Global production chains in the fast fashion sector, transports and logistics: the case of the Spanish retailer Inditex

Abstract

The concept of the global production network expressively covers the spatial interrelationships characteristic of the economy due to the existence of worldwide flows of information, raw materials, components, and finished products. Recent geographical analyses of global production networks in different economic sectors demonstrate that little attention has been paid to the logistical and transport systems through which networks are fully integrated. Nevertheless efficient logistics and transport services are essential to an understanding of their organisational and geographical structure. The supply chains of big fashion retailers provide a good example because the choice of global or local supply depends on whether suppliers rely on efficient transport and logistics systems that let them compensate for higher relative costs compared with developing countries —in the case of local supply— or the costs deriving from their greater distance to the market —in the case of global supply. In addition the challenges presented by the functional and geographical integration of fashion production networks can only be overcome if global retailers manage their logistics efficiently and leverage the differentiated advantages of the modes of transport in relation to time.This paper on Inditex, a Spanish leading group in the fashion sector, analyses how transport and logistics fit into the production network and provide the firm with one of its most notable competitive advantages. We first discuss the dilemmas that fashion retailers face when organising the supply chain and the contribution of logistics and transport to its functional and geographical integration. We then open the study of Inditex by describing the network of shops and manufacturing, presenting the principles of the logistical model, and providing details of the procedures applied for the functional and geographical integration of the chain of production of Zara, the best known of the company’s 11 brands. The analysis, based on recent and previously unpublished data on the brand’s logistics hub in Zaragoza (northeast Spain), sheds light on the modus operandi of the group and confirms the crucial importance of logistics in all facets of the production model. First, efficient logistics and sufficiently fast transport, allow the company to enjoy short lead times and be present in economically and geographically very disparate markets. Second, the productive structure, combining nearby and distant manufacturing, and both dispersion and concentration spatially and in production, also relies on the effectiveness of the logistical model. On the one hand, better internal and external communication and greater productivity compensate for the company’s higher costs of manufacturing in nearby areas. On the other, the vigour of the four clusters of suppliers in Asia (China, Pakistan, Bangladesh, and India) rests on the availability of efficient logistics and transport services, including air transport, which ameliorate the costs of their distance to the company’s distribution centres in Spain and other markets. Finally, we offer details of how the Inditex group completely centralises the distribution of its products to shops. The data for the Zara logistics hub in Zaragoza (North East of Spain) illustrate the value given to time in the company’s activities and how this consideration influences the organisation of the flows in and out of the hub. Air transport is used to send garments to distant markets and also for the reception of high-fashion-content garments from the Asian clusters and for their quick delivery to various markets despite the distance.The results provide evidence for considering logistics and transport as key facilitators for the Inditex expansion, but we understand that the effects described in the paper can extend to the fast fashion sector as a whole in that the geographical configuration of global networks increasingly depends on the organisational and logistical strategies that the firms adopt in order to meet the needs of time-sensitive customers. At the conclusion we remind that a heavy dependence on energy and the likelihood of fuel price increases threaten the future viability of a logistic model based on the present unrealistic cheapness of fast transport. As establishing the scope and reach of these aspects would require complementary analysis, we finish the paper whith tuh hope of having stimulate interest for a better understanding of the logistical and transport systems within the global production networks in a possible new economic and environmental context.