A logistics arms race is picking up in the fast-fashion industry. It is one that retail and marketing editor Kati Chitrakorn saw first-hand when she visited Mango’s new 186000-square-metre fulfilment facility near Barcelona. The highly automated centre, which cost €232 million, was designed to get shipments out to Mango’s 2100 locations faster, in alignment with trend performance. The updates are being made as Mango competes against even faster fashion companies, like Zara and Boohoo. But challenging Zara’s supply chain isn’t for the faint of heart – the brand has perfected turning new styles around in as little as four days.
By guest author Kati Chitrakorn from Vogue Business
The Spanish retailer gives a rare look inside its new logistics centre that will speed up deliveries and fulfilment.
- Mango’s automated centre consolidates the company’s logistics, giving it more control over customer experience and product allocation.
- The strategy is to speed up shipping and delivery times to better respond to trends as fast fashion gets more competitive.
- Since opening the centre, Mango has trippled the number of garments processed per hour and can ship items within days.
Every item of clothing sent to Mango’s 2100 stores in 110 countries around the world first passes through the Spanish fashion label’s new logistics centre in Llicà d’Amunt, a picturesque town outside Barcelona. Approximately 600 people work six days a week at the highly automated facility, where around 400 operations are machine-driven, to process items for store deliveries.
The company has so far invested EUR 232 million in the 186000-square-metre facility, which can stock up to 7 million hung garments and 20 million folded garments and accessories at the same time. It was completed in 2016 but became fully operational last summer. By incorporating the latest automation technologies, the centre is able to process 75,000 garments an hour, tripling the retailer’s former capacity.
As soon as hung garments arrive at Llicà d’Amunt, they are unloaded onto one of nine automatic loading bays, which can process 27000 garments an hour. Each bay is equipped with a classifier that separates the garments by size and style. They then travel along a 24-kilometre rail to be shipped out to stores or held in the warehouse. According to Mango, its hanging garment installation is one of the most automated in Europe.
On the opposite side of the logistics centre are automatic loading docks that can process 1,000 boxes of folded garments and accessories per hour. The boxes are passed through a weighing and labelling area and identified with a tracking ID so they can be located at any time. Like the hung garment area, the folded garment warehouse prepares boxes to be either shipped or stored based on in-store sales information.
“We are a fashion company with digital transformation and data in our hands, and we want to deliver meaningful changes. We can do this if we control our operations,” says Mango’s general manager Toni Ruiz, who pledged to allocate an additional €35 million to expand the space by 295,000 square metres in the coming few years.
Fast fashion’s efficiencies
Fast fashion retailers like Inditex have set the pace for agile supply chains by sourcing production close to its headquarters to make its lead times speedier. Today, its Zara brand takes about 10 to 15 days to bring a new item from concept to shop floor. In comparison, British online retailer Asos, which has many factories in continental Europe, takes four to six weeks — about the same time as Mango.
This shift toward speed has forced companies like Mango to rapidly update their bricks-and-mortar retail models for the digital age. Both Mango’s folded and hung garment operations in its new hub feature temporary storage spaces where products are ready to leave the facility in a few days or be kept up to four to five weeks. Items are selected to be shipped to stores according to predictive models and data analysis systems, carried out by the company’s integrated Warehouse Management System.
Following Zara’s footsteps, Mango does not replenish but instead replaces sold-out styles with new looks. That way, shoppers know to purchase an item when they see it because they might not have the opportunity to again, resulting in fewer markdowns and stronger margins. About 35,000 boxes of garments leave its logistics centre daily in roughly 70 trucks.
Ruiz hopes that Mango’s focus on streamlining logistics and automating its warehouse technology will help it better compete worldwide amid significant changes in the industry. The rapid rise of online competitors — from e-commerce upstarts like Boohoo and Nasty Gal to established giants like Amazon — is driving greater online fashion consumption. Companies like Mango have had to respond.
“Mango’s store network has gone through a very quick and important transformation,” says Antonio Pascual, Mango’s supply chain director, noting that the retailer has increased the average surface of its stores by almost 50 per cent, from 500,000 square metres of floor space in 2012 to over 800,000 square metres today. The larger, revamped stores offer shoppers a more complete online-offline experience, including easier returns and click-and-collect.
The opening of the Llicà d’Amunt site marks the first global distribution centre for Mango, whose operations were previously run out of smaller warehouses spread across multiple locations. By co-ordinating production and leveraging the latest technologies such as automation and tracking IDs, Mango can continue to get its latest styles onto the sales floor, satiating consumers’ need for newness. In the new centralised logistics centre, Mango’s clothing — produced in one of its 1,200 factories — is ready to be shipped in less than four hours if necessary.
“It guarantees we can do everything in the same place,” says Pascual. “It’s not about loading more trucks and garments, but maintaining a good level of service.”
After three years of stagnant sales, revenues picked up in 2018: Mango reported revenues of EUR 2.23 billion, an increase of 1.8 % from the 2017 financial year. It reached the breakeven point in operating profit, despite a net loss of EUR 35 million for the year. Gross profit increased by 36 per cent year on year, with EBITDA up 17% to EUR 135 million.
Ruiz says this was driven by the success of Mango’s new collections and online sales, which grew 31 % year on year to EUR 445 million. He declined to forecast sales figures for 2019, but noted that the next six weeks of holiday season would be “super important”.
While Mango has its main e-commerce warehouse in Palau-solità i Plegamans, garments from the facility can also be used to fulfil e-commerce orders if necessary. Investments in transforming the store network and logistics system have had a halo effect on online sales. E-commerce accounted for 10 % of total company turnover in 2015, and now accounts for 20 % of turnover, two years earlier than expected. Executives forecast that the channel will represent 30 % of sales by the end of the year.
While the efficiency of Mango’s new logistics centre has contributed to a gradual turnaround, Pascual says there’s plenty more to be done, and the company is working on more solutions to tackle challenges such as returns, which “force us to constantly adjust our reverse logistics”, he says. The company has also designed a flexible network of eight satellite distribution centres, with one opening in Mexico just a few months ago, “to be closer to our customers and offer the best service possible”.
Mango’s new strategy is poised to make it more up-to-date and dynamic. But keeping up with Zara is no easy feat: the company updates its inventory about twice a week, releases on average 500 new designs every seven days.
Pascual asserts that it is not Mango’s priority to compete with Zara. “Mango offers a great product in terms of value,” he says. Pascual stresses that the brand prefers to embrace relevant moods each season, rather than copying styles from the runway. “This is a key difference versus our competitors and a bet for value for our customers and the key to our success over the past 35 years.”