by Merlin Hernandez

Spanish clothing giant, Zara, can put out a new mass market collection in 14 days due to the very tight integration of in-house productive factors, compared to the 4-6 month collections of major design houses. Zara uses a centroid production matrix with the location determined on a coordinate grid system that plots distances among manufacturing facilities, suppliers, distributors, and customers to establish cost and delivery efficiencies, supported by integrated CRM and SRM systems. The goal is to achieve a sound reputation for innovation through fast creation of new designs at lower costs, faster delivery times, in ways that are hard to duplicate, in order to maximize profits. It’s all about being tuned into the external environment and going beyond analyzing trends, to creating the demand through new, edgy designs every two weeks to drive intense market interest. This keeps the company ahead of the trend curve to lead the market. So while at one end of the fashion business profitability is driven by high prices and selective placement, Zara controls short supply across wide placement and at low costs to drive “market hunger” (my term).  It is a case of production for shortage. The fast turnover leaves many unfulfilled buyers waiting for the next brief wave of new product. Since there is essentially no product life cycle – the product is obsolete in two weeks – market anticipation is a value in itself.

All of these strategies reflect the strengths of the organization which are facilitated by the astute management of the company’s resource capabilities for maximum production and delivery efficiencies. The resulting competitive advantage means that Zara remains one of the more desirable brands because of their unique designs, strong customer value, inimitable processes, and high demand. The company may have the same resources as other clothing manufacturers and retailers but the way those resources are organized and managed for their full potential is what makes the difference.