Globalization, rapidly advancing information technologies and the internet have triggered a drastic transformation in the fashion industry.
This is the case specifically for the different go-betweens that participate in the fabrication, design and distribution processes, shortening the time between the design of a garment and its arrival on the shop floor. This has created the concept of short distribution process.
This change has enabled the appearance of a business model capable of responding to the client’s demand in a matter of weeks: The so called “Fast Fashion”.
Because of this, response speed has become a decisive element to compete in the global fashion market.
In the 80’s, companies in the fashion sector were launching two collections per year in which fashion trends and designs, influenced by fashion leaders, were launched around 270 days before the market could turn them into commercial products for the mass market.
With this “Push” system (imposed on the consumer) the level of non commercial products was relatively high and as a result it was very difficult to accurately predict trends. Consequently the science of retailing largely focused on management models for already purchased product.
In addition, not only the physical but more importantly the relational distance between factories and sellers reduced the reaction capacity to adjust to changing trends.
However, today’s business model has changed drastically, in trying to adjust production to the client´s tastes and requirements. Successful fashion retailers have transformed from supplying the client’s needs, to focusing on the clients wants, at what cost, and where, all in real time.
This has been enabled through the close collaboration with providers/manufacturers allowing a drastically reduced time to market for trending products through improved speed and flexibility.
As a result, this flexible production has enables companies to create a “flash fashion” that is launched in small product quantities to test the customer reaction. When the product is well received by the customer, the actual launch of the product is in substantially larger quantities.
This system allows the retailer to reduce the amount of garments that end up failing, as the retailer is only re-stocking product according to sales results. Basically the retailer is restocking best sellers/high demand product, thereby giving the customer what they want and driving up profitability.
The “Fast Fashion” model requires uncut product, ready to be pulled to support the customer fashion needs in all four seasons. Essentially successful retailing companies design and produce all year round distributing the merchandise in short periods of time.
This “short circuit” distribution was born because of the need for more frequent deliveries with lower product quantities.
In the former traditional model the tendency was to produce most of the garments in Asian countries because of lower labour costs. Lower costs were seen as more important than speed of delivery.
Todays retail fashion leaders prioritize its products commercial viability and weekly deliveries above costs (in the focus on the customer). Consequently this leads to much shorter lead times for all elements of the supply chain.
Distribution is now based on a zero stock philosophy that, through constant follow up of the market, delivers new garments every week.
In this new model, flexibility is essential for all the stakeholders (and especially the factories) that must respond rapidly to changing demands in the market.
In the same way, information technologies have allowed retailers to obtain in store sales data in real time and has improved considerably the efficiency in which communication takes place between the stores and the company.
This new system allows to adapt supply and demand in an almost immediate way due to the fluency between the different components of the production process and the almost real time response capacity.
One of the main challenges that the fashion sector faces is the continuing introduction of retail innovations. All studies done about the sector lately, show the importance of technological innovation for fashion retailers to be capable to compete and defend its own market and also to open new international markets.
There is empirical evidence that supports the ability of companies to thrive linked to its technological capacity.
In regards to innovation, there has been a basic change in the way that the fashion companies have been focusing on the advantage of low costs (supply push), towards a focus centred in responding to the consumers’ needs which involves the development ofsupply systems and strategies focused on the client (supply pull).
The difference is that while they are very sensitive to price, businesses and market, where costs control was vital, the market of fashion is now more sensitive to time.
As a result, having the right product in the right place and in the right time and at the right price, is more important for the margin for the distributor than the sale price.
This change has come to develop a system in which information and time become key factors in the relation between the Company and the client, in a very complex process that must end in the act of producing and delivering on time.
This means the business organization and its processes need to link all this and the creation of the product in the least amount of time possible.
Specifically, a key component of the Inditex model is in achieving to adapt the offer, in the shortest time possible, to the clients wishes, and, where the time factor is the most important thing, even over production costs.
In analysing the organizational skills of the Inditex model we can identify a few advantages:
The first advantage is the vertical integration, key to quick response to a very changing demand.
In Inditex a perfect synchronization of the processes of production and distribution, anticipates the best conditions against competition. Inditex acts based on an integrated design model. The provisioning of raw material, production, the logistics chain and their own stores.
Integration is very high in provisioning of raw material, a more intensive reaction to the productive process faces (design, fitting pattern, cut, and dye, part of production, quality control, ironing, packaging and labelling) and distribution.
The second advantage is flexibility: the Inditex model, takes off from a basic collection, that becomes 70/80% of its production, with garments they call “basics” and “monoproducts” and that have been proved to be best sellers. Then 30-20% are high fashion garments, some not tested before.
At the beginning of every season, only 30/40 to 100 of the purchase is finalized, against a European sector that represent 60 to 100, This is called short distribution circuit.
This system allows to reduce the amount of garments that end up failing and to keep producing what is selling.
The last element that contributes to the development of product flexibility is a decentralization and autonomy that every commercial Brand has in their own business management, their management teams are independent in the commercial decision making process and in the way they manage their resources.
The Corporate central services that they all share allow their international growth, management, use of logistic technology, their human resources policy, legal and financial aspects etc.
The third advantage of the Inditex model is their brand segmentation, the diversification of offer based on the market qualities using their 9 commercial formats.
The fourth advantage is the strong knowledge of the consumers preferences that Inditex develops through based on the information provided on latest fashion trends the, design teams that travels constantly around the world looking for trends and also for options made by the design teams by producers.
Also using the information provided by sellers around the World, all this information is processed and sent to the design departments and to production units.
This allows knowing in real time and with low costs, the most popular articles, sizes, designs and colours to adapt the product to real demand.
The information flow between the store and central services is a key element in the Inditex model, and it is reinforced in four ways:
1.Through the cashier, the Company knows the sales daily and what products are selling, which others are not and the evolution of storage.
2. By phone or email, information about observations and specific demands made by clients are shared and used to design products.
3. Executives visit all departments of the central.
4. Through PDA (iPads) operated with software developed by Inditex, the store knows at all times the stock of every product, even with pictures of the item.
Our organization must be focused in satisfying our clients, that is the reason why we develop products our client wants and we sell them in a store that builds and gives an exciting experience.