ZARA's Inventory Management - What every fashion retailer can learn from ZARA? (2024)

FAQs

How does Zara manage their inventory? ›

Zara determines only 20% of a season's line 6 months in advance, entering the season with 50% of committed inventory. For the remaining 50% of its line, it adopts just-in-time production, a practice that helps them to respond to any “of the moment” trends or customer preferences.

Zara has 12 inventory turns per year compared to 3 – 4 per year for competitors. Stores place orders twice a week and this drives factory scheduling. Such short term focused order cycles make forecasts very accurate, much more accurate than competitors who may order every two weeks or every month.

Zara is the biggest Spanish clothing retailer in the world based on sales value. Its success is due to its fast fashion strategy that is based on a strong supply chain and quick market feedback loops.

Zara's super-efficient supply chain

After products are designed, they take around 10 to 15 days to reach the stores. er in Spain, where new items are inspected, sorted, tagged, and loaded into trucks. In most cases, clothing items are delivered to stores within 48 hours.

And with inventory, L2 noted that Zara avoids “eating losses and discounting surplus items by planning just 15 percent of its inventory in advance, informing subsequent inventory in response to consumer demand.”

Prioritizing your inventory helps you understand necessary ordering and manufacturing frequencies to meet your customers' needs. Inventory management tips include tracking sales, ordering and receiving stock consistently, and using specialized inventory management software.

We've put together a list of four crucial metrics that you should keep a close eye on over the course of the year: inventory turnover, average days to sell, return on investment, and inventory carrying costs.

Zara's Three Success Factors: Speed, Speed, and Speed.

The recommended options that should be applied by Zara are to improve distribution by opening regional distribution centers and to achieve increased online sales volume by creating a unique selling point.

What are the key strategies of Zara? ›

Zara's strategy disregards most of the components for a successful supply chain. Unlike many clothing suppliers that actively use outsourcing, Zara manufactures a significant number of its products using its own resources. The brand itself is engaged in the processes of design, storage, distribution, and logistics.

Product Strategy of Zara

At Zara, what it does is to create new clothing designs all year round and only produce a limited number before moving on to the next designs. With these abbreviated production runs, designs get sold out faster, and there are virtually no leftovers.

Four popular inventory control methods include ABC analysis; Last In, First Out (LIFO) and First In, First Out (FIFO); batch tracking; and safety stock.

Inventory management tries to efficiently streamline inventories to avoid both gluts and shortages. Four major inventory management methods include just-in-time management (JIT), materials requirement planning (MRP), economic order quantity (EOQ) , and days sales of inventory (DSI).

Zara's strategy is to offer a higher number of available products than its competitors. While most clothing retailers manufacture and offer to the public for sale 2,000 to 4,000 different articles of clothing, Zara's production has been markedly higher, at over 10,000 pieces produced per year.

Zara's success is based on its ability to adapt quickly. Unlike many clothing brands, whose designs are stagnant for the season, Zara is constantly assessing and reacting to the environment in a matter of weeks. The brand designs new styles and pushes them into stores while the trend is still at its peak.

What is the main purpose of inventory management? ›

The primary purpose of inventory management is to ensure there is enough goods or materials to meet demand without creating overstock, or excess inventory.

Inventory management is vital for retailers because the practice helps them increase profits. They are more likely to have enough inventory to capture every possible sale while avoiding overstock and minimizing expenses. From a strategic point of view, retail inventory management increases efficiency.

The management of inventory is necessary for any company so that excess stock is not stored at the company while simultaneously ensuring demand for customers is met. The optimal balance, however, is often achieved through properly planned and managed inventory.

Summary: Common SCM inventory golden rules are: (a) avoid situations where inventory and demand are out of balance, those slow-moving low margin products add no value to the firm and (b) production campaigns result in unnecessary inventory.

Example #1

Given the high consumption of soaps, it reorders raw materials to start manufacturing the next lot. Raw materials ordered beforehand, in this case, act as the inventory for the company. And the already delivered finished products are the inventory for retail units that will be selling soaps further.

However, the brand has recently faced three main challenges: e-commerce, competition and sustainability. To sustain its global expansion, the brand made a step toward digital expansion even before the pandemic hit, and it paid off. So far in 2020, Zara reports a 74% jump in online sales alone.

Zara is well known for its ability to be prompt in quickly delivering new clothes to their stores which are achieved by following a strict routine. Twice a week, at precise times, store managers order clothes, and twice a week, on schedule, new garments arrive.

What are the smart objectives for Zara? ›

By next year 2020, Zara aims to eliminate hazardous chemicals from its supply chain, set up donation boxes in all stores, train employees in circularity, and cut out fibers that come from endangered or ancient forests (so, viscose made from wood pulp).

Generating more traffic

While most customers visit a fashion store four times a year (once per season), Zara's rapid turnover means customers eager to see new designs visit about 15 times a year — generating almost four times more traffic than the average store.

Zara Join Life labels identify items produced using the most sustainable raw materials, such as organic cotton or recycled materials; forest-based synthetic fibres made using an efficient process such as Tencel® Lyocell; or clothing produced with technology using renewable energy, or that demonstrates efficient use of ...

The company's strategy involves stocking very little inventory and updating collections often to deliver the latest emerging fashion trends. This means fast manufacturing, fast shipment, and thus fast purchase; the fast delivery and turnover of apparel creating a sense of scarcity and urgency.

Centralized order fulfillment

Zara sticks to a deep, predictable and fast rhythm, based around rapid deliveries to stores. Each Zara outlet sends in two orders per week on specific days. Trucks leave at specific times and shipments arrive in stores at specific times.

Just-in-Time Production

Known for staying ahead of the trends, Zara changes its apparel designs every two weeks on average; most of its competitors do so every 10–14 weeks. To maintain this lightning pace, Zara utilizes Just-in-Time (JIT) production methods to keep turnaround times as tight as possible.

Zara's strategy disregards most of the components for a successful supply chain. Unlike many clothing suppliers that actively use outsourcing, Zara manufactures a significant number of its products using its own resources. The brand itself is engaged in the processes of design, storage, distribution, and logistics.

If you're looking to go on a spending spree, Zara will do it. The high street brand has new pieces dropping every single week, so it's pretty difficult to pop into the store or on the website without finding something you love almost immediately.

They ship very small batches twice a week. As a result, it creates a sense of scarcity, very few items are unsold, and if the experiment fails there is much time (thanks to their very responsive Supply Chain) to try other different styles. This eventually helps Zara find the right product almost every time.

Inventory management, a critical element of the supply chain, is the tracking of inventory from manufacturers to warehouses and from these facilities to a point of sale. The goal of inventory management is to have the right products in the right place at the right time.

Why does Zara resupply their stores so often? ›

Frequent replenishment allows Zara to match supply and demand more effectively than the competitors. Sell most products at full price and only half the markdowns in stores compared to competition.

Zara's strategy is to offer a higher number of available products than its competitors. While most clothing retailers manufacture and offer to the public for sale 2,000 to 4,000 different articles of clothing, Zara's production has been markedly higher, at over 10,000 pieces produced per year.

Frequent replenishment allows Zara to continue supply new design as consumer desire. This replenishment is one of Zara inventory management strategy where all stores are well managed. This means each store keep update the stocks and replace with high demand for goods base on consumer desire in geographically.

The brand could expand its customer base and encourage more shopping by investing more time to market themselves on digital platforms and improve its e-commerce sector's functionality. The biggest threat Zara is facing is the intense number and level of competition in the industry.

The market segmentation strategy of Zara focuses on customers who want a fast-changing wardrobe in keeping with the very latest fashion, yet also of good quality and at an affordable price. Zara customers are typically loyal: Zara ranks higher than competitors on the Net Promoter Score®.

Zara's value proposition focuses on keeping up with fast-changing fashion trends. Its activity configuration allows it to spot trends and launch new pieces in less than three weeks. Competitors show two collections per year and take over nine months to get items to stores.

The power of brand loyalty

Rather than spending more on pushing marketing out (it only spends about 0.3% of sales on advertising), Zara pulls customers in and turns them into brand evangelists to spread word of mouth about the brand.