ZARA: Staying Fast and Fresh
Felipe Caro, UCLA Anderson School of Management, discusses his award-winning case ZARA: Staying Fast and Fresh.
Zara, the flagship brand of the Spanish retail conglomerate Inditex, is one of the leading retailers of fast-fashion, churning out frequent in-season assortment changes of knockoffs of popular runway styles and trendy fashions. The company has received a lot of attention for its centralized distribution model.
In the past 10 years Inditex, and more specifically Zara, has been studied by MBA students, the world over, to understand its success in distribution and supply chain efficiency. Numerous cases have been written to better understand Zara's operations, marketing, information systems, and overall strategy, but most authors alike questioned Zara's long-term sustainability. Nevertheless, Zara's net sales reached 8,088 million Euros in 2010, representing an increase of 14% over the previous year and right in line with the average growth it had shown over the last decade. The 'Zara way' proved itself resilient even through an adverse economic scenario and the company sustained ten years of organic growth, but can it do it again? Where should Zara focus its efforts and what should drive its expansion from here? Should Zara localize its operations in China given that it will quickly become its second largest market? Would opening a major warehouse outside Spain jeopardize Zara's success with a centralized distribution model?
Zara is definitely a success story in the apparel world - comparable to Toyota in the automobile industry - and big part of the success is due to its operations. Though several cases had been written about Zara, they were either old or didn't have an operations management focus. Moreover, I had been collaborating with Zara for six years so I had a very deep understanding of the company from the inside, much more than the usual case writer that only spends a few days visiting.
My initial contact with Zara goes back to 2005 when I had just finished my PhD. My dissertation was motivated by Zara's operations, in particular the company's ability to change the product assortment dynamically during the selling season. The results I obtained were based on theoretical models that I developed with my thesis advisor and I wanted to know if the findings made sense in practice. So, I found the email address of a person that worked in distribution for the Children's department and sent him my thesis. He found it relevant and was able to convey it to senior managers, and that's how it all started. This long-standing collaboration helped ensure that I didn't encounter any major obstacles during the case development process.
Improving the case
After completion I find that the best way to improve a case is teaching it in the classroom. I taught the Zara case several times, and made some changes, before making it public. The main change was setting the ground for the final discussion on future challenges.
The primary teaching objective is to dissect Zara's operation strategy and make students realize how well engrained all the components are and their consistency with Zara's value proposition. A second goal is to open the discussion about possible challenges that could lie ahead. Here the case is open-ended and the quality of the discussion depends on students' participation, but in my experience it always goes well.
This case fits perfectly in any operations, supply chain, or strategy class for MBAs or in executive education programs. Almost invariably there will be some students that know the company, and probably many have shopped there, so that always helps in the case discussion. For many students, the case comes as a surprise. Before reading the case many believe that retailing is just about building a brand through marketing, but they soon realize that Zara was build around its operations and the brand recognition came later as a consequence. For many it's an eye opener.
For those interested, I would strongly recommend having a look at the papers I wrote from my collaboration with Zara. In particular, the paper Zara Uses Operations Research to Reengineer Its Global Distribution Process (Caro, F., Gallien, J., Díaz, M., García, J., Corredoira, J. M., Montes, M., Ramos, J. A., Correa, J. (2010) Interfaces. 40 (1), 71-84) is written in a less technical language so any MBA student could understand it.
UCLA Anderson School of Management
This case won the Production and Operations Management category and the New Case Writer competition at the ecch Case Awards 2013.
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