of trading firms as described earlier but in this instance they are part of

Of trading firms as described earlier but in this

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of ‘trading firms’, as described earlier, but in this instance they are part of Zara as opposed to being independent third parties. A similar office in Barcelona coordinates purchasing and sourcing in Italy and Turkey. As of 2011, 49 per cent of Zara’s clothes came from the ‘proximity’ area, 35 per cent from Asia and 14 per cent from Turkey and Italy (Johnson & Felsted, 2011). Despite the higher input costs (15–20 per cent more expensive in Europe than in Asia), the shorter supply chain enables Zara to design, manufacture and ship finished goods to stores in 4–5 weeks (two weeks for restocking). This contrasts with cycle times of up to six months for more traditional retailers. The highly responsive supply chain enables the company to integrate a decentralized, store-based information infrastructure with upstream design, procurement, production and distribution operations (Tokatli, 2008). By delivering a large number of varied garments, and reacting quickly to new trends, it can better match supply with demand than its com- petitors and sometimes charge more per item (to cover the higher production costs). Items that are the current trend (style, colour and so on) can be sold at a higher price, which is the essence of what UBS analyst Andrew Hughes was arguing when he stated, ‘fashion trends can be much more important than commodity costs’ (quoted in Johnson & Felsted, 2011). Quick response and short turnaround have been critical to Zara’s superior performance. But it is not merely a logistical innovation associated with proximity sourcing; it is complemented by an ability to react quickly to new trends and translate them into affordable items that nonetheless retain an edgy newness that appeals to young consumers (Dunn, 2007). Managers are responsible for mining sales data and then deciding what to offer in their store; compensation is based on sales and the accuracy of their forecasting (Sull & Turconi, 2008). By using point of sale data, store managers track local trends and report customer demand and sales on a daily basis to design groups at the company’s headquarters. The store thus becomes a crucial source of information, allowing the company to instantly adapt to customer demands
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257 GLOBAL COMMODITY CHAINS AND FAST FASHION (Lopez & Fan, 2009). Stores typically hire young fashion-conscious staff, pay scrupu- lous attention to sources of high frequency media information as a way of identifying local trends, and constantly adapt their offerings to match this evolutionary fashion process. By essentially empowering managers (and indirectly sales associates) to gather and transmit ‘trend’ information, Zara is able to continuously stay in tune with the latest fashions. As a result, its product failure rates of approximately 1 per cent are much lower than the industry norm of 10 per cent. Fewer unsold items, lower inventory costs through short turnaround, and a reduced need for discounting all more than compensate for its higher production costs. Additionally, Zara spends a mere 0.3 per
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