Does a Feedforward Orientation Provide Competitive Advantages Under Disruptive Conditions? A Review of Control Literature with an Illustrative Case

A Real-Life Example: The Case of Zara2

(a)

Future orientation: Zara’s designers (they employed nearly 300 in-house designers) instinctively intuited customer desires, spotted fashion trends in advance, provided advanced feedback, and supplied new ideas to members of their production and merchandising teams early in the merchandising cycle. They accomplished this through their designers physically attending fashion shows in known centers of couture such as Milan, Paris, and New York. Zara designers did not wait until the planning (or operational) cycle was completed to obtain and act on feedback. Instead, they tracked signals early to sense the directions that the market was moving towards in terms of fashion and tastes (Ansoff, 1980). This is an attribute representing a feedforward orientation (as shown in Table 1). However, beyond merely sensing these trends early, Zara’s designers also concurrently sketched designs and sourced fabrics based on their observations. On average, Zara annually created over 50,000 unique designs that were experimented with (Varma, 2017). These designers also worked with Zara store managers, sales managers, and design and commercial teams (many of whom were co-located in a sprawling hangar-like space near the company HQ in La Coruna in northwest Spain) to facilitate early introduction of these fashion items, especially during the peak selling seasons (Roll, 2021). Therefore, the designers were acting in advance of concrete outcomes such as the availability of actual sales data. Instead, they pulled customers as co-creators for their designs (Varma, 2017). This represented a feedforward orientation, since it was primarily occurring in the inbound logistics segment of the value chain. In addition, store managers also continuously tracked sales data, identified bestselling items, kept track of pieces returned by customers, and shared this information with the design teams (Roll, 2021). These activities represented a feedforward type of strategic implementation control, as described by Schreyogg and Steinmann (1987). This is because advance action was being undertaken even as the process was occurring. Moreover, consumption information and the progress of product life cycles were also being continuously tracked on an ongoing basis, further exemplifying their anticipatory orientation towards taking advance action.

(b)

Ex-ante actioning: Ex-ante actioning entails undertaking action long before the process has been completed and the output is available for measurement and for checking on outcome deviations. Zara spotted fashion trends early, acted on them without delay, and quickly reproduced items in small quantities at relatively low cost. It used its superior design and manufacturing skills to bring these fashions to market in as little as two to three weeks (Roll, 2021). On average, several dozen design prototypes were being regularly experimented with on an ongoing basis. This advance action compared favorably with the more than the six-month average time-lags taken for the same process by their other rivals (viz., H&M, Uniqlo, Forever 21) in fast-fashion. This was also partly made possible because these other competitors typically outsourced their production to globally dispersed suppliers in geographically distant places like China, India, and other locations, unlike Zara, who produced most items in-house in factories located close to their HQ in northwest Spain (Roll, 2021).

(c)

Using anticipatory information: Zara’s designers and store managers observed the fashion preferences of their targeted customer segment (younger, fashion-conscious, relatively affluent urban women) in their stores and spotted trends early. Through observing them, these designers intuited the desires and tastes of their target customers. In addition, their designers also attended trade shows, scanned publications, trawled the web, and visited college campuses and other locations frequented by their target customer segment. Zara designers also kept track of ongoing sales data to more quickly transmit the information necessary for reordering quantities (Varma, 2017). They also employed technology that focused on big-data analysis templates to identify trends (Varma, 2017). This technology enabled them to undertake data mining of the daily sales updates. Along with actual consumption information, the duration/stages of product life cycles were also tracked in advance.

(d)

Adaptiveness: Zara’s creative teams worked constantly on current and prospective products to create variations in styles, fabrics, and product mixes. There was constant innovation undertaken regarding chosen styles, fabrics, and fashion offerings. For example, during the pandemic-induced lockdown, when the buying habits and preferences of their customers changed drastically, Zara switched their product line to include pajamas and tracksuit bottoms that were then preferred by their quarantined, home-based customers (Harbott, 2021). Zara also employed learning-by-doing techniques through constantly experimenting with and improving on design prototypes, thereby exhibiting strategic foresight in the process.

(e)

Actions triggered by changes in external events and/or changes in assumptions: Zara’s business model, based on ‘fast fashion’, was severely disrupted during COVID-19 when all of Europe went into a lock-down mode as mandated by the EU’s response to the worldwide health pandemic emergency. This unanticipated external environmental shock severely disrupted Zara’s operations. Their factories, the majority of which were located around their headquarters in northwestern Spain, were closed to comply with regulatory edicts issued by the EU. In addition, many of their stores, spread across the globe on every continent, were also shut down because of the pandemic and the regulatory edicts issued by different country governments in response to the pandemic. Compounding these operational exigencies, their core customers, who were younger, more affluent women who visited Zara stores, on average, about 17 times a year (viz., 1.5 times every month) in anticipation of being able to snag the latest fashion merchandise, were also forced to quarantine at home. The combination of these factors resulted in a 44% decline in sales for Zara in the first quarter of 2020 (Roll, 2021). This was an immense blow for this company that had experienced steady sales growth ever since its founding. As was in their nature, Zara responded quickly. They cut inventory by 10% to cope with the lower demand (Harbott, 2021). They were also able to quickly reduce manufacturing capacity due to their manufacturing agility and flexibility (Harbott, 2021). They were also able to cut operating expenses by 21% in the calendar period ending June 2020 (Harbott, 2021). This occurred primarily during the period of the pandemic. Taking advantage of their short lead times, Zara quickly adjusted their clothing line by offering more comfortable items such as pajamas, tracksuit bottoms, etc. These were the items that were then preferred by their home-based customers over the extended lockdown period. The company also undertook other unprecedented steps to cope with the worldwide disruption of its operations. In March 2020, Zara ramped up web discounts, a significant departure from its earlier practice of not discounting merchandise. They also deviated from their traditional policy of always holding online and in-store prices at par (Harbott, 2021). Zara also quickly optimized their physical store network by closing as many as 1200 (mostly older, smaller) stores around the world (Roll, 2021). Their physical retail outlet strategy also underwent a shift towards concentrating on fewer, larger stores in prime locations (Roll, 2021). Their stores were also increasingly required to act as their distribution hubs for online sales. During the pandemic, their fledgling online business, which had already been in existence but dormant (since about a decade earlier) because it had not been emphasized, enabled them to respond quickly. Both in Europe and across most of the world, regulators permitted e-commerce to continue operating even when brick-and-mortar stores were temporarily closed. Therefore, the COVID-19 crisis accelerated Zara’s digital shift, with online sales growing 75% over nine months, ending in October 2020, compared with the same period in the previous year (Harbott, 2021). More recently, Zara has expanded into a GenZ-focused low-priced brand called ‘Lefties’ to counter the competitive threats posed by the offerings of newer third generation rivals like Shein (Reuters, 2024).

(f)

Enhancing effectiveness: Ideas for new designs bubbled up from the designers, store managers, and sales managers who were Zara’s advanced sensors of fashion trends. Once the design ideas crystallized, production was immediately undertaken in their manufacturing facilities located near their headquarters in northwestern Spain. Manufacturing of these experimental design concepts was limited to small quantities (Roll, 2021). This small-batch manufacturing method minimized risks for the firm by reducing the need for discounting of unsold items. Undergirding this capability were the process characteristics of Zara’s factories, which could manufacture items in small batches and could also operate on short lead-times. This enabled Zara to manufacture and supply items quickly based on emergent demand. Very low expenditure on advertising combined with high inventory turnover allowed them to keep their costs low. They were then able to pass on the cost savings to customers, thus consolidating their strategic value proposition of being able to supply unique fast fashion merchandise at affordable pocket/street prices. All these organizational process qualities were distributed across Zara’s different organizational functions and geographic locations. These processes contributed towards enhancing Zara’s effectiveness in fulfilling their mission and goals.

(g)

Flexible and evolutionary cause-and-effect assumptions: Zara designers coordinated with upstream production teams as well as with downstream merchandising. Zara experimented with several dozen design prototypes concurrently on a regular basis (Roll, 2021). Their designers created over 50,000 design prototypes annually, on average. Of these several design prototypes, only a fraction (less than half) eventually went into production. As previously discussed, Zara also incorporated learning-by-doing techniques in experimenting with and improving on experimental design prototypes. Co-located adjacent to their headquarters were several full-fledged photo studios, where finalized designs were styled and shot in-house. In doing so, they were attempting to exercise strategic foresight. Their operating structure was very flat (non-hierarchical) and nimble, thus eliminating unnecessary delays in decision-making (Varma, 2017).

(h)

Looser linkages between plans and budgets: Zara’s embedded quick response (QR) processes facilitated coordination between the design, production, and merchandising functions. This reduced cycle times, enabled faster speeds to market, and improved their flexibility. Their QR processes spanned functional, organizational, and geographic boundaries. Their learning-by-doing orientation increased flexibility and speed to market. Overall, their feedforward orientation across different organizational functions was predicated on a looser integration of planning targets with budgets. This is typically not the case in primarily feedback control approaches.

(i)

Uncertainty reduction: Zara identified the fashion desires of its core group of customers and spotted trends very early (Roll, 2021; Varma, 2017). They then used their superior design and manufacturing capabilities which were co-linked to bring these styles to market quickly, in as little as three weeks. This short cycle time compared very favorably with those of their ‘fast fashion’ competitors, who took as much as 6 months. This was primarily because their competitors outsourced and offshored their supply chains to geographically distant locations. Consequently, Zara’s shortened cycle times helped them to reduce uncertainty over whether the tastes and preferences of their target customers could change unexpectedly. The small batch production that they relied on reduced the risks to the company in case their prognostications were wrong. The small batch production runs enabled them to dispense with the need for large batch production, in order to exploit economies of scale (Roll, 2021). In addition to being able to process smaller orders, this advantage also enabled Zara to reorder more frequently with updated fashion items.