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EDC 2.1-Zara&UNIQLO

Zara and Uniqlo are two major global fashion retailers known for their quick and affordable clothing. [1] Zara launches over 10,000 new designs per year and relies on speed throughout its supply chain to quickly replenish stores with new inventory. It sources materials globally and keeps inventory levels slightly below estimated sales. [2] Uniqlo focuses on basic, casual clothing and emphasizes quality over trends. It controls inventory carefully and maintains long-term supplier relationships to improve its supply chain and keep prices low compared to competitors. Both companies use supply chain strategies tailored to their business models to deliver new affordable fashion rapidly.

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Yousra Zhar
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72 views3 pages

EDC 2.1-Zara&UNIQLO

Zara and Uniqlo are two major global fashion retailers known for their quick and affordable clothing. [1] Zara launches over 10,000 new designs per year and relies on speed throughout its supply chain to quickly replenish stores with new inventory. It sources materials globally and keeps inventory levels slightly below estimated sales. [2] Uniqlo focuses on basic, casual clothing and emphasizes quality over trends. It controls inventory carefully and maintains long-term supplier relationships to improve its supply chain and keep prices low compared to competitors. Both companies use supply chain strategies tailored to their business models to deliver new affordable fashion rapidly.

Uploaded by

Yousra Zhar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Quick and Affordable”: Zara & UNIQLO

1. Zara’s Three Success Factors: Speed, Speed, and Speed


Zara is a global fashion retailer which sells its goods around the world. The retailer’s
international footprint proves that national borders are no hindrance to a shared fashion
culture. Founded in 1975, the Spanish retailer Zara has stores strategically located in leading
cities across the continents, launches more than 10,000 new designs each year, and is
recognized as one of the world’s principal fashion retailers. It belongs to the INDITEX
Group, which also holds common brand names like Pull&Bear, Bershka, and Stradivarius.
Zara is well known for its up-to-the minute styles and products. The main key to their
corporate strategy is their SC strategy. The following statement by INDITEX gives the first
hint of this exclusive strategy: “Our approach to fashion—creativity, quality design and rapid
turnaround to adjust to changing market demands—has allowed us to expand internationally
at a fast pace and has generated an excellent public response to our retailers’ collections”
(Inditex 2014).
To keep responsiveness at the highest level, many garments are kept in a generic
unprinted stage. This approach is called postponement strategy, since products can be
modified from generic to finished according to customer demand.
Procurement offices in the UK, China, and the Netherlands deal with all purchasing
activities. In manufacturing, Zara links the two sites of SC strategies. On one site they import
40% of their products as finished goods from low-cost countries. This strategy is used for
“basics,” or products that are unchanged by fashion trends such as white and black T-shirts.
All other materials are bought from Mauritius, New Zealand, Australia, Morocco, China,
India, Turkey, Korea, Italy, and Germany. Zara tries to source locally instead of globally, thus
reducing transportation costs. Short lead times are another key factor for Zara. Where other
fashion companies supply every 3 months, Zara replenishes its stores twice a week. The
company provides the necessary fundamentals for subcontractors to meet their agreed upon
delivery times.
To implement its SC strategy, ZARA redesigned its inventory management. Previously,
goods were shipped from two central warehouses to each of the stores, based on requests from
individual store managers. These local decisions, when assessed on a global scale, inevitably
led to inefficient warehousing, shipping, and logistics operations. Production overruns,
inefficient SCs, and an ever-changing marketplace (to say the least) were some of the
problems which Zara had to overcome.
A variety of SCOM models was used in redesigning and implementing an entirely new
inventory management system. The new centralized decision-making system replaced all
store-level inventory decisions, thus providing results that were more globally optimal. Since
implementation, having the right products in the right places at the right time for customers
led to increase in sales from 3% to 4%.
Inventory at Zara is kept a smidge under the estimated sales levels. For example, if
demand increases immensely for clutch purses, they can assign emergency orders. In this
way, the company is able to deal with sudden demand changes. However, when the opposite
is the case, Zara’s management determined that the potentially lost customers would be less
costly than slow moving or last season’s products. Speed is Zara’s key strategy. All products
are to leave the warehouse after a maximum of 3 days. At the end of each season, Zara
reduces the price of its products up to 30% to sell remaining stocks.
All items arrive at the stores ironed, on hangers, and with price tags, saving valuable time
for staff. Zara’s pricing is based not on the classical cost plus margin principle, but on setting
prices according to comparable items in the local market. Because of this, it is possible that
the same product has a different price in each European country. To make price tagging
easier, Zara previously attached a tag on its goods showing all prices and goods could easily
be shifted from one country to another with reduced complexity. Today, bar codes are used to
tag the products, and these can be read via a scanner, showing the local price in the local
store. This also enables Zara to keep up-to-date information about when and where goods are
sold. All information is analyzed at headquarters so that particular strategies can be adapted if
necessary.
Marketing is minimized, as Zara sees all promotion activities as distracting for the
customer. The company has managed to present itself as a fashion retailer with everchanging
and up-to-date styles with good quality at affordable price levels. Customers value exactly
these assets—making all additional marketing efforts unnecessary.

2. UNIQLO: Basic, Casual Wear at Top Quality

UNIQLO does the exact opposite of Zara, but is no less successful. UNIQLO is one of the
largest and fastest growing Japanese companies and ranks third among fashion retailers
worldwide following Gap and Marks & Spencer. The mother company,FAST RETAILING
CO. LTD, which also owns brand names GU and Theory, was founded in 1963 in Japan,
where it still has its head office in Yamaguchi-City. Highquality and affordable products are
valued more highly than chasing the newest trend.
Products are rather casual and basic, making them occasion- and age-less, but still stylish,
using various colors and cuts. As a result, UNIQLO meets customer demand for clothes
without presenting them on the catwalk.
UNIQLO has multiple production and purchasing offices in Asia which look after more
than 100 suppliers each week. By doing this, the company is able to maintain good quality
control over their outsourced partners. If issues concerning quality arise, they are immediately
taken to the production units where means for improvements are found. Currently, UNIQLO
is seeking to expand their purchasing and production facilities to meet demand in the United
Kingdom and the United States.
UNIQLO controls its inventory carefully to maintain optimum inventory levels for each
week. At the end of each season, products are sold for 20–30% less than the initial price to get
rid of inventory.
Additionally, the fashion retailer has found a new place for selling clothes: railway
stations. The concept works fabulously for UNIQLO. Shinjuku Station is Tokyo’s biggest rail
station and the UNIQLO store there ranks 6th out of 770 UNIQLO stores. Popularity of so-
called one-day packs with basics like socks and underwear has also risen.
UNIQLO follows the SPA model (specialty store retailer of private label apparel) which
is a specialized model where fashion retailers track all business activities from the point of
origin up to the point of sale. This approach enables UNIQLO to improve its business
processes quickly and constantly, giving the company an advantage over its competitors.
Through long-term relationships with suppliers, UNIQLO is always seeking ways to improve
its SC. This affects selling prices. By optimizing its SC, the company has been able to lower
prices up to one third compared to its competitors.
UNIQLO promotes its products on posters, flyers, or TV, hinting which items will be put
out for sales the following week.

Discussion Questions
1. What is the danger of mixing elements (“hybrid strategy”) from both agile and lean SC
strategies?
2. Contrast and compare Zara and UNIQLO concerning their primary goals, product designs,
manufacturing, inventory, suppliers, lead times, and pricing strategies.
3. What factors are critical for each SC strategy?
4. What do you think of UNIQLO’s decision to open new facilities in UK and US?
5. Which roles does information technology play for SC coordination?
6. How do the SC strategies of Zara and UNIQLO support their competitive strategies to
achieve “strategic fit”?
7. Are you concerned about sustainability issues in apparel SCs?

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