The brand also creates clothes based on the latest trends. This adds another layer of fear of missing out. If shoppers don’t pick up on the current trends happening now, they’ll miss the boat. RETHINKING RETURNS In 2022, Zara made a game-changing decision, much to the chagrin of shoppers. It decided to charge $3.95 for returns that are shipped back; in-store returns would still be free. This alleviated the notion for many brands that they would have to continue offering free returns—a major expense—and would hopefully encourage buyers to consume more mindfully. ARTIFICIAL INTELLIGENCE Zara uses arti cial intelligence (AI) for operations management. It processes sales data, pins down inef ciencies, and is vital in inventory management that’s tracked through chips used in its tags. Zara manufactures various sizes and ts, and is able to use AI to help customers with nding the right size and understanding how a particular garment will look. It integrates services like Fit Analytics to narrow down options for shoppers, which results in fewer returns and positive customer feedback. Analytics Automating in-house production can production make di erence getting make a huge di erence in getting products manufactured and out the door as quickly as possible while increasing accuracy. and as possible increasing
The Harvard Business Review calls this “rapid- re ful llment” and the retailer cuts down on waiting time by removing outside suppliers and steps that cause delays to its products getting scooped up by buyers. Zara has its nger on the pulse of nearly its entire supply chain model. Automating in-house production can make a huge difference in getting products manufactured and out the door as quickly as possible while increasing accuracy. This also allows the brand to stay on top of the latest fashion trends and gives them a competitive advantage. Any supply chain model that relies on external factory processes can experience delays. In-house automation puts an end to this. Zara also leaves time for the factory to complete more menial tasks. For example, rather than having store managers or employees add tags in retail stores, they do this in-house. Another method that contributes to Zara’s success is producing products in limited or smaller quantities. This lends an air of exclusivity and urgency to the shopping experience, helping to push customers to purchase. quantities. an air of exclusivity and urgency to the
JIT production is a lean strategy that centers on eliminating waste from business processes to allow for a highly ef cient, streamlined system. This, in turn, enables companies to meet customer demand immediately. Zara manufactures a large quantity of clothes and accessories for stores worldwide but avoids excess inventory by creating urgency for shoppers by insinuating—and proving—that the items they see now won’t be around for long. MANUFACTURING INHOUSE One pillar of Zara’s supply chain strategy is investing in in-house production processes. These allow for greater exibility and better oversight, reducing the risk of errors, delays, and inef ciencies. To achieve this, Zara does much of its production in-house. Many of their factories are located near the company’s Galicia, Spain, headquarters, so it doesn’t need to outsource distribution centers or production facilities. It also maintains about 85% of capacity for any necessary in-season adjustments—allowing for greater exibility and agility in how and when new items are launched. capacity for any necessary
Zara carries about 11,000 distinct items per year in thousands of stores worldwide compared to competitors that carry 2,000 to 4,000 items per year in their stores. A highly responsive supply chain is central to the retailer's business success.
110 Inbound Logistics • January 2024
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