Zara

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If you’ve ever shopped at Zara, the ubiquitous clothing chain, you may have noticed its trendy offerings are not just up-to-the-minute but up-to-the-instant. Its styles swap in and out more often than al-Qaida second-in-commands. A March New York Times story noted that Zara seemed to have knocked off a few looks from the fall 2012 runway shows, which debuted just weeks earlier. “Other chains churn out fast fashion,” the story noted, while Zara “attempts the mind-spinningly supersonic.” How does Zara do it? If you’ve been reading this series, you’ve already guessed: operations. Supply chain management is the key to Zara’s corporate strategy. According to Nelson Fraiman, a Columbia Business School professor who wrote a 2010 case study about Zara, most apparel retailers commit six months in advance to the designs for 40 to 60 percent of their seasonal lines. By the start of each season, nearly 80 percent of that season’s inventory is committed—meaning a lot of it has already been manufactured. There are upsides to scheduling far in advance. When you’re paying for factory time in China and you don’t own the factory, booking the time up front ensures that the factory will have available capacity and that it will be focused on your company’s products instead of on some rival’s. It also keeps manufacturing prices predictable—no need to pay extra for emergency rush orders. But there are downsides, too. Once you’ve made your bets, you need to sit back and hope you guessed right that fuchsia and burlap would be the hot trends of the season. If they aren’t? You get stuck with oodles of unsold inventory. There’s not much you can do to move it out of your stores except cut prices. If that’s not working, you mark the items down even more and waste further money advertising the sale. Zara, on the other hand, commits six months in advance to only 15 to 25 percent of a season’s line. And it only locks in 50 to 60 percent of its line by the start of the season, meaning that up to...
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