SUPPLY CHAIN

STRATEGY OF
ZARA
BY:-
GROUP 5
SOURJA PAUL UM18306
SAHITHI TADALA UM18308
SUNIL KUMAR PATNAIK UM18322
SUPRIYA SARKAR UM18323
TUSHIT RAI UM18325
AGREEMA DAS UM18328
OVERVIEW OF ZARA

Origin Vision Mission Values Business Strategy

• Founded by Amancio • Committed to • Contribute to the • Fashionable, Differentiation

Ortega Gaona and satisfying the desires sustainable affordable clothes,
Rosalia Meraat 1975 of our customers development of large choice of styles • Increasing the
society and that of the number of available
• 1st store in A Coruna, • Continuously innovate environment with • Attractive prices, up to styles and decreasing
Spain our business to which we interacts date design qualities
improve your
• Offers fashionable experience. • Producing low
designs for men, • Creating sense of quantities cause to
women, and kids and • Provide new designs exclusivity, fast save in inventory cost
also sell accessories made from quality delivery of new
materials that are products and trends Cost Leadership
• Available in 86 affordable
countries with total of
• Imitates the latest
1763 stores
designs and makes
similar products with
• Major selling brands
cheap materials 2
of INDITEX
BUSINESS MODEL OF ZARA
SUPPLY CHAIN MODEL OF ZARA
• Zara uses its flexible business model in order to adapt to new changes as per the season and
thereby delivering the best output to customers

• Zara aims to deliver best and fastest output to the customers as per their desires

• All the stores located strategically at most up markets with high traffic and prestigious
locations

The major stages of Supply chain of Zara:

Design and order Sourcing and

Distribution Retailing
Administration Manufacturing
DESIGN AND ORDER
ADMINISTRATION
• Zara designs all its products
• Almost 40,000 products are designed every year out of which
10,000 are selected for production.
• Due to time constraint, very limited volumes of items are
prepared and presented in key stores to determine customer
response
• The failure rate is 1% compared with an average of 10 % in
this sector
SOURCING AND
MANUFACTURING
• Zara manufacture approximately 50% of its product in
its own store in Spain
• The items that are price sensitive rather than time
sensitive are been outsourced to Asia
• Vertical integration, technology-orchestrated
coordination of suppliers, fined tuned logistics and just
in time manufacturing makes Zara so much
competitive
• Zara manufactures about 15-20% of the items before
the season manufactures 50-60% at start of season and
rest is manufactured in the season
 DISTRIBUTION
• Zara has four main warehouses in Spain
• The finished items are directed to Zara store in the world
twice a week during regular periods and thrice during sale
seasons.
• RULE: Stock should not be kept for longer periods in
warehouses
• On an average it takes 24 hours to deliver the order within
Europe and 48 hours for order delivery in America or Asia.
RETAILING
• Zara aims to offer fresh newly designed style
garments and accessories like bags, jewelry, scarves,
shoes at relatively
• The merchandising and store operations help in
achieving the goal for the firm.
• Zara focuses on backward vertical integration instead
of manufacturing efficiencies to determine the next
order of customers
• The orders are closely tracked through centralized IT
system
SUCCESS FACTORS OF SUPPLY CHAIN OF ZARA
I. Vertical Integration

“ The vertical Integration of production Why Vertical?

system allows ZARA to place a garment in
any store around the world in a period
between two to three weeks ”
• Local Sourcing of raw material – Cutting cost as
they do not outsource any channel
• Fast time-to-customer – Cutting time, faster,
effective, and efficient

The designers select the most • Designs will be made into models in
cost-effective fabric for new factories Fabric will be sent to the
designs • Computer decides how to shear factories
fabric to waste as little as possible

Up to tens of kilometers of After sewing process, products

Label trademarks for different sent back to factories for
underground transmission line
countries button nailing, ironing,
connects all the processors
inspection
SUCCESS FACTORS OF SUPPLY CHAIN OF ZARA
II. Information Technology
Four critical information related areas that gives
ZARA its speed are:
• Information on Customer Needs
• Standardization of product information
• Product information and inventory
management
• Distribution management
IV. Customer Driven Process
• It uses Information system for customer
profiling, to analyze purchase patterns and
direct targeting
• It is able to respond quickly to fluctuating
customer demands in fashion trends
III. Shorter Lead Time
• Key Objective is “To Get the Shortest Time to
Market”
• Zara moves in step with its customer(Pull
System) and produces response within 2-5
weeks
• Chooses manufacturers that provide speed
over cost
V. Lower Quantities
• The added benefit of lower quantity is that if
a style does not work well, there is not much
to be disposed when the season-end sale
happens
 RISK MANAGEMENT IN SC OF ZARA
Risk
Management

Supply Chain Unethical

Ethics Activities

Unethical Activities In SCM

Supply Chain Ethics
 Procurement –
1. Following specifications that favor particular
 Relationship Orientation
supplier
 Channel Orientation
2. Using obscure contract terms to gain advantage
 Completion Orientation
over other party
 Environmental Orientation
 Bias Attitude - Allowing only certain suppliers to
bid
 Unethical Business Strategies –
1. Over committing resources or production
schedules.
2. Increasing prices when there is shortage of
product supply
 COMPARISON OF SCM OF ZARA AND
OTHER APPAREL COMPANY
ZARA
 As a brand, Zara values their speed and
responsiveness to the latest fashion trends
 Zara uses vertical integration to manufacture and
distribute products in small batches
 Quick in-season turnaround, from production
facilities located close to Zara’s distribution
headquarters in Spain, allows Zara to ship more
often and in smaller batches
 Zara keeps a large amount of its production in-house
and makes sure that its own factories reserve 85
percent of their capacity for in-season adjustments
 Zara follows central logistics. Each of Zara’s outlet
sends in two orders per week on specific days and
timing. Trucks leave at specific times and shipments
arrive in stores at specific times
 Reacting to customer’s wishes is a core constituent
of its competitive advantage
H&M
 H&M outsources all it’s production and does not own
any factory
 It’s production is handled by 850 independent suppliers,
mainly in Asia and Europe
 H&M manufactures in advance 80% of it’s inventory
while introducing remaining 20% based on current
market trends
 Inventory is held in regional replenishment centers
while not having back up stocks
 H&M having a very complex supply chain uses a very
well developed IT system. This gives them a competitive
advantage by allowing 20% of manufacturing to be done
in shorter lead times
 Using central inventory management software each
store is connected to corporate logistics and H&M
warehouses
 H&M is known for its emphasis on researching and
forecasting upcoming trends
SWOT ANALYSIS

Strengths Weaknesses
• Brand Name
• Over Dependence on European

S W
• Strong Distribution network
• Strong Dealer community Markets
• Skilled workforce • Smaller product portfolio
• Information System • Primitive demand forecast tools
• Keeping Low Inventory • One manufacturing center
• Performance in new markets • Lack of extensive advertising

Opportunities Threats
•
•
•
•
Expansion beyond Spain
Decreasing cost of shipping
Increased customer spending
Develop a formal Asia logistic center
O T •
•
•
•
•
Rising labor costs
Laws in different countries
Market disruptive technologies
Imitation of the counterfeit
Customer switching
• More segmentation
RECOMMENDATIONS
1 2

DOCUMENTATION LONG TERM CONTRACTS

Standardized processes and Mutual respect and continuous

products interaction

3 4
COMMUNICATION LEAD TIMES

Store manager should order the

Multidisciplinary and departmental
products directly instead of going
training
through the HQ
THANK YOU