A company that did not need any publicity to make its

owner- Amancio Ortega, one of the richest men on the

plant. A company with over 2000 stores located
across 88 countries with an employee base of almost
140000 employees and 8700 people joining each year
and the average age being 28. Zara never had to come
up with a brand new product to become the worlds
largest apparel retailer. It believed in inventing a new
process and so man behind this process innovation is
dominating the global industry. The latest news said
that on October 23, 2015, that he briefly surpassed
Bill Gates as the richest man on earth with the net
worth of 80 billion USD when Inditex share price was
on all time high. The story of this man from stitching
shirts to become one of wealthiest man is truly
inspirational.

The middle-aged
mother
buys
clothes at the
Zara
chain
because they are
cheap, while her
daughter aged in
the mid-20s buys
Zara
clothing
because
it
is
fashionable.
Clearly, Zara is
riding two of the
winning
retail
trends-being
in
fashion and low
prices-and
making a very
effective
combination out
of it. Much talked
about especially
since its parent
companys IPO in
2001, often admired, sometimes reviled, but hardly ignored, Zara
has been a interesting case study for many other retailers and
fashion brands around the world.

The major motivation- the competition..

Competitors are charging at
Zara like a bull attacking a red
rag as they look to topple the
worlds largest fast fashion
brand and steal a portion of
their profit. But despite of all
these, this fashion chain has
been able to dominate the
retail apparel market. Gap,
H&M
and
Benetton
are
considered
Inditexs
three
closest
comparable
international competitors.

Positioning is the fashion

industry all have general
characteristics, such as type of
supply, age group served or
quality, similar. The real
differentiation
is
in
the
production strategy chosen.
Zara is the only one with the
lead time now, in fact, this
characteristic makes it more
competitive than other and has
encouraged its success.

Competitor
Strategies..

Crushing

Zaras speed of delivery,

vertical
integration,
its
deployment of Just-in-Time
operations
and
use
of
technologically
advanced
logistics processes is the key
to its success. Collaboration of
chief tasks, strategic use of
organizational resources and
core competencies contribute
to
Zaras
competitive
advantage.
Vertical integration
At its heart Zara is building on a
vertically integrated demand and
supply chain contrasting from the
industry.
The company bases production
largely on customer demand as
gleaned from continuously updated
orders from store managers.

Most of its peers combine design

and
sales
but
outsource
manufacturing, often to low-wage
subcontractors where as Inditex
produces a large proportion of its
products in its own factories.
Typically,
Inditex
performs
internally
the
more
capitalintensive and value-added intensive
stages of production, such as
purchasing
raw
materials,
designing, cutting, dyeing, quality
control, ironing, packaging, labeling,
distribution, and logistics and
outsources more labor-intensive
and less value-added-intensive
stages of production, such as
sewing.

Distribution and retail sales are

also
performed
by
Inditex
subsidiaries. All Inditex products
are shipped from multi-million
square foot logistics centers in
Spain. At these facilities, products
are tagged, boxed, moved through
miles of conveyor belts, and
shipped to fulfill the orders of
individual stores.

Short Lead Times: Keeping

up with fashion.

By focusing on shorter response

times, the company ensures that its
stores are able to carry clothes that
the consumers want at that time.
Zara can move from identifying a
trend to having clothes in its store
within 30 days where as others take
4-12 months. Thus, most retailers
try to forecast what and how much
its customers might buy many
months in the future, while Zara
moves in step with its customers.

Zaras relationship with their

manufacturers,
proximity
to
market,
and logistics skills,
combined with their concurrent
product development process;
help them achieve short lead
times. The key objective of the
company is to get the shortest
time to the market.

This has helped them correct most

problems resulting from forecasting
errors and also working capital
requirements
are
reduced. An
important rule to have a short lead
time is played by information
technologies because they inform
designers about what consumers
want.

Amancio Ortega Gaona, the founder of

Inditex, thought that consumers would
regard clothes as a perishable commodity
just like eatables to be consumed quickly,
rather than stored in cupboards, and he
has gone about building a retail business
that provides freshly baked clothes.

Information
Technology
Keeps It Boiling
Poor communication is often the
culprit
of
bottlenecks.
Zara
invested in information technology
(IT) early on. Their in-house IT is
simple and effective.
Information travels from the stores
to the designers, transmitting the
demand and concerns of the
customers. Zara's shops use
Information Technology to report
directly to its production centers
and designers in Spain.

Collecting information on consumer

needs:
combines
information
collected through visiting university
campus, discos and other venues,
from
daily
feedback
of
salespersons, and sales reports.
Thus, they directly contribute to
streamlined fashion collection of
the entire company.
Diversification: Zara diversifies its
product information with common
definitions, allowing it to quickly
and accurately prepare designs,
with
clear
cut
manufacturing
instructions.
Product information and inventory
management gives Zaras team the
capability to design a garment with
available stocks, rather than having
to order and wait for the material to
come.
Distribution
management:
distribution facility functions with
minimal human intervention to
ensure each order reaches its right
destination. Optical reading devices
sort out and distribute more than
60000 items of clothing an hour.

React Rather Than Predict..

What sets Zara apart from many of
its competitors is what it has done
to its business information and
business process. Rather than
concentrating on forecasting, it
has developed its business around
reacting swiftly.
From the beginning to end, the
process of defining a concept to
receiving goods might take almost
9 to 12 months for any typical
retailer. Zara, on the other hand,
concentrates its forecasting effort
on the kind and amount of fabric it
will buy. It is a smarter hedge for
one, fabric mistakes are cheaper
than finished goods errors, and
secondly, the same fabric could be
turned
into
many
different
garments. In fact, to maintain its
flexibility it buys semi-processed
or un-coloured fabric that it
colours up close to the selling
season based on the immediate
need.

With that edge, and a super-fast

garment design and production
process, it takes to the market
what its customers are looking for.

As far as finished garments are concerned,

rather than forecasting, it just quickly
produces the least amount possible of what
is hot with consumers, and moves to the
next hot style fast. With its range of clothes
constantly being updated, one or two slowselling items are unlikely to hurt profits.
Customers are also more likely to visit its
shops regularly to see new stock.
Zara's global average of 17 visits per
customer per year is considerably higher
than the three visits to its competitors.

Advanced Logistics..
Products of Zara are shipped from
the manufacturing site in Spain
through Corunna depot or Zara
Logistics. The inventories are not
stocked and are distributed to the
Zara stores twice in a week. For
overseas
distributions,
the
inventories are carried to the
Spain border, and the logistics
carrier of the country takes it
down to the stores. Stores order
more
stocks
from
offers;
commercial manager takes the
orders and passes on to the
logistics who handles the stock.
Stores are graded according to
their sales and accuracy of orders,
this rank governs their priority
level for supplies of order. If any
product is not selling in the market
their production is immediately
stopped. This means that no
stocks will be piled up. If a product
is not selling in certain stores, the
company stops production of that
product.
This
eliminates
unnecessary stocking of unsold
goods. This process adapts to
consumers preferences quickly.

Ninety per cent of Zara stores are

company-owned; the rest are
franchises or joint ventures.
Customers entering a Zara store in
London, Paris, New York or in Rio
de Janeiro find themselves in the
same environment: a
predominantly white, modern and
spacious store, well-lit and walled
with mirror.

Is Future Growth
Sustainable..??
What have changed since then is
the scale of the business and
the scale of the challenge facing
Inditex
management.
After
decades of dizzying growth,
some are asking whether Inditex
is approaching the limit of its
long expansion drive. With close
to 6,400 stores in 88 countries,
900m items of clothing sold last
year,
and
an
increasingly
important presence in online
sales, how much more of
Inditexs ever-growing output
can the global consumer absorb?

The expansion so far has been

relentless. For more than a
decade, the group has opened
at least one new store every
day. In 2010, it overtook Gap
to become the worlds largest
fashion retailer by sales. A
year later, it usurped Banco
Santander as the biggest
company in Spain. Inditex
shares have risen sevenfold
since the group went public in
2001, turning its reclusive
founder into the third-richest
man on the planet. Today, it is
the undisputed industry leader,
a company studied in business
schools
and
management
books, hailed at home and
abroad as a rare European
success story in a continent
scarred by stagnation and
unemployment.