In 1975 Amancio Ortega founded Zara to better understand world markets for his fashion merchandise. A decade later Ortega formed a parent company for Zara, Inditex. Zara produces where it will sell and and this provides short lead times for new fashion concepts and ideas.
Zara is a booming fashion brand and company that is under the parent company Inditex Corporation. Zara is very different from most fashion brands in that they rarely have sales or advertise. Most of Zara’s production process is done in-house.
Zara is very different from the average fashion brands and companies in that they take a technologically advanced approach. For example, Zara’s store managers are required to use PDAs. PDAs, or Personal digital assistants, are handheld computing devices that are used for mobile purposes when outside of the office setting and are used for the purpose of collecting customer input and feedback. For an information system, Zara uses a Transaction Processing System so that they can gather customer purchase information.
The use of a Transaction Processing System and PDAs allows Zara to make the necessary changes to improve sales, inventory and make other important decisions. Zara develops designs according to the customer demand and sales data. As an incentive, Zara gives individual bonuses that are directly linked with the success of the design team.
Zara produces the majority of their merchandise in-house and uses inventory optimization models to determine the amount of each items that should be delivered to each store. With a mindset of going green, Zara uses renewable energy systems at their logistics centers and use biodiesel for their trucking fleet. Zara has several limitations, including operations vulnerabilities and financial vulnerabilities, as well as rising transportation costs.
In contrast to Zara, most fashion companies use contract manufacturing. In contract manufacturing companies outsource production to third-party firms. The advantages of contract manufacturing are lower costs and increased profits. The disadvantages of contract manufacturing are poor working conditions, sweatshop labor, and disregard for environmental concerns or issues.
If you compare Gap to Inditex you will notice that Inditex’s numbers are approximately double the numbers of Gap. The only numbers that are not doubled are the revenues.
Personally, I have never had a shopping experience with Zara, but I have heard great things about it from my cousin who has shopped there.