Demand forecast for short life cycle products : Zara case study

Abstract

The problem of optimally purchasing new products is common to many companies and industries. This thesis describes how this challenge was addressed at Zara, a leading retailer in the "fast fashion" industry. This thesis discusses the development of a methodology to optimize the purchasing process for seasonal, short life-cycle articles. The methodology includes a process to develop a point forecast of demand of new articles, the top-down forecast at the color and size level and an optimization module to produce recommendations to define the optimal quantity to purchase and the optimal origin to source from. This thesis is the first phase of a two phases purchasing optimization process. The focus of this thesis is: a) the outline of an enhanced purchasing methodology b) the development of the most important input in the system: a point forecast of demand at the article, color, and size level, and c) the development of an IT prototype to automatically manage the purchasing methodology. The second phase of the purchasing optimization process focuses on the optimization module. The optimization module is beyond the reach of this thesis.