In an increasingly digitalized and connected world, fashion trends are spreading and changing faster than ever and consumers increasingly want to update their wardrobes faster and for a cheaper price. Basically consumers are expecting fashion retailers and brands to react instantly to new trends. In fact it is estimated that consumers keep their clothing approximately half as long as 15 years ago. [1] In order to be successful going forward, fashion retailers need to be able to get new trends to the market as quickly and cheaply as possible. How could fashion brands possibly answer to this challenging trend?<\/p>\n
Inditex, the company behind brands such as Zara and Massimo Dutti is one of the most successful fast fashion companies in the world. The success of Inditex is largely based on their ability to forecast demand and match data with supply through the use of digitalization, and thus cater to the demand by the consumers for quick introductions of new and trendy clothes for a cheap price. This has allowed Inditex to grow by a 10%+ annual rate between 2007 and 2016 [2].<\/p>\n
One of the key ways that Inditex has utilized digitalization in its supply chain is through the use of RFID (radio frequency identification). Inditex rolled out the use of RFID technology in 2014 and it allows for the individual identification of each of its garments through radio waves. In more practical terms, the RFID pieces are inserted inside the safety alarm of clothes. [3] The individual identification of its garments enables Inditex\u2019s brands (e.g. Zara) to immediately order more items to its stockroom when an item is sold. [3] It also provides Inditex with immediate data on which products are the most popular ones and feeds this data to production and fulfilment systems. [4] This allows Inditex to produce more of the items in the highest demand and thus minimize waste in its supply chain. The use of the RFID technology to identify individual pieces of clothing also enables Inditex to control its inventory more efficiently both for its stores and warehouses to reduce inventory loss. [5] Furthermore as merchandise is unloaded to the warehouses and stores, the RFID system immediately recognizes which pieces of clothing should be unloaded. [4] This reduces the manual labor time needed in the unloading process and thus streamlines logistics. Finally in-store customer service is improved by Inditex\u2019s ability to immediately identify a piece of clothing requested by the customer either in the store storage area or the central warehouse. [5] This allows Inditex to immediately send this piece of clothing to the store or directly to the customer\u2019s home. The use of RFID is one of the main enablers of Inditex being able to create up to 65,000 new design per year [6] and having the ability to supply orders to stores and online customers in 2 \u2013 48 hours. [7]<\/p>\n
Digitalization of the supply chain for consumer goods can be divided into six different categories: Planning, Physical flow, Performance management, Order management, Collaboration and Supply Chain strategy. [8] I think it is fair to argue that Inditex is so far doing a very good job within utilizing digitalization for Planning and Order management. From an outside in perspective a recommendation for the Inditex management would be to put increasing focus on the four other categories. For the Physical flow part, management should focus increasingly on how to utilize robotics in warehouse management and autonomous and smart vehicles in transportation processes to reduce costs and further improve supply chain productivity. [8] Moreover, Inditex should make sure to gear Performance management towards real-time analysis and improvement rather than doing it retrospectively on for example a monthly basis. Furthermore, Inditex is currently quite heavily vertically integrated, however for the Collaboration part, Inditex should consider whether it would make sense to outsource part of the supply chain and rather operate in close co-operation through the use of technology with its supply chain partners. Finally for the Supply Chain strategy part Inditex should make sure to utilize techniques such as microsegmentation and mass customization. [8] This increases in importance for example as consumers are looking for more customization for their products (e.g. Nike already allows its customers to design their own shoes [9]).<\/p>\n
To summarize, Inditex is a front-runner within fashion when it comes to utilizing digitalization in its supply chain. However, Inditex still has several areas of supply chain digitalization it can develop its capabilities within in order to maintain its top position in the market.<\/p>\n
There are two open questions that I think are interesting in this context. How can Inditex make its supply chain more sustainable by utilizing digitalization? Secondly how should retailers on a more detailed level think about the utilization of autonomous and smart vehicles in its supply chain?<\/p>\n
Word Count: 797<\/p>\n
[1] Remy Nathalie, Speelman Eveline, Swartz Steven, \u201cStyle that\u2019s sustainable: A new fast-fashion formula.\u201d McKinsey & Co<\/em>, October 2016, https:\/\/www.mckinsey.com\/business-functions\/sustainability-and-resource-productivity\/our-insights\/style-thats-sustainable-a-new-fast-fashion-formula<\/a>, Accessed November 2017<\/p>\n [2] Inditex Group, 2017 Company Profile, p. 16, https:\/\/www.inditex.com\/documents\/10279\/245194\/Group+Profile\/7e81b535-64aa-40bf-8625-c498a72be73d<\/a> , Accessed November 2017<\/p>\n [3] Inditex Group, \u201cInditex deploys RFID technology in its stores\u201d, July 2014, https:\/\/www.inditex.com\/en\/article?articleId=150174&title=Inditex+implanta+la+tecnolog%C3%ADa+RFID+en+sus+tiendas<\/a> , Accessed November 2017<\/p>\n [4] O\u2019Marah, Kevin, \u201cZara Uses Supply Chain To Win Again\u201d, Forbes, <\/em>March 9, 2016, https:\/\/www.forbes.com\/sites\/kevinomarah\/2016\/03\/09\/zara-uses-supply-chain-to-win-again\/#390d51b51256<\/a> , Accessed November 2017<\/p>\n [5] Miraleds Tatiana, Garrido Azevedo Susana, Charrua-Santos Fernando Bigares, Mendes Luis Antonio, Oliveira Matias Joao Carlos, \u201cIT applications in logistics and their influence on the competitiveness of companies \/ supply chains\u201d, Scientific Annals of the \u201fAlexandru Ioan Cuza\u201d University of Ia\u015fi Economic Sciences<\/em>, Vol 62, No 1 (2015), http:\/\/saaic.feaa.uaic.ro\/index.php\/saaic\/article\/view\/158 , Accessed November 2017<\/p>\n [6] Inditex Group, 2017 Company Profile, p. 11, https:\/\/www.inditex.com\/documents\/10279\/245194\/Group+Profile\/7e81b535-64aa-40bf-8625-c498a72be73d<\/a> , Accessed November 2017<\/p>\n [7] Inditex Group, 2017 Company Profile, p. 11, https:\/\/www.inditex.com\/documents\/10279\/245194\/Group+Profile\/7e81b535-64aa-40bf-8625-c498a72be73d<\/a> , Accessed November 2017<\/p>\n