Spanish clothier Zara turns the rules of supply chain management on their head. The result? A superresponsive network and profit margins that are the envy ofthe industry.
by Kasra Michael A. Lewis, and Jose A.D. Machuca
hen a German wholesaler suddenly canceled L1 big lingerie order in 1975, Amancio Or-
tet;;a thought his fledgling clothing company might go bankrupt. All his capittil was tied up in the order. There were no other buyers. In desperation, he opened a shop near his factory in La Coruna, in the far northwest corner of Spain, and sold the goods himself. He called the shop Zara. Today,over 650 Zara stores in some 50 countries attract wellheeled customers in luxury shopping districts around the world, and Senor Ortega is arguably the richest man in Spain. The clothing company he founded, called Inditex, has been growingever since he opened that first Zara shop. From 1991 to 200^, Inditex's sales - 70"-:. of which spring from Zara - grew more than 12-fold from €367 million to €4-6 billion, and net profits ballooned i4-ft)ld from €31 million to €447 million. In May 2001, a particularly tough period for initial public offerings, Tnditex sold 25% of its shares to the public for €2.3 billion. While manyof its competitors have exhibited poor financial results over the last three years, Zara's sales and net income have continued to grow at an annual rate of over 2O'H.. IIAIWARD
The 21st-century Supply Chain
The lesson Ortega learned from his early scare was this: To be successful, "you need to have five fingers touching the factory and Hve touching the customer." Translation: Control what happens to your product until the customer buys it. hi adhering to this philosophy, Zara has developed a superresponsive supply chain. T'he company can design, produce, and deliver a new garment and put it on display in its stores worldwide in a mere 15 days. Such a pace is unheardof in the...