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Collapsing the Supply Chain – the secret behind Zara’s success

Did you know consumer responsive supply chains are the driving force behind better demand forecasting by leading retailers?

Take Zara for example; Zara didn’t have to create a new product to become the world’s biggest fashion retailer. It simply invented a new process. And process innovation is dominating the global economy. Zara has maintained its stand as a leader as a result.

Amancio Ortega founded Zara in 1975 as an attempt to better understand world markets for his fashion merchandise. From that first store in Spain, Zara has expanded to 2,200 stores in 93 countries around the world.

What’s the secret to Zara’s competitive advantage? Its supply chain.

Zara produces around 450 million items a year. How can it stay so efficient with the sheer volume that passes through its supply chain? Regular, small batch deliveries with clock-work precision twice a week to all of Zara’s stores around the world.

 

Fundamental to Zara’s slick supply chain is its use of technology, including personal digital assistants to capture real-time consumer data not only on transactions, but also on consumer preferences. Stores are also directly linked backwards to internally-controlled production and fulfilment systems, which means demand data flows unimpeded to the supply chain.

Synergy between business and operations strategy

Zara’s key operational theme is one of agility. Its product development, manufacturing, and supply chain processes – some of which are a radical departure from the normal practices in fast fashion – are expressly designed and implemented for agility.

Precise inventory management

You’ll be hard pressed to find any excess inventory or deadstock in a Zara warehouse. Throughout the supply chain, lean is word, all the way from raw materials to the finished garments on the shelves.

Digitisation to the rescue

For too long, manufacturers have settled for siloed and inconsistent information, as well as manual processes, to understand and manage their supply chain. Lest anyone lament the impossibility of replicating Zara’s model, digitisation promises a retrofit approach to supply chain awareness. In terms of demand sensing, advanced analytics brought to bear on Point of Sale (POS) data, social media feeds and website clickstreams offer new levels of awareness about what the market wants.

Through the deployment of sensors and the collection and analysis of the data they generate, the Internet of Things (IoT) opens new avenues to influence and augment actions, from urging you to get up from your desk and move, to replenishing inventory when a store shelf empties. To truly build value from IoT investments, retailers should be expansive in their thinking, considering innovative applications and the use of supporting technologies, such as Microsoft Dynamics 365 for Retail.

The power of a supply chain management and operations platform that combines all these capabilities at cloud speed and scale is obvious. Companies positioned to digitally transform their supply chains will see accelerated time to market and reduced cost to enter new markets or scale new lines of business. Microsoft supports flexibility in deployment, enabling you to leverage existing investments while expanding with either a cloud or a hybrid model that includes both on-prem and cloud systems. Microsoft Dynamics 365 ends the artificial separation of ERP and CRM and makes it easy for employees to collaborate and even role-switch to engage customers or address supply chain issues.

Take supply chain management to the next level; talk to our Retail experts today.