Experiences of supply chain management of fast fashion enterprises in the world and lessons for vietnamese enterprises
Rationale
The traditional fashion supply chain was characterized by slow response times and long lead times, with designers and retailers forecasting demand a year in advance and adjusting releases based on seasonal trends However, as consumers began demanding more affordable products with quick turnaround times, the industry underwent a significant transformation This shift paved the way for the rise of the fast fashion industry, which emphasizes rapid production and swift response to changing fashion trends.
The recent changes in the supply chain landscape highlight the need for supply chain managers to create increased supply pressure to deliver low-cost, high-quality goods quickly and efficiently, while maintaining agility to adapt to shifting market conditions In Vietnam, the clothing market was valued at approximately $5.6 billion in 2019, with an expected annual growth of 8.8% from 2019 to 2023, primarily driven by affordable apparel accounting for 97% of revenue Despite the expanding fashion industry, many Vietnamese fashion chains like Ninomaxx, N&M, Blue Exchange, and Viet Thy have significantly reduced their store counts and scaled back development, raising questions about the underlying causes of these changes.
This article explores the challenges faced by supply chains that do not respond promptly to market changes, which can hinder business success To address this, I conducted a comprehensive study on the supply chain management strategies of leading fast fashion brands like ZARA, H&M, and UNIQLO worldwide The goal is to extract valuable lessons that Vietnamese enterprises can adopt to enhance their supply chain efficiency and competitiveness This research aims to provide insights into best practices in fast fashion supply chain management, making it a relevant and impactful graduation thesis topic.
Purpose, objectives and questions of the research
This research is aimed to propose orientations and solutions to promote the Supply Chain Management of Vietnamese Fast Fashion Enterprises
In order to achieve the above purpose, each chapter of the research needs to fulfill the following tasks:
Understanding the core theories and theoretical foundations related to Supply Chain Management (SCM) is essential for optimizing operations within the Fast Fashion Industry Key theories such as Lean Supply Chain, Agile Supply Chain, and Just-in-Time (JIT) principles provide a framework for managing rapid product turnover and meeting consumer demand efficiently Several factors influence SCM in the fast fashion sector, including consumer preferences for quick new trends, short product life cycles, and the need for rapid production and distribution Additionally, technological advancements, global sourcing strategies, and inventory management practices significantly impact the effectiveness and responsiveness of fast fashion supply chains Recognizing these theories and factors is crucial for developing flexible, cost-effective, and timely supply chain solutions in the fast fashion industry.
Analyze and assess Supply Chain Management of Fast Fashion enterprises in the world such as ZARA, H&M, UNIQLO
Represent objective SWOT analysis for some Vietnamese enterprises From that, recommend some solutions to promote Supply Chain Management of Vietnamese Fast Fashion enterprises
The research focuses on answering main questions below:
What is supply chain management? What factors affect the fast fashion supply chain? What are special about the supply chains of ZARA, H&M, UNIQLO?
What lessons have been learned for Vietnamese enterprises?
Subject matter and scope of the research
Subject matter of the research:
Supply Chain Management model of ZARA, H&M and UNIQLO
This article examines the supply chain management strategies of leading fast fashion brands like ZARA, H&M, and UNIQLO, highlighting key issues and lessons learned By analyzing these industry giants, Vietnamese fast fashion enterprises can adopt best practices to enhance their supply chain efficiency and competitiveness Effective supply chain management is crucial for rapid product turnaround, cost reduction, and maintaining high customer satisfaction in the fast-paced fashion market Implementing flexible, transparent, and technology-driven supply chains can enable domestic brands to respond swiftly to market trends and reduce lead times Learning from the successes and challenges of ZARA, H&M, and UNIQLO provides valuable insights into optimizing procurement, manufacturing, and distribution processes Ultimately, adopting innovative supply chain solutions rooted in these lessons can help Vietnamese fast fashion companies establish sustainable growth and capture a larger market share.
- Space: The scope of activities of 3 brands ZARA, H&M, UNIQLO and Vietnam fast fashion market
Research methodology
This research employs a qualitative case study methodology, analyzing secondary data collected from official websites of ZARA, H&M, UNIQLO, and other reputable sources Each case is examined individually within the same theoretical framework, allowing for a detailed comparison across brands The study utilizes various research techniques, including statistical analysis, descriptive methods, and synthesis, to draw scientifically valid conclusions and provide comprehensive insights into the subject.
Structure of the research
In addition to the introduction, conclusion, list of abbreviations, tables, figures and list of references, the main content of the topic consists of the following 3 chapters:
This chapter provides a comprehensive understanding of the Fast Fashion Supply Chain Management, defining its core principles and significance It also offers a thorough literature review of existing research on the key factors influencing the efficiency and sustainability of the fast fashion supply chain.
Chapter 2: Analysis of supply chain management of fast fashion enterprises in the world
This article provides an overview of the supply chain management strategies of leading fast fashion brands including ZARA, H&M, and UNIQLO It highlights the similarities and differences in how these companies optimize their supply chains to achieve fast turnaround times and cost efficiency ZARA is known for its highly agile and responsive supply chain, allowing quick adaptation to fashion trends H&M emphasizes cost-effective global sourcing and extensive supplier networks, while UNIQLO focuses on vertical integration and innovative manufacturing processes Understanding these distinct approaches offers valuable insights into the competitive landscape of fast fashion supply chain management worldwide.
Chapter 3: Some recommendations for Vietnamese enterprises Supply Chain Management
This article highlights the key achievements in supply chain management of the three leading fast fashion corporations, demonstrating innovative strategies that drive efficiency and responsiveness It emphasizes the importance of adopting agile supply chain practices to stay competitive in the fast fashion industry Additionally, the article offers strategic recommendations for Vietnamese businesses and authorities to enhance supply chain resilience, streamline operations, and foster sustainable growth in the rapidly evolving market.
THEORETICAL BACKGROUND
Theoretical background of Supply Chain Management
1.1.1 Overview of Supply Chain Management
The technology boom of the 1980s significantly transformed the Supply Chain Management industry The widespread use of the term "supply chain management" only emerged in the mid-1990s, coinciding with the globalization of the manufacturing sector Before that, businesses primarily referred to concepts like "logistics" and "operations management." Understanding the definitions of a supply chain and supply chain management is essential for grasping these industry shifts.
A supply chain is a complex network of facilities and distribution channels responsible for procuring raw materials, transforming these materials into intermediate and finished products, and delivering them to customers This interconnected system ensures efficient production and distribution processes, crucial for meeting customer demands Understanding the supply chain's functions helps optimize logistics, reduce costs, and enhance overall business competitiveness.
A supply chain encompasses all entities involved in fulfilling a customer request, including manufacturers, suppliers, transporters, warehouses, retailers, and even customers This interconnected network ensures the smooth flow of products, information, and finances from production to the end consumer, highlighting its critical role in efficient supply chain management.
A supply chain is a interconnected network of functions within an organization, starting from the development of a strategic plan and culminating in the delivery of a product or service Effective supply chain management involves coordinating these activities to optimize efficiency, reduce costs, and ensure timely delivery Streamlining supply chain operations is essential for maintaining competitive advantage and meeting customer expectations in today's fast-paced market.
Strategic coordination involves aligning traditional business functions and tactics both within a company and across the entire supply chain This holistic approach aims to enhance the long-term performance of individual companies and the overall supply chain By fostering collaboration and synchronized efforts, businesses can achieve improved efficiency, responsiveness, and competitive advantage Effective supply chain management relies on this systemic integration to optimize operations and drive sustained success.
Supply chain management involves coordinating production, inventory, location, and transportation among supply chain partners to optimize responsiveness and efficiency According to Michael Hugos (2008), effective supply chain management ensures the best balance between meeting market demands and operational efficiency This strategic alignment helps businesses deliver products effectively while minimizing costs, enhancing overall competitiveness.
Supply chain management involves the planning and control of sourcing, procurement, production, and logistics activities to ensure efficient product flow It emphasizes collaboration with channel partners such as suppliers, intermediaries, third-party service providers, and customers to optimize the entire supply chain Ultimately, supply chain management integrates supply and demand processes across organizations to improve efficiency, reduce costs, and enhance customer satisfaction.
Supply Chain Management (SCM) is the process of coordinating the movement of physical goods and related information across the entire supply chain It involves synchronizing the flow of products from low-level component suppliers to the end consumers, ensuring efficiency and seamless delivery Effective SCM optimizes inventory, reduces costs, and enhances customer satisfaction by managing the complex network of production, distribution, and logistics.
1.1.1.2 Fundamental elements of supply chain
Figure 1.1 Fundamental elements of supply chain
Source: Author's proposal based on SCC a Prоductiоn
Production capacity is essential for a supply chain’s ability to manufacture and store products efficiently Skilled managers understand the importance of balancing responsiveness and efficiency when making production decisions to meet market demands Companies operating facilities and warehouses at near full capacity struggle to adapt quickly to fluctuations in demand, limiting flexibility Conversely, enterprises with excess capacity in their factories and warehouses can respond rapidly to significant changes in product demand, enhancing overall supply chain agility.
Excess capacity increases costs because capacity costs money, and unused capacity results in idle resources that do not generate revenue The more excess capacity a business has, the less efficient its operations become, leading to higher operational costs and reduced profitability Proper inventory management is essential to optimize capacity utilization and minimize unnecessary expenses, ensuring a more efficient and cost-effective operation.
Inventory is a vital component of the supply chain, encompassing everything from raw materials to work-in-progress items and finished goods It is distributed among manufacturers, wholesalers, and retailers, ensuring products are available at each stage Effective inventory management optimizes stock levels, reduces costs, and enhances overall supply chain efficiency.
Effective inventory management is crucial for balancing inventory inflows and outflows, helping businesses reduce operational costs and increase profitability Maintaining adequate inventory levels enables a company to quickly respond to fluctuations in customer demand, enhancing overall customer satisfaction However, insufficient inventory can lead to missed sales opportunities and negatively impact customer service To maximize efficiency and minimize costs, businesses should aim to keep inventory expenses as low as possible while ensuring enough stock to meet customer needs.
When managing inventory, there are three key decisions to consider: cycle inventory, which is the amount of stock required to meet customer demand between purchases; understanding cycle inventory helps optimize order quantities and reduce stockouts; effectively managing cycle inventory ensures a balance between maintaining sufficient stock and minimizing carrying costs.
Safety inventory is stock held as a buffer against uncertainties in demand or supply If demand forecasting were perfectly accurate, only cycle inventory would be necessary, as safety stock would be unnecessary, ensuring smooth operations and reducing stockouts Proper management of safety inventory helps mitigate risks and maintain service levels in supply chain management.
Seasоnal Inventоry: this is inventоry that is built up in anticipatiоn оf predictable increases in demand that оccur at certain times оf the year c Lоcatiоn
A profitable location is essential for a business’s survival and growth, serving as the key point for supply chain facilities When selecting a site, managers must evaluate various factors such as facility costs, labor expenses, workforce skills, infrastructure quality, taxes, tariffs, and proximity to suppliers and customers Location decisions significantly influence the supply chain’s overall cost and performance, reflecting a company's core strategy for efficiently delivering products to the market Effective transportation options also play a crucial role in optimizing logistics and ensuring timely delivery.
Theoretical background of Supply Chain Management of Fast Fashion Industry
Fast fashion refers to clothing designs that quickly transition from runway shows and celebrity styles to mainstream stores, capitalizing on current trends This rapid turnaround enables consumers to access the latest fashion looks at affordable prices (Hayes, 2021)
Fast fashion is characterized by affordable, trendy clothing that quickly translates runway and celebrity styles into mass-market garments This rapid production cycle allows retailers to meet the high consumer demand for new, fashionable items As described by Solene Rauturier in 2022, fast fashion enables the quick turnaround from design inspiration to high street availability, fueling the cycle of constantly changing fashion trends.
Simply put, fast fashion replicates the trends with low-quality materials and rapid production cycles in order to bring cheap styles to the public
1.2.1.2 The History of the Apparel Industry & Emergence of Fast Fashion
Before the 1800s, fashion was a slow process, requiring people to prepare materials such as wool and leather and weave their own clothes The Industrial Revolution revolutionized clothing production by introducing advanced textile machines and sewing machines, making clothing easier, faster, and more affordable to produce As a result, dressmaking shops emerged to serve the growing middle class, transforming the fashion industry and increasing accessibility for broader populations.
Young people were creating new trends, and clothing became a form of personal expression, but there was still a distinction between high fashion and high street
Low-cost fashion experienced a surge in popularity as online shopping boomed, leading fast-fashion retailers like H&M and Zara to dominate high streets worldwide These brands rapidly reproduce trending designs and high-end looks by copying elements from top fashion houses, offering affordable and accessible style options to consumers.
Fast fashion offers affordable prices and trendy styles, making it a popular choice for many It also serves as a tool for democratizing fashion, allowing everyone to express their personal style regardless of social class or income level This inclusivity enables fashion to become a universal form of self-expression accessible to all.
Young people are increasingly conscious of the environmental impact of their clothing choices, leading to a shift in consumer preferences As a result, the fast fashion industry is evolving towards more sustainable practices to meet the growing demand for eco-friendly products.
1.2.2 Factors affecting the fast fashion supply chain
A successful supply chain strategy must be aligned with the overall business strategy, ensuring strategic fit and coherence In the fast fashion industry, this alignment is crucial due to the need for rapid product launches and quick production times Companies must prioritize innovation and continuously create customer desire to stay competitive As a result, the specific business orientation heavily influences the selection of the most appropriate supply chain model, enabling fast turnaround and market responsiveness.
ZARA prioritizes speed by producing approximately 50% of its garments in-house rather than outsourcing to developing countries, enabling rapid response to market demand The company is willing to accept 15-20% higher costs compared to competitors, understanding that this investment ensures it can deliver sufficient quantities of products to customers promptly This strategic focus on agility and supply chain control sets ZARA apart in the fast fashion industry.
Fashion industry trends are constantly evolving, with supply chains shifting from prioritizing high-quality, slow-response apparel before 1960 to meeting the demands for faster turnaround times and affordable prices driven by rapid fashion changes The fast fashion industry has continuously adapted, transitioning from offering trendy, inexpensive products to emphasizing compelling brand narratives and now focusing on environmentally friendly offerings To achieve sustainability, modern fast fashion supply chains must integrate environmental, social, and economic considerations at every stage—from raw material sourcing and design to production, distribution, transportation, and recycling—ensuring a comprehensive approach to sustainable development.
1.2.2.3 Information technology a Influence the demand forecasting process
In demand forecasting, historical data is essential for accurate predictions, with data sets from both products and related items providing valuable insights Utilizing advanced tools, such as artificial intelligence (AI) decision support systems, is crucial for generating reliable and actionable forecasts AI-driven solutions enhance the accuracy of demand predictions, enabling better inventory management and strategic planning Implementing AI in demand forecasting ensures businesses can respond effectively to market trends and customer needs.
Effective forecast sharing is essential for all supply chain agents, highlighting the need for a dedicated platform to facilitate this process In the fast fashion industry, adopting strategic alliances such as Quick Response (QR), Collaborative Planning, Forecasting, and Replenishment (CPFR), and Vendor Managed Inventory (VMI) is crucial for seamless operations Implementing an Electronic Data Interchange (EDI) platform ensures suppliers and customers can efficiently share forecasts and vital information, enhancing supply chain coordination and responsiveness.
An effective demand forecasting system that integrates external market information—such as stock market trends, retail market performance, and competitors’ activities—can significantly enhance the accuracy and reliability of forecast results Incorporating these external data sources makes demand predictions more comprehensive and robust, ultimately supporting better-informed decision-making in supply chain management Additionally, leveraging such insights can positively influence the design process by enabling more strategic planning and resource allocation, leading to increased operational efficiency and competitive advantage.
Implementing CAD/CAM software is essential for accelerating new design development, as it streamlines the process of designing and manufacturing prototypes, finished products, and product runs This advanced technology makes the design process more systematic and efficient, significantly reducing the time required to bring new products to market Embracing CAD/CAM solutions enhances collaboration among involved companies and ensures faster, more accurate production workflows.
Electronic data exchange platforms, e.g EDI, (lacovou et al., 1995), EPC enhances communication between stakeholders, helps exchange and comment in a timely related draft designs c Influence warehouse management and shipping
Implementing warehouse management software, logistics management tools, RFID, and robotics is essential to enhance efficiency and reduce processing times RFID (Radio Frequency Identification) streamlines the recording of goods entry and exit, providing precise location tracking within the warehouse for easier goods retrieval According to Metro AG Group (2006), automation during the importing process can cut manual labor time by up to 80%, significantly boosting productivity and optimizing retail operations.
RFID tags have transformed garment and accessory identification by effectively preventing counterfeiting and theft They also enhance the customer experience through seamless and improved service Leading fashion brands such as Burberry, Ralph Lauren, and Rebecca Minkoff are at the forefront of adopting RFID technology to ensure authenticity and enrich shopper engagement.
18 discovered innovative ways to transform their customer experience into a more fulfilling journey
ANALYSIS OF SUPPLY CHAIN MANAGEMENT OF FAST FASHION
OVERVIEW OF ZARA, H&M, UNIQLO
Table 2.1 Overview of ZARA, H&M and UNIQLO
Parent Company Inditex H&M Hennes & Mauritz
Zara is a prominent Spanish fast fashion retailer headquartered in Arteixo, Galicia, known for its rapid response to fashion trends Founded in 1975 with just 30 Euros, Zara has grown over four decades to become one of the world's leading fashion brands As part of the Inditex group, one of the largest global fashion distribution companies, Zara benefits from extensive resources and innovative supply chain management Inditex also owns popular brands such as Massimo Dutti, Pull & Bear, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe, strengthening its position in the fast fashion industry.
Initially, Zara sold affordable lookalike products of high-end fashion brands However, in the 1980s, the company transformed its approach by revamping design, manufacturing, and distribution processes This shift aimed to reduce lead times and enable Zara to quickly adapt to new trends, establishing its reputation for "instant fashion" and fast fashion innovation.
Soon after the 1908s, Zara started to become popular, and in no time it went beyond Spain
By the 1990s the store had already entered the US, France and many European regions
Zara currently operates over 6,900 stores across 88 countries worldwide, selling more than 450 million items annually Over the past five years, Zara has consistently expanded its global presence by opening an average of 400 new stores each year.
Zara is a prime example of a company that deeply understands and tailors to its customers' needs Over the decades, Zara has focused on responding to current fashion demands rather than predicting long-term trends This customer-centric approach allows the brand to stay relevant and adapt quickly to evolving market preferences.
H&M is the world's second-largest clothing retailer, following Zara, with a vast global supply chain The company operates in over 74 countries, offering minimal yet fashionable fast clothing Known for its affordability and trendy designs, H&M has established itself as a leading fast fashion brand worldwide.
In 1946, Swedish entrepreneur Erling Persson, then 30 years old, embarked on a road trip across the USA, where he conceived the innovative idea of selling women’s fashion in a new way The next year, in 1947, Persson opened his first women’s clothing store in Vösterås, Sweden, named Hennes, which means "Hers" in Swedish, marking the beginning of his fashion retail venture.
In 1968, Persson acquired the hunting apparel brand Mauritz Widforss, leading to the rebranding of the company as Hennes & Mauritz This change reflected the brand’s expansion to include menswear in its product offerings.
Hennes & Mauritz was listed on the Stockholm Stock Exchange in 1974, marking a significant milestone for the company That same year, the brand was rebranded as H&M, establishing a stronger global identity Following the merger and rebranding, H&M steadily expanded internationally, moving beyond Sweden's borders to become a prominent global fashion retailer.
In 1972, Tadashi Yanai inhеritеd his fathеr’s chain of mеn’s tailoring storеs, in Ubе,
Yamaguchi, after becoming company president in 1984, opened a new store in Hiroshima called Unique Clothing Warehouse, later shortened to Uniqlo, which became a pivotal catalyst for the company’s rapid expansion Inspired by his travels to Europe and the US, where he discovered major casual apparel chains like Benetton and Gap, Tadashi Yanai recognized the immense potential of Japan’s casual wear market He shifted the family’s business strategy from focusing on suits to casual clothing, sourcing fashion goods in bulk at low cost to maximize profitability Additionally, Yanai observed that many foreign fashion chains operated with vertical integration, controlling the entire process from design to production and retail By 1998, he had successfully opened over 300 Uniqlo stores across Japan, solidifying the brand’s position in the casual wear industry.
One of the main challenges faced was changing consumer perception of the brand, which was seen as a discount retailer selling cheap, low-quality apparel to the suburbs This perception was completely transformed when the brand launched the Global Quality Declaration, signaling a commitment to higher standards and quality.
In 2004, Uniqlo committed to ceasing the production of low-priced, low-quality garments, marking a pivotal shift in their brand focus Since then, the company has gained recognition for its high-quality fleece jackets, transforming public perception Today, Uniqlo is seen as an affordable yet premium brand, balancing value with quality, and positioning itself as a leader in the casual apparel market.
Uniqlo, a wholly-owned subsidiary of Fast Retailing Company Limited, is renowned for offering high-quality private-label casual wear at affordable prices As of September, Uniqlo continues to strengthen its global presence by providing stylish, durable clothing options for customers seeking value and quality.
2019, thе brand has grown to morе than 2,250 storеs in 25 countriеs across Asia, Еuropе and
US in just a mattеr of 22 yеars It is thе biggеst apparеl chain in Asia with ovеr 800 rеtail storеs in Japan alonе
Fast Retailing boasts a market capitalization exceeding USD 49.2 billion and employs over 56,000 people worldwide In 2020, the company generated revenues of USD 22 billion and achieved a profit of USD 2.5 billion Its home market in Japan significantly contributed to its success, accounting for 38% of its overall revenue.
Uniqlo's down jackets account for 23% of the company's total revenue, with one in four Japanese consumers reported to own one Fast retailing has experienced an incredible growth rate over the past five years, and this confidence is reflected in its optimistic revenue forecast of a 9.5% increase for FY2021.
According to Forbes, Uniqlo boasts a brand value of USD 9.2 billion and ranks 84th among the world’s most valuable brands The company’s success is largely attributed to its founder’s innovative strategies and a strong customer-centric culture.
Analysis of Supply Chain Management in ZARA, H&M, UNIQLO
Figure 2.4 Overview of ZARA’s supply chain
ZARA introduces a minimum of two new designed items per week - 10,000 new items in a year However, only 15-20% of ZARA's total production is pre-produced while 80-85% is
In 2004, a renowned pop star's concert tour in Spain sparked a surge in demand for her outfits among teenagers and young girls As the tour progressed, Spanish fans began wearing sportswear similar to what she wore in her first show, demonstrating the influence of celebrity fashion on youth trends Recognizing this market reaction, clothing retailer ZARA swiftly designed and distributed similar outfits, stocking stores across Spain within two weeks to meet the rising demand.
ZARA proactively anticipates customer demand by collecting daily feedback from store managers about shoppers' preferences, dislikes, and needs This real-time demand forecast data is promptly relayed to ZARA designers, enabling them to quickly create new designs aligned with current customer trends Additionally, ZARA employs strategic product pricing to ensure competitive market positioning and optimize sales performance.
ZARA adjusts its product pricing based on customer willingness to pay, leading to regional price variations In Spain, ZARA is regarded as an affordable and popular fashion brand accessible to a broad consumer base Consequently, ZARA's prices in Spain are significantly lower compared to other international markets, reflecting its strategic position as a cost-effective clothing option for local shoppers.
Figure 2.5 ZARA’s product price in different markets
In 2015, Inditex, the parent company of ZARA, announced regional pricing strategies, revealing that ZARA's valuation in Korea is nearly twice the product price compared to Spain Effective inventory management is essential for optimizing sales and maintaining brand consistency across diverse markets.
ZARA delivers fashionable and trendy clothing tailored to diverse tastes through a controlled and integrated process, ensuring just-in-time production This efficient approach optimizes inventory management costs while consistently meeting customer demand.
ZARA's success is driven by maintaining a significant portion of its production in-house, with factories reserving 85% of capacity for in-season adjustments This in-house production strategy provides ZARA with remarkable flexibility in managing the volume, frequency, and variety of new product launches.
ZARA commits only 15-25% of its seasonal inventory six months in advance, allowing for greater flexibility in fashion trends By the start of the season, it locks in just 50-60% of its clothing line, meaning that up to half of its garments are designed and manufactured mid-season This agile approach enables ZARA to rapidly adapt to changing customer preferences and fashion trends, maintaining its competitive edge in the fast fashion industry.
When a particular style or design becomes a must-have on the street, ZARA quickly responds by releasing new items Designers rapidly create fresh styles that are fast-tracked to stores while trends are still at their peak Store managers gather and communicate customer feedback—highlighting preferences, dislikes, and emerging demands—which is instantly relayed to ZARA’s designers for real-time trend adaptation This agile process allows new products to be designed and delivered to stores within 4 to 6 weeks, while existing items can be modified in just 2 weeks, ensuring ZARA stays ahead in fast fashion.
ZARA offers its clothing at approximately 85% of the full retail price, significantly higher than the industry average of 60-70%, demonstrating its premium pricing strategy Additionally, less than 10% of ZARA's stock consists of unsold items, compared to the industry average of 17-20%, highlighting its efficient inventory management and strong demand for its products.
Every organization requires the purchase of supplies, which can be raw materials, components, subassemblies, spare parts, equipment, services, and consumables The purchase is buying or renting them
ZARA sources fabrics, threads, and other components through a combination of purchasing offices in Barcelona and Hong Kong, as well as direct sourcing at its headquarters in Arteixo, Spain Approximately 50% of the fabrics purchased are left undyed to ensure flexibility in producing the latest fashion trends while minimizing waste and costs Comditel, a wholly owned subsidiary of Inditex, manages relationships with external suppliers and handles dyeing, molding, and finishing processes for non-dyed fabrics, contributing to ZARA’s efficient supply chain and high-quality apparel production.
ZARA sources approximately 60% of its products through local cooperatives, allowing for greater flexibility in production The company produces around 50% of its items in Spain, with 28% made in Europe and 24% in Asia, highlighting its diverse manufacturing footprint ZARA's unique production strategy emphasizes quick turnaround and responsiveness to fashion trends, setting it apart from other apparel brands This approach enables ZARA to adjust the type, quantity, and frequency of new styles efficiently, ensuring a dynamic and up-to-date inventory.
26 regulated and items are revealed at different stages according to a modified design to maintain customer curiosity
ZARA's high-tech automated cutting facilities efficiently produce clothing by precisely cutting multiple fabric layers based on computer-designed patterns, reducing waste and ensuring accurate garment sizes Fabrics are vacuum sealed and machine cut at ZARA’s advanced facilities, which minimizes material waste and streamlines production After cutting, the fabric is carefully marked for shipment to tailors, supporting efficient and sustainable manufacturing practices.
The design and procurement process at ZARA begins 5-6 months before the sales season, incorporating approximately 65% of fabric needs based on planned collections, while the remaining requirements depend on the latest market trends ZARA tests customer reactions by producing 15-20% of items pre-season, followed by manufacturing 50-60% at the start of the season, with the rest produced in-season, allowing real-time customer feedback to influence product offerings Fabric cutting is performed in Galicia and northern Portugal, where around 11,000 workers at 350 small, independently operated workshops handle sewing, guided by ZARA's instructions The entire process, from design to prototyping and cutting, is highly efficient, enabling ZARA to finalize products within just 10 days once fabric is in stock, ensuring quick response to fashion trends.
After arriving at production centers, garments undergo double quality checks, are ironed, tagged, and securely wrapped before being shipped to distribution Approximately 60% of ZARA's manufacturing occurs in Portugal and Spain, strategically chosen for their expertise, cost-efficiency, and time sensitivity The company handles capital-intensive processes like dyeing and fabric cutting in-house, while outsourcing labor-intensive tasks such as sewing ZARA focuses on producing style-driven and trend-reflective garments, along with basic designs and crochet items Despite higher production costs compared to Asian manufacturers, ZARA maintains quality and speed by carefully balancing outsourced and in-house manufacturing processes.
ZARA operates four distribution centers located in Spain, each specializing in different product lines The two Logistics centers, ZARA and Logistics Europe SA, manage the distribution of adult clothing for international markets, while Leon SA handles domestic goods, and Logistics Meon SA is responsible for children's clothing The company's distribution process is highly efficient, with garments shipped twice weekly from the centers Non-European shipments are sent via Santiago de Compostela airport, while European store deliveries are made by truck, ensuring store receipts within 24 hours This rapid and organized distribution network is key to ZARA’s fast-fashion success.
36 hours Stores located outside of Europe receive the loss within two days
Comparative analysis between Supply Chain Management in ZARA, H&M,
Table 2.2 Similarities between ZARA, H&M and UNIQLO
Short prototyping and product development cycles
2 new collections every month It takes an average of 5-30 days to deliver across all ZARA stores
Launch time for an H&M product in Europe is 2-3 weeks (may take longer if manufactured in Asia)
Constantly releasing new fabrics such as HeatTech fabric, AIRism cooling fabric, Ultra Light
40 around the world Down, etc
Invest in the right information infrastructure
Use data for inventory management, logistics management, and product demand analysis
Building a global information system infrastructure, connecting stores with procurement systems and warehousing systems
Create a large database of company information integration, sales forecasting and inventory management on the basis of data analysis
Continuously opening new stores to gain market share
Research based on youth fashion trends and customer feedback
Data analysis for previous seasons combined with analysis of upcoming trends
UNIQLO's R&D Center researches the latest fashion and lifestyle in the world
Pricing products based on the price customers are willing to pay, each product has its own price in each market
Prices are almost the same in other markets (Due to many global suppliers)
The price is slightly higher than the Japanese market (still different due to supplier network and partners)
Products in stock account for less than 10% of inventory 50% of the stock is designed and manufactured in season, based on customer response to adjust
80% of the inventory is produced in advance during the year, 20% is introduced to the market according to market trends
The Department of Inventory Control maintains optimal store inventory levels by monitoring sales and inventory every week
Procurement Raw materials are available from the parent company Inditex
Work with suppliers in 44 different countries 54% of the cooperative factories are close to the headquarters in Arteixo
Conduct for Manufacturers and Suppliers‖
750 top suppliers All suppliers agree to the
Purchase denim according to specific spinning and dyeing standards from Kaihara Corporation
Development of new functional fabrics such as HEATTECH and Silky Dry with manufacturer Toray Industries, Inc Purchase of cellulosic fibers (vegetable fibers) at Rayon Etc (Chinese company
Source: Author's proposal Table 2.5 Difference in Make
Own 10 own production factories Made 50% in Spain, 24% outsourced in Europe, 26% outsourced in Asia
Do not own factory About 70 partner factories and 80% of UNIQLO products are made in China
80% of the designs are from the collections of the designers, 20% are
Use global fashion trend forecast, eg get from WGSN (trend
Focus on developing materials instead of
43 from the fashion of celebrities forecasting company) following trends
Source: Author's proposal Table 2.6 Difference in Deliver
Deliver There are 4 main warehouses, 10 logistics centers in
Use outsourced Don't ship items directly to each store, instead use a dense network of distribution centers around the world
Previously outsourced completely 2016: combined with logistics company Daifuku to create a fully automated warehouse
The stores are located in prime locations: commercial centers, Landmark,
Stores located in locations in the city center or shopping centers
Criteria for choosing stores: places that help increase brand awareness
All stores use the same VMD (combination of: art installation, fashion and architecture, interior)
Use a custom VMD for each location
Not announcing the unified store layout because the product belongs to the simple clothing line
Factors influence the performance of 3 Supply Chain Management models
An enterprise's supply chain is a critical component of its market strategy, directly influencing how it meets customer needs To remain competitive, the supply chain must be highly responsive to evolving market demands and align seamlessly with the company's overall business strategy Ultimately, the business strategy is driven by customer preferences, ensuring that supply chain operations support customer satisfaction and business growth.
Understanding customer needs is crucial for companies to design responsive and efficient supply chains that enhance profitability and market share H&M aims to capture a broad market by creating sub-brands with distinct styles and price points, necessitating diversified input sources and collaboration with numerous global suppliers In contrast, ZARA focuses on offering affordable, high-quality products through a streamlined approach, primarily investing in strategically located retail stores to boost brand visibility ZARA emphasizes constant store openings and invests heavily in visual merchandising, updating displays every two weeks to engage customers without relying on traditional advertising.
Uniqlo differentiates itself through a unique adaptation strategy, positioning as a privately held apparel company that emphasizes simplicity and convenience in fashion Unlike brands like ZARA or H&M, which focus on rapid design turnover, Uniqlo invests more in developing innovative materials and fabrics, prioritizing research and development over creating numerous new designs This approach significantly impacts its supply chain, enabling Uniqlo to streamline production and offer high-quality, functional apparel primarily distributed through its official website.
The fashion industry is constantly evolving, with up to 24 "seasons" annually in the fast fashion sector Recently, there has been a significant shift towards sustainable fashion, driven by consumers who increasingly demand transparency regarding product information, origins, ingredients, originality, and environmental impacts.
Despite the fast-paced and trend-driven nature of the fast fashion industry, leading brands like ZARA, H&M, and UNIQLO are making significant shifts towards sustainability These industry giants are embracing sustainable development practices to reduce environmental impact and promote responsible fashion Their efforts demonstrate a growing commitment within the fast fashion sector to prioritize eco-friendly initiatives and foster a more sustainable future.
H&M is committed to using organic cotton to promote sustainable fashion and reduce environmental impact Conventional cotton farming heavily relies on chemicals and pesticides, which harm ecosystems and human health In the United States, the world's largest cotton exporter, approximately 25% of all pesticides are applied to cotton crops, highlighting the environmental concerns associated with traditional cotton cultivation By choosing organic cotton, brands like H&M aim to minimize chemical use and support eco-friendly farming practices.
H&M is committed to environmental sustainability by using organic cotton grown without pesticides or synthetic fertilizers, reducing negative environmental impacts The company has trusted organic cotton for many years and invests significantly in sustainable cotton production To ensure the authenticity of organic cotton, H&M actively participates in the Better Cotton Initiative (BCI), which promotes better farming practices for cotton farmers worldwide By 2020, H&M aims to source 100% of its cotton from more sustainable and environmentally friendly sources.
Technology is reshaping the entire mainstream industry in general and the fast fashion industry in particular In addition to using artificial intelligence to improve customer experience, ZARA and UNIQLO have also been applying robotics to the supply chain to improve work efficiency
ZARA has established 14 advanced automation factories in Spain, featuring robotic systems that operate continuously to pre-cut fabrics and produce fabric components efficiently The company has invested in laser barcode scanners capable of sorting over 80,000 fabrics daily with an error rate of less than 0.5%, ensuring timely production Additionally, ZARA pre-orders undyed fabrics, allowing flexible color adjustments based on current fashion trends to meet customer demands swiftly.
In October 2018, UNIQLO partnered with Daifuku, a leading material handling equipment manufacturer, to automate operations at its large warehouse in Tokyo's Ariake district This collaboration has resulted in a 90% reduction in the warehouse's workforce and enabled 24/7 operations through robotic transportation Daifuku's advanced robotic system efficiently moves clothing products from trucks to storage by reading product kernels for accurate stock information, then packing and transporting items onto conveyor belts for seamless storage.
H&M addressed inventory challenges by implementing RFID tags based on industry-standard GS1 electronic product codes (EPCs), enabling rapid and precise product location at a granular level This technology allows retailers to shift from twice-yearly to weekly or daily inventory counts, significantly improving inventory accuracy Research from GS1 UK and the University of Leicester shows that RFID enhances inventory visibility, facilitating better sales decisions that drive profitability Since adopting RFID, H&M has experienced increased sales and a reduction in end-of-season discounts, demonstrating the effectiveness of this supply chain innovation.
46 greater accuracy and precision of inventory data warehouse Although H&M has not yet released the results of their RFID testing, in 2018 their expansion has expanded to 1,800 stores across 12 markets