Initial Shipment Decisions for New Products at Zara

Abstract

Given uncertain popularity of new products by location, fast fashion retailer Zara faces a trade-off. Large initial shipments to stores reduce lost sales in the critical first days of the product life cycle, but maintaining stock at the warehouse allows restocking flexibility once initial sales are observed. In collaboration with Zara, we develop and test a decision support system featuring a data-driven model of forecast updating and a dynamic optimization formulation for allocating limited stock by location over time. A controlled field experiment run worldwide with 34 articles during the 2012 season showed an increase in total average season sales by approximately 2% and a reduction in the number of unsold units at the end of the regular selling season by approximately 4%.

OM Forum—Practice-Based Research in Operations Management: What It Is, Why Do It, Related Challenges, and How to Overcome Them

“…Another example arose from project work with Zara, which revealed ad-hoc manual approaches for determining shipments of different sizes of the same articles to stores, and for simultaneously determining markdown prices of related products during clearance sales. The existing literature was found insufficient to address these practical challenges, which led to Caro andGallien (2010, 2012), and to Gallien et al (2015). One further instance arose when Caterpillar contacted researchers to aid in the design of the supply chain for a new product line.…”

“…Properly controlled experiments with high statistical significance can be very challenging to organize however: The collaborating practitioner may be unwilling to risk an experiment with sufficient sample size; there may be financial, legal, ethical, or resource constraints; practical issues such as IT systems or organizational structure may limit design options; and so forth. For examples of controlled field experiments in OM and discussions of practical challenges, see Caro andGallien (2010, 2012), and Gallien et al (2015).…”

Zara vs. Uniqlo: Leadership strategies in the competitive textile and apparel industry

“…Throughout its expansion, Zara has remained competitive thanks to its fast‐paced internationalization and niche‐based supply chains, which include specialized and well‐established suppliers in the textile and apparel industry (Gallien et al, ; García‐Álvarez, ; Martinez, Errasti, & Rudberg, ; Tokatli, ; Zara, −2017).…”

“…Throughout its expansion, Zara has remained competitive thanks to its fast-paced internationalization and niche-based supply chains, which include specialized and well-established suppliers in the textile and apparel industry (Gallien et al, 2015;García-Álvarez, 2015;Martinez, Errasti, & Rudberg, 2015;Tokatli, 2014;. In 1963, Amancio Ortega Gaona (founder and chairman of Inditex) entered the clothing business and grew his firm into a major brand in Europe.…”

“…Along with their competitors in the fast fashion sector, such as H&M, Gap, and Benetton, (see Exhibit ) Zara and Uniqlo have made significant strides in promptly responding to consumer needs and fashion movements. These include a new “ paradigm change ” in the apparel industry (Choi, , p. 85) and efficient distribution systems (Gallien, Mersereau, Garro, Mora, & Vidal, ). Both Zara and Uniqlo employ business models that are staunchly competitive and oriented toward global growth.…”