Zara Uses Operations Research to Reengineer Its Global Distribution Process

Authors:
Felipe Caro;Jérémie Gallien;Miguel Díaz;Javier García;José Manuel Corredoira;Marcos Montes;José Antonio Ramos;Juan Correa
Affiliations:
UCLA Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095;MIT Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142;Zara, 15142 Arteixo, La Coruòa, Spain;Zara, 15142 Arteixo, La Coruòa, Spain;Zara, 15142 Arteixo, La Coruòa, Spain;Zara, 15142 Arteixo, La Coruòa, Spain;Carrefour, 28028 Madrid, Spain;Dell Computers, Austin, Texas 78759
Venue:
Interfaces
Year:
2010

Citing 2
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Abstract

Overcoming significant technical and human difficulties, Zara recently deployed a new process that relies extensively on sophisticated operations research models to determine each inventory shipment it sends from its two central warehouses to its 1,500 stores worldwide. By taking a retail size-assortment view of a store's inventory, the model incorporates the link between stock levels and demand to select store replenishment quantities. Through a rigorous, controlled field experiment, we estimate that this new process has increased sales by 3--4 percent; this corresponds to estimated profits of approximately $233 million and $353 million in additional revenues for 2007 and 2008, respectively.