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Third Eyesight Event - Fast Fashion learnings from Zara

Aug '09
Consumers have a continuous supply of new products at competitive prices as brands try to gain a share of their wallet share. As consumers look for value-for-money, companies need to cut their product costs. At the same time, the supply chains also need to respond quickly to consumer demands, rather than the traditional push system.

One company that has profitably managed to achieve a speedy response to consumer needs is Inditex that owns the popular fashion brand ZARA, with over 1500 stores across 72 countries and that grew sales in 2007-2008 when other brands were struggling to keep their market share.

Companies such as Zara, H&M, and Primark follow the “Fast Fashion” business model that aims at providing quickly products based on the latest trends to the consumers in a cost efficient manner. They manage quick response even with stores that are spread out geographically.

Following the Fast Fashion business model Zara has achieved turnaround times as low as a couple of weeks. Rather than predicting trends a season or two in advance, Zara incorporates the daily feedback from stores on products in developing the new range. New styles are introduced in the stores every two weeks continually through the year (while the store is replenished twice a week). Limited quantities enhance the desirability of new products among consumers, and reduce inventory risk. The frequent addition of new styles provides shoppers continually with fresh merchandise motivating them to visit the store more frequently.

And Zara is a manufacturer as well. Inditex exercises a close control over production by using a mix of in-house and outsourced manufacturing. The company exerts control over its supply chain for uniqueness of fabric, design and colour, and helps it to manage lead time and costs more effectively. Of the manufacturing processes outsourced much is sourced from suppliers based in Europe especially near Spain for products with high fashion content.

The Fast Fashion model delivers higher return on capital employed, higher inventory turns, better same store sales growth figures. To work well, the model requires a close collaboration between the retailers and suppliers or contractors. As the supply chain gets shorter and the roles evolve, the challenge for all the stakeholders is to add value, while improving the responsiveness and efficiency of the entire chain at the same time. Retailers, brands, manufacturers and exporters need to introspect and examine their processes. Certain principles of the fast fashion business models can be applied to their current businesses, improving critical path management and helping them manage the process more effectively.

A workshop series on “Fast Fashion-India-2009" is being conducted in August 2009 in New Delhi, Bengaluru and Mumbai. The faculty will be Ken Watson (Managing Director, Industry Forum, UK) and Devangshu Dutta (Chief Executive, Third Eyesight) who will be discussing how businesses can achieve faster design-to-delivery supply chains and deliver better products with lower risk, reducing the cash-to-cash cycle. Both have extensive operational and strategic experience with industry-leading retailers and brands around the world. They have discussed the “Fast Fashion” principles extensively through workshops around the globe with over 4000 delegates.

Third Eyesight

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