SUPPLY CHAIN STANDARD JULY/AUGUST 2009
www.supplychainstandard.com
with its suppliers, which include Paul Smith, Hugo Boss and
Henri Lloyd. It provides a collaborative platform through which
data and images for millions of seasonal products can be
captured from their suppliers. By eliminating costly mistakes
caused by poor data quality and reduce the time taken to
capture information by around 50 per cent efficiency has been
significantly increased.
Stephen Jeffries, director of retail, EMEA at Inovis, reckons
that fashion supply chains cannot run effectively without the
support of technology. “IT drives efficiencies in the supply
chain now and will do more so into the future. Cash flow is
going to be king in the next year and a half so getting these
efficiencies right, at the right time, is going to be key for
retailers.” He adds that, while the high street has seen a bit of a
sales slump in recent months, things are likely to pick up in the
run up to Christmas 2009, so retailers need to be able to
modify processes when this happens.
The increase in popularity of online retail has added a
further level of complexity. House of Fraser recently brought its
online operation in-house and is now running it from a
mezzanine level at its main distribution centre in Milton
Keynes. This has streamlined processes meaning products get
onto the web quicker, so time to customer is also reduced.
Times are changing and those that survive are going to be
the ones that adapt. Stephenson warns: “What’s worked for the
last 20 years isn’t necessarily the best way of doing it today. We
have to start thinking about big solutions, not just small
adjustments… It takes nerve even to contemplate major
changes in an uncertain market, but major change is what will
pull the brave through the recession into the boom that’s sure
to follow. Every day is a day wasted. We should be talking today
at the top strategic level, and looking at the fast, high impact
actions we can put in place to ensure survival.”
CASE STUDY
Fast fashion
Imagine that you have a hot new product. You
display it in your store window believing that
you have beaten your competitors to identify a
key trend in the market. Good things can only
come your way. But just a couple of days later
your biggest competitor has responded with its
own take on this hot new product.
It’s morale-sapping – intentionally so. And the
ability to do that is just part of the Zara concept
of fast fashion, says Prof Jose Luis Nueno,
professor of marketing at the IESE Business
School, who has worked closely with Zara’s
parent Inditex as it has developed its strategy.
Of course, this is an extreme example – it is
very expensive to move that quickly even for an
organisation as agile as Inditex.
Inditex started out as a garment
manufacturer selling through the traditional
wholesale system in Spain and it wasn’t until
two big wholesalers went bankrupt that, in
1975, it decided to open its first store. It has
since gone on to become one of the largest
apparel retailers in the world with sales of more
than ten billion euros. It now has 4,264 stores
around the world and sales outside Spain now
account for 66 per cent of the total.
Professor Nueno says that none of this
would have been possible if the company had
not developed its “Fast Fashion”logistics. “It is
easy to predict style for a business garment –
but much less easy for a leisure garment,”he
says highlighting the importance of speed in
this market.
Zara, Professor Nueno points out, has a big
offer in basic goods. These are low price
products such as T-shirts and are positioned in
the centre of the store. Crucially, although prices
are low, margins for these products are high.
The Fast Fashion goods are positioned
around the edges of the store, attracting the
buyers. With the Fast Fashion products stock
SCS:FASHION SUPPLY CHAINS 13
Prof Jose Luis Nueno of the IESE Business School explains to Malory
Davies the supply chain philosophy that has made Zara such a
formidable competitor in the high street fashion business.
CASE STUDY
Off the rails
European retailer WE Fashion, which operates
230 stores across the Netherlands, Belgium,
Germany, Switzerland, Luxembourg and France,
has implemented a series of Oracle Retail
applications. The retailer chose Oracle’s Retail
Merchandising System, Retail Allocation, Retail
Price Management, Retail Warehouse
Management System and Retail Trade
Management, which it expects to provide
insight into store, inventory, merchandise and
rotation is rapid and if a product doesn’t sell, it is
eliminated and something else brought in.
In general, products turn around from nine
to 30 days which enables it to have fresh stock
in the store. By staying one step ahead of the
fashion trends in this way, the retailer keeps
customers interested. If customers understand
that a store is constantly being updated with
new products, they get into the habit of visiting
regularly. There is less need to advertise.
And, critically, the system results in much less
unsold stock which must then be moved out
and discounted to get rid of it. A conventional
retail system can have up to 40 per cent of
stock being discounted. For Inditex, the figure is
much lower – ten to 20 per cent. Professor
Nueno points out that the resulting margin
depletion is also much lower – only a quarter of
the conventional level.
Inditex aims to outsource as much of its
logistics as possible and has a matrix based
on the functions that are most important to
the client and those that it does well. So a lot
of IT is carried out in-house, says Professor
Nueno. “There is one programmer for every
three designers.”
This philosophy means that most of the
transport is contracted out. Inditex has the
benefit of a private facility at Zaragoza Airport
which it can make use of 24 hours a day. As a
result a container of goods flown in from a
factory in the Far East can be unloaded and
goods loaded on another aircraft for the final
destination within an hour.
So far, 2009 has been another challenging
year for the sector but Inditex expects to
continue outperforming the industry.
The Group expects to add 230,000 square
metres of retail surface area, approximately 95
per cent of it in international markets, the
company says.
supply chain operations, enabling it to adapt to
changes in demand.
Koen Aben, chief information officer says: “As
we continue to grow, WE Fashion recognises the
importance of deploying systems that not only
support our expansion long-term but enable us
to maintain an intimate understanding of
customer demand. We recognise that Oracle
Retail applications are key to delivering the tools
that can help us develop our business.”
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