Zara: The Technology Giant of the Fashion World

Synopsis
Zara is a company that defines what the fashion industry has termed fast fashion. The flagship
specialty chain of Spain-based clothing conglomerate, Inditex, Zara has built an information and
distribution system that allows it to put the latest runway fashions in its stores in a matter of weeks at a
fraction of what the big-name designers charge.
In addition to fast, Zara is prolific. In a typical year, Zara launches about 11,000 new items. Compare
that to the 2,000 to 4,000 items introduced by both H&M and Gap. Zara stores receive new merchandise
two to three times each week, compared to four to six times per year for most clothing retailers. More
and smaller batches of items translates into fashion exclusivity. This in turn results in fewer mark-downs
and higher profits.
Zara controls a true vertical marketing system. A good portion of the channel participants are centralized
geographically around its corporate headquarters in a remote corner of Northeast Spain, rather than
spread out around the globe. This and its IT system are what allow it to achieve the speed and
responsiveness that it does.
Discussion Questions
1. As completely as possible, sketch the supply chain for Zara from raw materials to consumer
purchase.
As the case points out, finding the starting point of a product concept is hard to nail down with
Zara. But the following is an attempt to do this:
Design: The starting point is a collaborative phase that includes teams of creative professionals
who carry out the design process and store managers who spot trends and feed data to
corporate.
Materials: Zara makes 40 percent of its own fabric. It is not clear from the case where the other
60 percent comes from, but given the information on the rest of the process, it is likely purchased
more on a local basis than on a global basis.
Cutting: Zara produces more than half of its own clothing. It cuts all fabric in-house at its
complex in Spain.
Sewing: Cut fabric and designs are sent to one of several hundred local co-operatives.
Ironing: Ironing is performed in-house by workers trained for a specific task (lapels, shoulders,
etc.).
Final preparation: Clothing is wrapped in plastic and transported on conveyors to local Zaraowned warehouses. The automated warehouses sort, pack, label, and allocate clothing items to
specific regions and stores.
Delivery: Stores within a 24-hour drive receive deliveries by truck. All other stores receive their
goods via air parcel.
Sale: All stores are company owned.
2. Discuss the concepts of horizontal and vertical conflict as they relate to Zara.
There is little information given in the case regarding channel conflict. But one could easily
speculate as to the outcomes. Because Zara owns much of its own supply chain and exhibits an
extreme amount of control over the elements that it does not own, conflict is likely minimal. With
respect to horizontal conflict, the only members of the supply chain on a horizontal level would

be the hundreds of local sewing co-operatives. It is difficult to imagine the type of complaints
that such co-operatives might wage against each other that would affect Zara. However,
horizontal issues might result in vertical conflict. Zara owns much of the supply chain. Thus, any
conflict would be internal and could be handled in a much different manner than if the entities
were independent. But the co-operatives are not company owned. Because there are so many of
them, however, conflict should be minimized as Zara has plenty of options.
3. Which type of vertical marketing system does Zara exhibit? List all the benefits that Zara
receives by having adopted this system.
While Zara does not own all of the stages of the vertical marketing system, it seems to have a
strong control over those that it does not own. Zaras system fits the description of a corporate
VMS better than it fits the contractual or administered systems. The text provides an outtake
example of Zara in the section on corporate VMS that illustrates the benefits that Zara achieves
through this structure. These include control over almost every aspect of the supply chain, more
items produced, faster design-to-shelf times, lower inventories, and more frequent shipments. In
short, Zara is faster, more flexible, and more efficient than other fashion houses and chains
because of its corporate VMS.
4. Does Zara incur disadvantages from its fast-fashion distribution system? Are these
disadvantages offset by the advantages?
One disadvantage that Zara incurs is possibly a higher cost on materials and labor by not
sourcing globally to the cheapest source. This, however, is offset by the cost savings of not
having items shipped all over the world. It is also offset by dramatically faster response time
between each stage. Because Zaras competitive advantage is the fast part of the fashion, this
is much more important than the minimal amount that Zara could save by sourcing globally.
5. How does Zara add value for the customer through major logistics functions?
Warehousing: The only warehousing done in this system is local and brief for the component
parts and the finished items. This adds value by cutting down on costs associated with
warehousing and by decreasing the time-to-shelf.
Inventory Management: The IT system and the VMS in general both contribute to Zaras ability
to offer a just-in-time system. This results in lower inventories, cut costs, and faster throughput.
Transportation: Zaras shipping system is certainly quick. That is the big advantage. Shipping by
air freight to individual stores is not the cheapest way to go. But again, Zaras competitive
advantage is speed.