{"id":26901,"date":"2017-11-15T22:59:27","date_gmt":"2017-11-16T03:59:27","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/made-to-order-can-zara-make-the-shift-to-true-mass-customization\/"},"modified":"2017-11-15T22:59:27","modified_gmt":"2017-11-16T03:59:27","slug":"made-to-order-can-zara-make-the-shift-to-true-mass-customization","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/made-to-order-can-zara-make-the-shift-to-true-mass-customization\/","title":{"rendered":"Made-To-Order: Can Zara Make the Shift to True Mass Customization?"},"content":{"rendered":"

Arguably the original \u201cfast fashion\u201d retailer, Zara has been lauded for its products\u2019 speed-to-market and in many respects, is an exemplar of the digitalized, vertically-integrated supply chain. The control afforded by Zara\u2019s 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<\/em> 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\u2014using digital design and printing (e.g. 3D printing and scanning) to truly match supply with demand at an individual consumer level\u2014true<\/em> mass customization.<\/p>\n

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\u2019 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\u2019 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].<\/p>\n

Zara\u2019s 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 \u201cmade-to-order\u201d products. As such, there still exists a classic \u201cbullwhip effect\u201d that results from the information lag between identification of customer needs and communication up the supply chain[6]. While Inditex leadership (Zara\u2019s 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.<\/p>\n

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\u2019 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.<\/p>\n

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 \u201calways working in batch sizes of one[3].\u201d 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]<\/p>\n

[1] Ferdows, K., Lewis, M., & Machuca, J. (2004). Rapid-Fire Fulfillment.\u00a0Harvard Business Review<\/em>.<\/p>\n

[2] Jack, L. (2015). The Adidas \u201cSpeed Factory\u201d Aims To Bring Local Customization To Manufacturing.\u00a0Fast Company Magazine<\/em>.<\/p>\n

[3] Halzack, S. (2017) How a custom blazer in 90 minutes just might change the apparel business.\u00a0The Washington Post.<\/em><\/p>\n

[4] Kestenbaum, R. (2017). 3D Printing In-Store Is Very Close and Retailers Need to Address It. Forbes Magazine.<\/em><\/p>\n

[5] Stevenson, S. (2012, June 21). Polka Dots Are In? Polka Dots It Is! How Zara gets fresh styles to stores insanely fast\u2014within 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<\/p>\n

[6] Bhatia, A., & Asai, R. (2007). Mass Customization in Apparel & Footwear Industry\u2013 Today\u2019s Strategy, Future\u2019s Necessity.\u00a0Wipro Technologies<\/em>.<\/p>\n

[7] Roca, J., Vaishnav, P., Mendonca, J., & Morgan, G. (2017). Getting Past the Hype About 3-D Printing.\u00a0MIT Sloan Management Review<\/em>. Retrieved from http:\/\/ilp.mit.edu\/media\/news_articles\/smr\/2017\/58323.pdf<\/p>\n","protected":false},"excerpt":{"rendered":"

Arguably the original \u201cfast fashion\u201d retailer, Zara has been lauded for its products\u2019 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. <\/p>\n","protected":false},"author":10252,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[160],"class_list":["post-26901","hck-submission","type-hck-submission","status-publish","hentry","category-mass-customization","hck-taxonomy-organization-zara","hck-taxonomy-industry-retail","hck-taxonomy-country-spain"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nMade-To-Order: Can Zara Make the Shift to True Mass Customization? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/made-to-order-can-zara-make-the-shift-to-true-mass-customization\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Made-To-Order: Can Zara Make the Shift to True Mass Customization? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Arguably the original \u201cfast fashion\u201d retailer, Zara has been lauded for its products\u2019 speed-to-market and in many respects, is an exemplar of the digitalized, vertically-integrated supply chain. 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