. The pull method means that products are not being created for back inventory since there is an order that generates the pull (Ledbetter, 2020). This pull method brings the challenge: Zara needs a tuned and responsive supply chain so that they can be responsive to changing trends and consumer demand (Tokatli, 2028, p.23).
A related challenge is that the entire supply chain must be linked to customers’ demand, such that the design, purchasing, manufacturing, and distribution are set up with rapid change in mind. Zara needs to have short, tight, flexible, and collaborative supply chains in order to provide the brand’s fast fashion and trend agility (Takatli, 2008).
As Zara expands into different countries, they must manage supply chains local to that market. For instance, stores in the United States and Mexico must be served by a Zara-controlled supply chain and Zara-owned manufacturing that Zara manages in North America. Stores in China must be served by a Zara-controlled supply chain and Zara-owned manufacturing that Zara manages in Asia. This allows manufacturing and distribution to be responsive to local markets and demand in stores with a localized, but automated, smart supply chain (Dishman, 2012).
This idea, globalizing while still being centralized and agile, is the biggest challenge that Zara faces. Their strategy is to continue to have centralized design and thought leadership (in Spain), influenced by localized trends in various markets (in the US, Japan, etc.), driving tightly managed supply chains in those markets. These tightly managed supply chains in those markets allow Zara to respond quickly with a similar 48-hour turnaround time, regardless of geographical distance from Spain. With centralized oversight, Zara can maintain the fast fashion culture and image that they are striving for while still being agile with localized manufacturing and supply chain.
Berfield, S. & Baigorri, M. (2013). Zara’s Fashion Edge. Retrieved from: https://bambooinnovator.com/2013/11/20/zaras-fast-fashion-edge/#more-33581
Dishman, L. (2012, March 23). The Strategic Retail Genius Behind Zara. Forbes. Retrieved from https://www.forbes.com/sites/lydiadishman/2012/03/23/the-strategic-retail-genius-behind-zara/?sh=6b4907469d8b
Ledbetter, P. (2020, February 24). How Do We Implement a Pull Method? IndustryWeek. Retrieved from https://www.industryweek.com/operations/continuous-improvement/article/21123662/how-do-we-implement-a-pull-method
Tokatli, N. (2008). Global sourcing: insights from the global clothing industry—the case of Zara, a fast fashion retailer. Journal of Economic Geography, 8(1), 21–38. http://www.jstor.org/stable/26161238