Key Points

• ZARA has embraced Lean practices to supercharge its production line.
• Lean practices have enabled ZARA to become one of the most prominent fast fashion houses in the world.
• ZARA’s focus on Lean practices has led to local manufacturing, fast turnaround times, and fresh designs regularly.

ZARA changes its clothing designs every two weeks, offering 11,000 distinct garments annually. In comparison, competitors change their designs every three or four months and produce 3-4,000 distinct pieces.

This is fast fashion: the business model of replicating high-fashion, luxury-brand pieces quickly and cheaply, making them available to customers while the trend and demand are at their highest. With nearly 3,000 stores in 96 counties and an estimated net worth of around $20 billion, ZARA has merged fast and traditional fashion into a popular market space it dominates.

Problems in the Fashion Industry: Speed, Price, and Predictability

Amancio Ortega was born in Leon, Spain in 1936 to a railroad worker father and a mother who worked as a maid. Eight years later, on the northwest coast of Spain four hours away, Rosalia Mera was born in La Coruna.

Both would find themselves working in the clothing industry at early ages – Ortega first as an assistant to a shirt-maker, then a tailor himself, then a clothing store manager; and Mera worked as a seamstress from age 11 to help her family with money – and 1966 would find them married to each other, at 30 and 22 years of age, respectively.

In 1975, they founded ZARA together, opening their first location that same year in A Coruña, Spain. Ortega – an unknown with little retail experience – named it Zorba after his favorite film, Zorba The Greek. A neighborhood bar had already beaten him to that name, so Ortega and Mera changed the name to ZARA.

His experience before ZARA allowed him to recognize inefficiencies in the fashion industry’s business model at the time. For example:

The process of moving a garment from designer to factory to store was long and slow.
The costs associated with that process – including expensive advertising campaigns – were ever-increasing; only the rich could afford to buy “high fashion” or enjoy trends.

There needed to be more ability to control the supply chain, and more flexibility within the supply chain.

Ortega recognized there was an untapped market, and he wanted ZARA to tap into it.

They Decided to Try JIT, Kanban, Kaizen, and More

Ortega knew from his previous jobs that the fashion industry as a whole operated by a less-than-ideal business model. He wanted the Zara experience to be different.

He wanted to be fast, affordable, and innovative, and do it all efficiently. Additionally, he wanted to invest more of his budget into higher pay for the local workforce. Ultimately, he wanted to provide a carefully engineered, predictable, repeatable fully customer-centric experience.

These are the practices and philosophies that ZARA started building on all those years ago. Subsequently, it is these practices that drive their success still today.

Just-in-time Production

Just-in-time (JIT) production is a Lean business model where only what is needed – and only at the time it is needed, and in the amount it is needed – is produced. Used correctly, it results in the elimination of waste and inconsistencies from the production process.

With productivity improved as a result, ZARA stores can maintain a very low inventory of merchandise. However, they are continuously updating collections with the newest trends.

Stores place orders twice weekly – this is what drives factory scheduling. Because order cycles are focused on short runs, forecasting becomes very accurate for ZARA.

This creates a competitive edge in an industry where bi-weekly or monthly orders are the norm. Because they do not need to place big bets on yearly fashion trends, ZARA can make many smaller bets on short-term trends that are easier to predict.

ZARA’s short production runs also mean any given design is limited. This encourages customers to buy quickly while inventory is available. As a consequence, stores have little excess inventory and can avoid having to do big markdowns on their items. New items are designed and sent out to the stores in four to six weeks. Additionally, existing items are modified in only two weeks.

Agility

Agile businesses count on and are therefore prepared to adapt to changes or disruptions in their manufacturing processes. Because fast fashion by its very nature is about change. However, learning to be agile and highly responsive has taken ZARA to the next level.

Kanban Pull Systems

Push and pull systems are the two methods most commonly used when businesses are looking to organize their inventory and regulate their manufacturing practices. Push systems are designed to push inventory out to the customer, and pull systems exist to respond to customer demand.

ZARA uses a pull system. They only fill inventory when a customer places an order, replacing exactly what was ordered and how many. Nothing more, nothing less.

Kaizen

Kaizen, loosely translated, means good change; or, in other words, continuous improvement. ZARA uses Kaizen as a tool to meet or exceed every aspect of their customer’s expectations, down to the last detail.

They are constantly obtaining, analyzing, and responding to customer feedback. Their entire adapted process of doing so is automated by a cutting-edge IT infrastructure, for the utmost in efficiency.

One-piece Flow

One-piece flow is the opposite of mass production. Instead of large quantities of something being produced, small quantities are produced to match the pace of customer demand. This method reduces and removes all types of waste from the process and allows ZARA to be much more agile.

By implementing these five core tenets of Lean business practices, ZARA perfected its best practices and found the best, most efficient way to achieve its business goals.

ZARA’s 4 Best Lean Business Practices

Don’t Be Afraid to Change Procurement Methods

ZARA’s supply chain approach is unique partly because their procurement teams do not work on the number of finished clothes but rather the number of raw materials used in manufacturing those clothes.

ZARA buys extensive quantities of fabric but does not commit to a particular color or pattern until customer feedback is analyzed and trending patterns are identified. A piece of clothing that doesn’t meet expectations cannot be resold, but fabric can be reused. This is both budget- and environment-friendly.

Build Close Supplier Relationships

This means “close” as in geography, and “close” as in collaboratively. Relationships with suppliers that are located close to their factories mean ZARA can order on an everyday-need basis. This is unparalleled supply chain control and flexibility These relationships are the key to the successful execution of the entire business model, so they must be built on mutual senses of trust and deep collaboration.

Obtain and Listen to Customer Feedback

All day, every day, ZARA stores are gathering customer feedback. Customer purchases, returns, and item reviews are all entered into a database accessed by ZARA’s design teams, who use the information to determine how designs are performing. Decisions as to discontinuations or alterations are made. The information is also used to update future designs accordingly.

This level of customer data analysis is fully automated and customized to ZARA’s specific goals; the system is the heart of their cutting-edge IT infrastructure. Listening to customer feedback is a pillar of ZARA’s business framework that has cut the time they deliver new styles to market from six months to two weeks. It’s how they remain quick and agile when responding to the changing market.

Do Your Manufacturing In-house, and Do It Locally

The heart of ZARA and its famous supply chain is a massive distribution center called “The Cube.” ZARA’s factories are connected to The Cube via a network of underground tunnels home to a high-speed monorail system that transports cut fabric (bulk quantities of which can be delivered directly and quickly to the distribution center) to these factories for dyeing and assembly. The entire process is automated.

This level of control, when managed correctly, means production rates can be quickly increased or decreased, resulting in less inventory in the supply chain (and less need to finance that inventory with working capital). This also means that ZARA does about 50% of their manufacturing in advance versus the 80-90% done by competitors. Interestingly, ZARA tries to keep about 85% of its plants idle to optimize the response time to demand changes around the world.

How ZARA Sticks Out From the Crowd

By embracing Lean practices, ZARA has positioned itself at the top of the fashion game. Fashion is already an industry marked by rapid changes, and ZARA is one of a few organizations that adapt swiftly. By incorporating the aforementioned Lean practices into the organization, ZARA can move faster than other fashion houses, releasing new and fresh designs twice a month while keeping supply high.

Other Useful Tools and Concepts

If you’d like to see how Lean practices can benefit your organization, you’ve come to the right place. You can see how Lean and Six Sigma alike have completely reversed the fortunes of Dr. Pepper, a popular soft drink manufacturer beloved across the United States. Adopting these principles has led to Dr. Pepper saving 100s of millions of dollars every year.

Additionally, you might want to see the differences between Six Sigma and Agile. Our comprehensive guide analyzes these two approaches, marks their differences, and helps you determine which might be better suited for your organization.

ZARA: Leaner, Better, Faster, Stronger

ZARA was fortunate to come to life at the time it did after Ortega had already learned some valuable lessons about what was and was not working in the fashion industry. There was a golden opportunity for someone to do what no one else was doing, and be the best at it. While there are examples throughout the industry of companies successfully implementing Lean Six Sigma and Lean business practices. Outside of the car industry, no company provides a better example of how to properly execute a Lean business model than ZARA.