ZARA: Speed And Responsiveness Are The Kings.

Al Tai Ho is a small town in northwest Spain, near the Pacific Ocean, surrounded by fishing villages.

In the center of the town, there is a glass building situated in a large green lawn.

This is the headquarters of Zara.

Zara launched the idea of "fast fashion" about 20 years ago, and then developed a highly centralized design, production and sales system which has often been the object of research but rarely replicated.

The official name of the building is "Cube".

It is the "center" of Zara.

"Cube" is the headquarters of the Zara fashion empire, and this empire is built on an unconventional concept: speed and responsiveness are more important than cost.

Zara is famous for its small batch and quick release of new products in stores.

Store management orders are placed two times a week, and new clothes are delivered to stores two times a week.

To achieve this, Zara controls more production processes than most retailers: about half of their garments are produced in Spain or neighboring countries.

For Zara, the supply chain is its competitive advantage.

Zara's global expansion may finally test its ecosystem based on the peninsula.

Spain has always been its largest market.

But in 2013, Zara's number of stores in China (142) surpassed France, making China its second largest market.

All retailers will face challenges in China.

The Spanish garment maker may face a unique dilemma in China, because Zara is a global company with no localized operation.

"The secret of their success is centralization," said Felipe Carlo, an associate professor at University of California at Los Angeles's Anderson School of management and a business consultant at Zara. "They can make decisions in a very coordinated way."

Zara's ability to control inventory in Al Tai Ho is a key part of his business model.

"Once they decide to localize, set up two centers, Spain and China, that will be a totally different Zara."

Carlo said.

Outside the cube is the main distribution center which covers more than 460 thousand square meters.

The company produces about 450 million items each year for its 1770 stores in 86 countries.

According to Zara, about 150 million garments are inspected and classified in this center.

Whether a shirt is produced in Portugal, Morocco, China or Bangladesh, it will first be shipped to Spain and then sent to the store.

Outside the distribution center are 11 Zara affiliated factories.

Every shirt, knitted sweater and skirt produced by these factories are sent to the distribution center directly through the automatic underground track.

The orbit is nearly 200 kilometers long.

The surrounding Galicia area is covered by Zara subcontractors.

Oman, Theo, 77, the world's third richest man, has served as chairman of Inditex, a company he built around Zara before 2011.

Inditex has seven other brands and has become the world's largest apparel retailer.

In 2012, the sales revenue of the 6009 stores was close to 16 billion euros (21 billion 400 million US dollars), of which Zara accounted for 10 billion 500 million euros.

According to Inditex, the company opened more than 400 new stores in 2013, of which about 110 were Zara stores.

The company expects new stores in 2014 to reach at least that amount.

The desk is still in front of the biggest cube, with designers, buyers, planners and marketers.

Information about which products sell well and which products do not sell well have been coming from shop managers around the world.

Designers quickly respond to these information.

To make adjustments, buyers can make more orders (but not too many unique things) for a certain coat, and the planners can decide which items to be removed from the store.

Zara produces the latest fashion in factories in Spain and Portugal, Morocco and Turkey.

According to the company, the garments produced by these factories account for about half of Zara's inventory.

Its basic T-shirts, knitted sweaters and other products are ordered from the Asian factories which are usually lower in manpower cost according to the traditional timetable (about six months ahead of schedule), and then shipped to Spain.

Managers have been investing in high-tech equipment and extra capacity to enable their factories to cope with sudden increases or changes in production - very few Asian producers can do that.

A Harvard Business School Case Study of Zara shows that at the start of the season, ordinary retailers have placed orders for at least 80% of the upcoming garments.

But Zara only 50% of the design is so long in advance.

Change does not disrupt the system. It is part of the system.

The new product was packed overnight onto the truck and sent directly to the store or sent to the airport.

These trucks and aircraft operate in accordance with established timetable and deliver clothing to most stores within 48 hours.

Zara can afford extra manpower and pportation costs, because it does not need to sell as much discount as its competitors.

It doesn't advertise either.

Harvard's case study shows that the average selling price of Zara clothing is 15% off of the total price, while the industry average is 40 percent off to 30 percent off.

The proportion of unsold goods accounted for less than 10% of the inventory, and the average industry level was 17% to 20%.

"Zara knows well that if they don't need to offer such a big discount, they can spend money in other ways," said Dr.

They can see the benefits and benefits of this certainty and rhythm in the supply chain. "