ZARA Case study
Perey, Lauren Alexis G.
Pili, Alessandra Emile F.
3TE-4
OR CASE STUDY
Zara Uses Operations Research to Reengineer Its Global Distribution Process
1. OR Approach
A. Problem Analysis:
“Fast fashion” is a term often associated with this Spanish clothing manufacturer and retailer, which has rapidly sped up the process of designing and delivering fashionable clothes throughout the world. Zara’s supply chain includes two primary warehouses located in Spain that periodically receive shipments of finished clothes from suppliers and ship replenishment inventory directly to every Zara store in the world twice a week. A key associated challenge is to determine the exact number of units of each size (up to eight) of each article (up to 3,000 at any time) that should be in each shipment to each store (more than 1,500).
This problem is critical because its solution determines the “bloodstream” of Zara’s merchandise to its stores, and it is challenging because
I. The number of associated shipment decisions reaches several millions,
II. The amount of relevant data (warehouse inventory, store inventory, and store sales history for each article) is also enormous,
III. The available warehouse inventory is often limited,
IV. Most stores will only sell merchandise when the set of available sizes is complete enough (introducing complex dependencies across sizes), and
V. These decisions must be made in just a few hours.
B. Solution Development:
In 2005, the process used by Zara for determining shipments involved the examination by a large team of warehouse employees of shipment requests sent by every store, which presented an opportunity to improve both scalability and revenues.
The Zara team started to develop an alternative decision process relying on proven analytical methods, including forecasting algorithms, stochastic analysis, and a large-scale mixed-integer programming model. Its implementation presented many technical difficulties, including the
Pili, Alessandra Emile F.
3TE-4
OR CASE STUDY
Zara Uses Operations Research to Reengineer Its Global Distribution Process
1. OR Approach
A. Problem Analysis:
“Fast fashion” is a term often associated with this Spanish clothing manufacturer and retailer, which has rapidly sped up the process of designing and delivering fashionable clothes throughout the world. Zara’s supply chain includes two primary warehouses located in Spain that periodically receive shipments of finished clothes from suppliers and ship replenishment inventory directly to every Zara store in the world twice a week. A key associated challenge is to determine the exact number of units of each size (up to eight) of each article (up to 3,000 at any time) that should be in each shipment to each store (more than 1,500).
This problem is critical because its solution determines the “bloodstream” of Zara’s merchandise to its stores, and it is challenging because
I. The number of associated shipment decisions reaches several millions,
II. The amount of relevant data (warehouse inventory, store inventory, and store sales history for each article) is also enormous,
III. The available warehouse inventory is often limited,
IV. Most stores will only sell merchandise when the set of available sizes is complete enough (introducing complex dependencies across sizes), and
V. These decisions must be made in just a few hours.
B. Solution Development:
In 2005, the process used by Zara for determining shipments involved the examination by a large team of warehouse employees of shipment requests sent by every store, which presented an opportunity to improve both scalability and revenues.
The Zara team started to develop an alternative decision process relying on proven analytical methods, including forecasting algorithms, stochastic analysis, and a large-scale mixed-integer programming model. Its implementation presented many technical difficulties, including the