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The Business Results of Zara Stem from its Founder

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It has long been the contention of Supply Chain Matters that companies whose senior management team has a solid grounding and understanding in principles of operations and supply chain management can often have their supply chain serve as a competitive differentiator for business outcomes.  There are many industry examples. We can turn to names like Apple, McCormack Foods, and global apparel retailer Zara,part of Spain’s Inditex Group.

We call reader attention to an article published in the January issue of FORTUNE and featured on CNNMoney, Amancio Ortega Gaona- the Third-Richest Man in the World.  The article traces the personal history of a man who is described as difficult to know, impossible to interview, very wealthy, and serves as the original founder and continued chairmen of Inditex Group.  It provides some context to a man we often did not know much about, one who came from the roots of poverty to surpass Warren Buffet as the third wealthiest individual on the planet. Mr. Ortega has built a fashion empire that spans more than 80 countries and consistently delivers growth and profitability in both good and challenging economic environments.  One profound article quote: “Beginning 40 years ago, Ortega ripped up the business model that had been refined over decades by Europe’s fashion houses and replaced it with one of the most brutally fast turnaround schedules the industry has ever attempted.  Decades later Zara is the world’s biggest fashion retailer.

What is stunning is that Ortega built this business upon two fundamental and clear principles:

  1. Give customers what they want.
  2. Get goods to customers faster than anyone else.

The result is described as:  “ …  a global retailer that is more of an optimal supply chain than a traditional retailer.” Once more, few retailers have managed to challenge Zara’s industry success.  While Spain and other parts of Europe are suffering from severe economic stress, Zara reported a 17 percent increase in total revenues for the first three months of fiscal 2012. The retailer just opened its 6000th store , with over 300 outlets now in China. The track record of growth consistency in revenues and profits is admirable.

What this author appreciated in reading Ortega’s background was his innate understanding of the industry and of the methods to control the supply chain. In the formative years of Zara, he organized thousands of local sewing cooperatives while providing opportunities for supplemental family incomes.  He insisted that speed and production agility be the driving force of the business model, and even today, Zara stores refresh their inventory within 48 hours. The essence of Zara remain its employees, a flat organizational structure, and its supply and logistics teams.  Chairmen Ortega prides himself and his management teams in their ability to connect with all levels of employees. Today, Ortega continues to live by modest means, living in the same Spanish community of his youth.

The legacy of Mr. Ortega and Zara will obviously remain as an important case study in agile and resilient supply chain management.  More importantly, the takeaway is having a leadership culture that understands that supply chain agility, responsive logistics and operations management and valued people do matter in successful business.

Bob Ferrari

 

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