Bonjour à toutes et à tous. Suite au message de Jos, j’ai décidé de publier quelques articles orientés business. Le premier article est une étude de cas sur le groupe Inditex (Zara…) que j’avais écrit en exercice lors de mon MBA aux USA. L’article explique comment Inditex et Zara est devenu un des leaders mondiaux de l’habillement (son PDG est aussi l’homme le plus riche d’Europe, avec 39,5 milliards de dollars de fortune) et un océan de rentabilité alors même que Zara est l’une des rares marques de vêtement à continuer à largement produire en Espagne, restant partiellement sourde aux sirènes de la délocalisation. Explications (article en anglais)
Inditex is a Spanish company, which is one of the world’s largest fashion groups. Founded in 1974 by Amancio Ortega, Inditex owns several cloth brands, such as Massimo Dutti, and Zara, a brand which represent 2/3 of the sales (in dollars) of the company.
Why Inditex has found recognition as one of the best supply chain performers ?
Inditex became of the most successful fashion groups, with a turnover over €11bn ($15bn) and profits over €1,3bn ($1,8bn). Inditex became successful, because it set up an efficient supply chain in order to provide fashionable and cheap clothes to its customers. Thanks to the supply chain, Zara, for instance, is able to set up a new collection every two weeks, which motivate its customer to come back often – 17 times a year vs 3 for its competitors (2) – and buy now until the clothes will be gone. In spite of spending lot of money in advertisement, Inditex prefers to open new stores and continuously improve (kaizen) its supply chain, in order to create more and more value to its customers.
What is the supply chain of Inditex?
Most of the competitors of Inditex use to subcontract and outsource the manufacturing process, in order to decrease the cost of goods sold. At the opposite, Inditex preferred control its supply chain and integrate most its supply chain: Inditex design, produce, promote and sell its clothes by itself, even if it has still some suppliers. However, the relations with its suppliers are “managed process links” and allow Inditex to control and improve its supply chain.
In order to keep the control of the process, most of the clothes are manufactured in Spain or countries close to Spain rather than Asia even if wages are 8 times (1) higher in Spain than in China ($1650 against $206). Inditex can control better its supply chain – and avoid delays, bad buzz like the scandal of Nike whose suppliers used child-labor. But main objectives are to produce just in time and decrease the inventory costs or the risk of obsolescence – clothes are a very short life cycle – and the need to markdown to get rid of old garments. Typically, a cloth is produced only to replace a sold produce. The integrated supply chain allows Inditex to improve the speed of its supply chain: low transportation time, 1 or 2 days for truck delivery in Europe and 2 days of plane delivery in other countries. With this so-efficient supply chain, Zara, the major brand of Inditex is the sole fashion brand to launch a new collection every two weeks.
Eventually, Zara supply chain process listen the voice of customer thanks to the point-of-sale (POS) system. Typically, if a customer ask a new color or shape of collar, the seller can wit this information in a small electronic device. If other customers ask the same kind of features, a software will tell to the designers which features customers want. A good way to target perfectly needs of customers. Inditex can follow the new trends and needs of its customer. For example, “When Madonna gave a series of concerts in Spain, teenage girls were able to sport at her last performance the outfit she wore for her first concert, thanks to Zara” (1)
Does this ranking seem justified, based on my research?
Inditex completely redesign the supply chain of fashion groups, with success. For instance, Inditex produce most of its garment close to Spain, which was not an obvious choice. Second point: when most of garment firm spend a lot of money to advertise their products, Inditex doesn’t spend money on advertisement (only 0.3% of its turnover) and use this money to open new stores – to extend the business – with the best locations possible – to attract easily customers without advertising. This innovative supply chain of Inditex, which allow the company to outdo its competitor in being more fashionable, cheaper and more profitable, deserve the ranking it has.
Does the purported supply chain competence provide a source of competitive advantage? Is so, how is advantage achieved and can it be sustained?
The supply chain of Inditex provides a competitive advantage to the firm. For instance, Inditex builds trusting relationship with its main suppliers in Spain. When Inditex needs to produce a new garment, the suppliers of Inditex are so confident that they start to produce without a contract, which allow speeding up the supply chain process. A feature – confidence among the supply chain- that is difficult for the competitors to imitate. Then, Inditex is an integrated company, from manufacturing to retail stores. It will probably difficult for competitors to have a so huge control about the supply chain because, “The Inditex way is an all-or-nothing proposition that has to be fully embraced to yield results” (2). If 10 factors – for example, inventory management, information technologies used… – has to work together to achieve a similar supply chain and each factor can be copied 80% of the time, a company has only 11% (80%^10) to copy it supply chain.
1) The Economist, http://www.businessmodelalchemist.com/2005/06/zaras-business-model.html
3) (2) N. Kumar and S. Linguri, “Fashion Sense,” Business Strategy Review, Summer 2006.