Made-To-Order: Can Zara Make the Shift to True Mass Customization?
Arguably the original “fast fashion” retailer, Zara has been lauded for its products’ speed-to-market and in many respects, is an exemplar of the digitalized, vertically-integrated supply chain. However, with customers increasingly demanding one-of-a-kind, bespoke products, Zara must begin to invest in 3D design and manufacturing technology to enable true mass customization.
Arguably the original “fast fashion” retailer, Zara has been lauded for its products’ speed-to-market and in many respects, is an exemplar of the digitalized, vertically-integrated supply chain. The control afforded by Zara’s in-house design, manufacturing, and distribution capabilities allows new collections to reach stores within 2 weeks of conception (compared to a six-month lead time for comparable retailers)[1]. Furthermore, Zara offers a large number of SKUs and in limited quantities based on current consumer trends. These capabilities enable optimal sales planning, just-in-time manufacturing, and inventory management, allowing Zara to approximate a mass customization model. While many fashion retailers have struggled to optimize their supply chains, and, in doing so, remain competitive, some new entrants are taking digitalization to the next frontier—using digital design and printing (e.g. 3D printing and scanning) to truly match supply with demand at an individual consumer level—true mass customization.
To retain its competitive advantage, Zara must begin taking stock of new digital technologies and viewing early-adopters as veritable threats. For example, Adidas has developed the SpeedFactory, an initiative to increase utilization of 3D knitting with the goal of manufacturing sneakers customized to an individuals’ foot shape, size, and performance needs[2]. Ministry of Supply, predominantly an e-commerce retailer, has recently invested in one mass customization tool: a $190,000 3-D knitting machine which uses customers’ desired garment color, cuff, and button type to manufacture a custom real-time in 90 minutes[3]. There are two major reasons why piloting such mass customization tools is a necessity for established retail giants such as Zara. First, customers are increasingly demanding one-of-a-kind, bespoke products, placing pressure on retailers to increase supply chain flexibility. In addition, mass customization tools offer the opportunity to reduce costs. Manufacturing goods on-demand offers production and overhead cost savings and means virtually no risk of unsold inventory. For instance, 3D knitting also results in minimal fabric waste relative to traditional manufacturing and is almost entirely automated, resulting in lower labor cost[4].
Zara’s agile, vertically-integrated supply chain is benefitting from ongoing investment in digital technology to improve speed-to-market and responsiveness to customer preferences. This has manifested as small batch sizes, a high number of SKUs, and limited shelf time in stores. For example, Zara now reserves 85% of its in-house production capacity for in-season design adjustments[5]. Production capacity utilization is sacrificed to enable agility in responding to changes in demand, thus shortening turnaround times for products resulting from trends identified mid-season. The company is also investing in RFID technology to improve inventory management at both a store and warehouse level. Still, despite increasing supply chain efficiency, Zara has not moved to creating truly “made-to-order” products. As such, there still exists a classic “bullwhip effect” that results from the information lag between identification of customer needs and communication up the supply chain[6]. While Inditex leadership (Zara’s parent company) does harp on the importance of continuous supply chain optimization in the long-term, there has been no mention of radical supply chain enhancements such as investment in 3D printing technology as one path towards full customization.
In the near-term, akin to companies such as Adidas, Nike, and Ministry of Supply, Zara must pilot 3D design and manufacturing technology. 3D technology offers an opportunity for Zara to further consolidate its supply chain, shrinking lead times and reducing direct material and labor costs, transportation costs, retail space needs, as well as inventory and obsolescence costs. The pilot should begin with a single market to first realize economies of learning and quantify impact to each step of the supply chain as well as overall profitability. The pilot would also enable Zara to assess customers’ reactions to the new technology, evaluating both the consumer experience and product enhancements such as seamless clothing. Over the next 3-5 years, Zara must determine the optimal mix of standardized versus customized products to offer, and thus determine the degree of technological shift required to meet this demand. Furthermore, Zara must determine how to allocate capital efficiently such that new manufacturing processes and technologies can be integrated into the supply chain without disrupting operations and impairing the ability to serve the existing customer base.
Despite the promise of 3D design and manufacturing technology, some are skeptical of its practicality in mass retail. Felipe Caro, a UCLA professor of technology and operations management and former Zara supply chain strategist, contends that the reduced labor and obsolescence costs may not be scalable since pure play mass customization is “always working in batch sizes of one[3].” Such criticism raises several questions for retailers such as Zara to consider. Will 3D printing technology be cost-effective enough to justify mass customization, and if so, on what time horizon? Considering the fast fashion industry as whole, will consumers continue to seek personalization, and if so, will they be willing to pay more?[7]
[1] Ferdows, K., Lewis, M., & Machuca, J. (2004). Rapid-Fire Fulfillment. Harvard Business Review.
[2] Jack, L. (2015). The Adidas “Speed Factory” Aims To Bring Local Customization To Manufacturing. Fast Company Magazine.
[3] Halzack, S. (2017) How a custom blazer in 90 minutes just might change the apparel business. The Washington Post.
[4] Kestenbaum, R. (2017). 3D Printing In-Store Is Very Close and Retailers Need to Address It. Forbes Magazine.
[5] Stevenson, S. (2012, June 21). Polka Dots Are In? Polka Dots It Is! How Zara gets fresh styles to stores insanely fast—within weeks. Retrieved November 12, 2017, from http://www.slate.com/articles/arts/operations/2012/06/zara_s_fast_fashion_how_the_company_gets_new_styles_to_stores_so_quickly_.html
[6] Bhatia, A., & Asai, R. (2007). Mass Customization in Apparel & Footwear Industry– Today’s Strategy, Future’s Necessity. Wipro Technologies.
[7] Roca, J., Vaishnav, P., Mendonca, J., & Morgan, G. (2017). Getting Past the Hype About 3-D Printing. MIT Sloan Management Review. Retrieved from http://ilp.mit.edu/media/news_articles/smr/2017/58323.pdf
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This is fascinating. I agree that the key challenge will be to figure out how to decrease cost and increase speed of mass production when you are working in batch sizes of 1. Perhaps this type of technology is better suited for low-volume, high-price items, such as men’s suits. Companies such as Indochino have online platforms that guide the customer through the process of measuring one’s size and choosing fabric/style customizations. It seems that 3D knitting could further revolutionize that niche of the clothing industry.
https://www.bostonglobe.com/lifestyle/style/2013/04/17/the-yourself-bespoke-suit-new-generation-men-find-that-online-custom-made-measure-suits-them-just-fine/a7DBvTyFlguwHEah9dazaK/story.html
Interesting essay. I agree with your concerns about whether or not this could ever become scalable or cost-effective. I also wonder whether adding this capability would end up actually improving Zara’s value proposition to customers. Zara’s business model is built on allowing consumers to follow the latest fashion trends (and get access to the newest en vogue items as quickly as possible), which seems somewhat antithetical to the concept of clothing personalization. I could see mass customization being more attractive for more timeless items, such as shoes, that consumers will keep for years but it’s hard for me to see customers being overly concerned with customizing a $40 sweater that they’ll likely only wear for a few months. Perhaps an effective way to implement this would be to apply it to only select product offerings for which Zara has high conviction it will be value-added for customers (which can be teased out in the slow, localized rollout approach you suggested). And perhaps over time the cost of 3D printing will deflate as technology providers become more efficient, which could create a completely different cost-benefit outlook.
This is really interesting, thanks for your perspective. I think the question you posed at the end of your article (will consumers continue to seek personalization, and if so, will they be willing to pay more?) should be one that retailers ask themselves before they invest in new technologies such as 3-D printers. My worry is that while consumers–particularly millennials–may in fact continue to seek personalization in their fashion items, I doubt that they will be willing to pay more for a customized item. Particularly for many of the items that Zara sells, namely, sweaters, shirts, dresses, pants, etc, the possible degrees of customization are limited. In addition, my intuition is that it is unlikely that someone will create their own sweater design and then be willing to pay Zara for it. After all, much of Zara’s customer promise lies in providing “high-fashion” items as determined and created by Zara, and that is what customers are seeking when they shop there. While customization has its merits, I worry that it actually has the potential to dilute Zara’s brand equity and customer promise if customers themselves are doing the work.
Great writing. I think Zara is a prime example of an industry shift within fashion and the need to manufacture, distribute, and deliver at a much faster rate than ever before. Regarding your question at the end, I believe customers are definitely moving more towards wanting more customized products. When we think about what value a supply-chain model can provide to a customer, it is the ability to bring a product that is truly personalized. This delivers on customer promise because of the optimization of an efficient supply-chain. With companies like Amazon and Zara, and rising customer expectations, we will only see more of this model.
Interesting article! While I completely agree that as a fast-fashion company, Zara needs to be tech savvy in order to drive toward a more dynamic product mix that reacts faster to changes in consumer tastes, I wonder if 3-D knitting technology is directly in line with Zara’s customer promise. If Zara’s goal is to provide customers with an ever changing set of clothing options at an affordable price, then wouldn’t investing in customization be directly at odds with this? I think the Adidas and Ministry of Supply examples you provide show applications in which this 3D knitting technology would work: both of these companies provide products that are perceived to be of high quality that last. I would argue that Zara serves customers that value continued variety over customizability, but I guess that is the hypothesis that Zara is testing by investing through this investment!
In my opinion, UCLA’s Prof. Felipe Caro’s view on the low potential for scalability of mass cutomization in Zara is certain and will remain so until 3D technologies reach maturity. Compared to high-end brands such as Nike and Adidas, Zara’s apparel retail approach focuses in low cost and low price (hence moderate quality) items. As per the article “Zara’s Secret for Fast Fashion” (HBS Working Knowledge, 2/21/2005), “Zara often beats the high-fashion houses to the market and offers almost the same products, made with less expensive fabric, at much lower prices.” Therefore, until 3D technology is mature and technology prices are compatible with low cost business models, this strategy would only be marginal on Zara’s product mix.
Thank you for such an interesting article! I think 3D printing will definitely play a big role in the retail industry in the future. However, with the current costs and capabilities of 3D printing I think that it is not yet suited for all of Zara’s product lines. Zara’s proposition is “fast fashion” where it follows customer’s trends and more importantly copies/ adapt slightly from other high fashion brands. Customers are not looking for personalization but are looking for just “fashionable” casual every day apparel. However, I do see potential in the accessories line where customers may want to tweak the design (eg stone color, necklace color) or the sizes (ie ring sizes and bracelet sizes). Accessories is more timeless and require more specification in terms of fitting to the customers.
Really fascinating look into the hyper-competitive world of consumer goods and in particular retail. I think that it’s an interesting balance that Zara is trying to strike here as they go towards a more personalized world – can they maintain tight supply chains while giving their consumers the level of personalization that they crave? I think that as 3D technology evolves there may be a case to be made that manufacturing can become increasingly localized. If you can put a 3D printer on the block next to your retail store and have a lead time of let’s say one day for a fashion item, that would completely revolutionize retail. With that system you may have better controls over your products and given localities more control over creative direction. Obviously, this is an extreme example that would be a long ways away, but what would the author think of that alternative?