In the fast fashion retail business strategy, supply chain management processes serve to introduce fashionable merchandise rapidly, such that stores can respond immediately to customer demand for merchandise. This was pioneered by Zara, a global specialty apparel chain located in La Coruna, Spain, but it also has been adopted by other retailers, including American Apparel, H&M (headquartered in Sweden), Top Shop (U.K.) and Forever 21 (U.S.). The approach is particularly effective for specialty apparel retailers that target fashion-conscious consumers who simply must have the latest looks-but they want to do so on a very limited budget. These shoppers load up on new fast fashions every few weeks, instead of purchasing a few higher-priced basics every few months.

To fit with such short cycles and meet customers' demands. the fast fashion process starts with the receipt of timely information from store managers. At Zara, store managers always have their reporting devices literally in hand. These handheld devices, which are linked directly to the company's corporate office in Spain, enable daily reports on what customers are buying (or not) and what they are asking for but not finding.
For example, customers might want a purple version of a pink shirt that they see on the shop floor. Managers immediately pass the information on to the designers in Spain. Those designers then communicate electronically with the factory that produces fabric for shirts. This factory starts up its automated equipment, which is run by assemblers who live in close proximity to the factory. (The un-dyed fabric comes from Asia, where Zara finds inexpensive sources. and then bulk fabric ships to Spain and Portugal to be manufactured into apparel.) The robots in the company's 23 highly automated factories start cutting out shirts and mixing purple dye. For final construction, a network of 300 or so small assemblers, located near the factories in Galicia, Spain, and northern Portugal, takes responsibility for making the final product. Finally, to ensure timely delivery, the shirts get shipped by truck to stores in Europe and by air express to stores in the rest of the world.
THE BENEFITS OF FAST FASHION FOR ZARA
Zara's main advantage over its competitors, such as The Gap and H&M, has resulted from its highly responsive and tightly organized supply chain. Unlike these competitors, Zara selects factory locations that are in close geographic proximity to the company's headquarters in Spain. Although this approach increases labor costs, compared with outsourced production in lower-cost countries in Asia. it also improves communication, reduces shipping costs and time, and reduces the time before new fashions appear in stores. It also gives Zara the flexibility to modify its operations in one supply chain function to expedite processes in another, such as pricing or tagging. It might hang merchandise on racks in the warehouse so that store employees can move apparel directly from delivery to the sales floor. And it can do all this because it maintains complete control over the entire process.
Furthermore, instead of shipping new products a few times a season, as many of its competitors do, Zara makes deliveries to every one of its stores every few days. The purple shirts would be in stores in two weeks-compared with the several months it would take for most department stores and other specialty apparel stores to accomplish the same feat. Because its fast fashion system also ensures shorter lead times. it's less likely that any Zara store will be out of stock before the next sweater shipment arrives. Limiting the stock in stores even can create a sense of scarcity among its customers. If they don't buy now, the item might not be available next time they visit the store. By producing and shipping in these small quantities. Zara can quickly recover from its (rare) fashion faux pas. Finally, the efficiency of its supply chain means Zara rarely has to discount merchandise that is not selling. At Zara, the number of items that end up marked down is about half the industry average. Even with these results. Zara still manages to introduce around 10.000 new designs and 40.000 new SKUs each year.
MOVING TOO FAST? THE NEGATIVE EFFECTS OF FAST FASHION
Despite some strong signals of success-including annual growth rates of approximately 20 percent in terms of sales and number of stores-Zara started to outgrow its own strategy. By their very nature, fashion trends change rapidly and constantly, and so must the merchandise on Zara's shop floors. Faced with disappointed customers, some sales managers ordered extra quantities of hot items, to avoid stock outs. Even with this attempt to circumvent the replenishment system, some stores still suffered from stock outs, because they received fewer units than they had ordered when overall demand exceeded inventory levels. For some items, Zara even confronted perhaps the most frustrating scenario in a supply chain: Inventory sat unused, eating up storage costs. at one location, even as another store desperately pleaded for the same inventory to meet its customers' demand
As noted among the benefits, the company launches as many as 10,000 new styles annually, with a range of colors and sizes, resulting in hundreds of thousands of SKUs in the system. If we add in replenishment orders, which are received twice weekly, Zara's average shipping total reached nearly 2.5 million items per week, all coming from the company's distribution center. Its legendary supply chain efficiency thus was in danger of a clogged artery.
In response, Zara has adopted some new mathematical processes that turn human experience and mountains of data into actionable information. These models factor in store managers' unique requests for merchandise replenishments, together with historical trends in the sales of the same item. Merchandise display practices have been altered, such as removing all sizes of a garment from the sales floor if a popular size is not available. This practice helps reduce customer frustration, in that they never see an item that might not be available in their size. It also diminishes shipping: if the medium size is unavailable, the small and large sizes do not get shipped either. Instead, these remaining sizes head toward the stores that still has all sizes in stock, so they can be available to customers there.
Growth, costs, market demand, and technology advances all can push retail executives to rethink their business processes. But truly savvy managers search for ways to optimize operations, even when business is running smoothly. As Zara learned, current approaches will not necessarily work tomorrow. As the founder of Zara's corporate owner Inditex told the company's first deputy chair and CEO. -Once a month, come here thinking that we are near bankruptcy. You will find a lot of things to change."
What are some of the ways that Zara's supply chain management system has helped create value for its customers? Provide specific examples.