SUPPLY CHAIN PRACTICES

OF ZARA

TABLE OF CONTENTS
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.

Acknowledgement
Executive summary
Zara Company Profile
Fashion Industry Overview
Fashion Industry Growth Drivers
Zara Customer & Product Mapping
Zaras key factors of success or winning formulae
Zara Logistics & Supply Chain
Is Zaras competitive advantage sustainable?
Learning
Zara In Sum
Bibliography

EXECUTIVE SUMMARY
This project aims at understanding the supply chain practices followed by the fast
fashion collection manufacturing company Zara, Spain. It takes into consideration
the profile of the company and the characteristics of fashion industry and on what
factors does it future growth depend upon. Then the report moves on to concrete on
the various key factors of success of Zara. The time cycle of the products of Zara,
what it offers to its customers including the customer segmentation has been
considered. Then the logistics and supply chain mechanism has been considered at
length. These include the methodology used to react to recent changes rather than
predicting it, production methods, distribution methods and use of information
technology at various stages of supply chain. Finally, it is discussed whether the
competitive advantage that Zara has is sustainable or not. The various learning
from Zaras supply chain management has also been jotted down In the end.

ZARAS PROFILE
Zara is the flagship chain store of Inditex Group owned by Spanish tycoon
Amancio Ortega.Zara is the most internationalized of Inditexs chains. The group
is headquartered in ACoruna, Spain, where the first Zara store opened in 1975. As
of August 2009, there are more than 1,500 Zara stores around the world. It is
claimed that Zara needs just two weeks to develop a new product and get it to
stores, compared with a six-month industry average, and launches around 10,000
new designs each year. Zara has resisted the industry-wide trend towards
transferring fast fashion production to low-cost countries. While it spent little on
ads, it spent heavily on stores. Zara is a vertically integrated retailer. Unlike similar
apparel retailers, Zara controls most of the steps on the supply-chain: It designs,
produces, and distributes itself. The business system that had resulted was
particularly distinctive in that Zara manufactured its most fashion-sensitive
products internally. Zara did not produce "classics", clothes that would always be
in style. In fact, the company intended its clothes to have fairly short life spans,
both within stores and in customers' closets.

FASHION INDUSTRY OVERVIEW

The fashion industry is characterized as a chain, in which profits derived from
unique combinations of high-value research, design, sales, marketing, and
financial services that allow retailers, branded marketers, and branded
manufacturers to act as strategic brokers in linking overseas factories with
markets. There are various types of fashion and each type has its own
characteristics. e.g. Fast fashion is one of them which are used to describe clothing
collections which are based on the most recent fashion trends, whereas classical
fashion on the other hand describes those clothing collections which are evergreen.
The recent trends are generally the ones that are presented in various fashion
week organized around the globe. Fashion is a thing which constantly changes. Its
value depreciates slowly after the time is gone. In the time period when the product
has just become out-of-fashion till its value becomes zero, the product is
generally sold on sale. As a result, this industry tends to extract as much profit as
possible when the product is in fashion then give heavy discounts.

FASHION INDUSTRY GROWTH DRIVERS

There are many factors on which the future growth of fashion industry depends:1. World GDP
The GDP growth will determine the buying capacity of people and also the
condition of other industries on which fashion industry depends.
2. Policies
-As many countries are plunged into recession, the countries are changingthe
import and export policies. These policies will have a major impact on theindustry
growth as most part of fashion accessories are exported to other countries.
3. Development of logistics
Logistics is the backbone of fashion industry. As the better the logistics, faster
the product hits the market, cheaper the cost, better it is for thecustomers and so for
the companies.
4. Growth of retail chains
Most of the companies do not have their exclusiveshowroom only. They depend
a lot on multi-branded showrooms across the world tosell their products. Hence the
growth and stability of the retail chains will go on toimprove the condition of
fashion industry.
5. Development in IT
Speed of the process, the customers order from ordering theraw material to the
final selling of the product, greatly depends on the technologyused in the system.
E.g. use of RFID, clipped tags, faster printers, better communication channels etc.
Better the technology available and used the better theresponsiveness of the
fashion industry towards customers demands.6.
6. Others

 There are various skills (of people or computer) which influence a lot thefashion
industry such as forecasting etc.

ZARAS CUSTOMER AND PRODUCT OFFER

Zaras Customer Segment

LOW COST FASHION FOR THE 16 TO 24 YEAR OLDS

LOW COST
Get it approximately right
Eliminate creative design
Fast-response supply chain
including design
Finalise design knowing material
supply constraint
Optimise the supply process for
speed and cost
Manage follow-up (next batch)
and customer flows

FASHION
Respond to what customers want
create a demand chain
Copy trendy fashion fast
Create a store experience
Create a network/brand

Zaras Customer offer

FRESH/FAST
Fast copying of
leading styles
Fast delivery in
own stores
Limited editions

QUALITY

COST

Raw material: medium

Knit: poor
Look: grand!
Customer satisfaction:
fashion at low price

Low monetary cost

Low time cost:
the Zara experience

FLEXIBILITY
Limited customer variety: only what is on display and in limited choices
But every customer is participating in the process: helps determine the next
batch

Zaras Product Offer

Product Offer High customization

Low volume
Supply Process
High unit margin
High quality
Flexible Process

High fashion: Out of price

Rigid Process

ZARA

High standardisation
High volume
Low unit margin
Low quality

M&S: Out of Fashion

Zaras Product Life Cycle Curve

Generally, a typical Product Life Cycle Curve looks like the one given in the
diagram where Sales decreases as the product moves over the time line. But as
Zara is in a high fashion industry and its product offering are the latest trends and
designs with a life of maximum 5-6weeks so its Product Life Cycle Curve becomes
like the one given in next diagram.

ZARAS KEY FACTORS OF SUCCESS OR

WINNING FORMULAE
Zara concentrates on three winning formulae to bake its fresh fashions:
Short Lead Time = More fashionable clothes
Lower quantities = Scarce supply
More styles = More choice, and more chances of hitting it
Firstly,
by focussing on shorter response times, the company ensures that its stores are able
to carry clothes that the consumers want at that time. Zara can move from
identifying a trend to having clothes in its stores within 30 days, this means that
Zara can quickly identify and catch a winning fashion trend, while its competitors
are struggling to catch up. Catching fashion while it is hot is a clear recipe for
better margins with more sales happening at full prices and fewer discounts. In
comparison, most retailers of comparable size or even smaller, work on timelines
that stretch into 4-12 months. Thus, most retailers try to forecast what and how
much its customers might buy many months in the future, while Zara moves in step
with its customers. Trend identification comes through constant research not just
traditional consumer market research, but a daily stream of emails and phone calls
from the stores to head office. Unlike other retailers, Zara's machinery can react to
the report immediately and produce a response in terms of a new style or a
modification within 2-4 weeks. Many other retailers have such long supply chain
lead times that for them it would seem a lost cause for them to even try and
respond to a sales report.
Secondly,
by reducing the quantity manufactured in each style, Zara not only reduces its
exposure to any single product but also creates an artificial scarcity. As with all
things fashionable, the less its availability, the more desirable the object becomes.
The added benefit of lower quantities is that if a style does not work well, there is
not much to be disposed during the season-end sale. The result of this is that Zara
discounts only about18 percent of its production, roughly half the levels of
competitors.
Thirdly,

instead of more quantities per style, Zara produces more styles, roughly 12,000 a
year. Thus, even if a style sells out very quickly, there are new styles already
waiting to take up the space. Zara can offer more choices in more current fashions
than many of its competitors. It delivers merchandise to its stores twice a week,
and since re-orders are rare the stores look fresh every3-4 days. Fresh produce,
moving in step with the fashion trend and updated frequently the ingredients are
just right to create the sweet smell of success.
Now, the question is how does Zara achieve its three key success factors which
would be a nightmare for most other retailers to achieve in such short time spans?
So, let us look at the mechanisms that enable Zara to deliver on these parameters as
well as some unique aspects of the retailer's business model.

ZARAS LOGISTICS AND SUPPLY CHAIN

If you thought that it is not possible to produce all this success in the same kind of
set-up as other retailers, and that it also has to cost something, you would be
absolutely correct on both counts. Zara follows a structure that is more closely
controlled than most other retailers, and pays further by having the various
business elements in close proximity to each other, around its headquarters in
Spain.

1) Ownership and Control of Production

Retailers like the American chain Gap and the Swedish retailer Hennes &
Mauritz completely outsource their production to factories around the world and
mostly to low cost Asian countries. In contrast, it is estimated that 80 percent of
Zara's production is carried out in Europe which is within the small radius of its
headquarters in Spain. In fact, almost half of its production is in owned or closelycontrolled facilities.
Sourcing/Fabrics

Manufacturing

In house fabrics sourcing comditel

40%

In house manufacturing (50%)

External fabrics sourcing

60%

External manufacturing (50%)

While this gives Zara a tremendous amount of flexibility and control it does have
to contend with higher people costs, averaging 17-20 times the costs in Asia.
Counter-intuitively Inditex has also gone the route of owning capital-intensive
manufacturing facilities in Spain. In fact, it is a vertically integrated group, with
up-to-date equipment for fabric dyeing and processing, cutting and garment
finishing. Greige (undyed fabric) is more of a commodity and is sourced from
Spain, the Far East, India, and Morocco. By retaining control over the dyeing and
processing areas, Inditex has fabric- processing capacity available on demand to
provide the correct fabrics for new styles. It also does not own the labour-intensive
process of garment stitching, but controls it through a network of subcontracted
workshops in Spain and Portugal.

2) Supercharged Product Development

Design and product development is a highly people-intensive process. The heavy
creative workload of 1,000 new styles every month is managed by a design and
development team of over 200 people. This means that every person on an average
is producing around 60 styles in a year or 1-2 styles every week.
With new styles being developed and introduced frequently, each style would
provide only around 200,000-300,000 of retail sales, a far lower figure than other
retailers or brands, and certainly not cost-efficient in terms of design and product
development costs. But obviously, this higher cost of product development is more
than adequately compensatedby higher realised margins .
In addition, the entire product development cycle begins from the market research.
This combines information
from visiting university campuses, discos and other venues to observe what
young fashion leaders are wearing
from daily feedback from the stores
from the sales reports.
This has meant a significant investment in information technology and
communications infrastructure to keep streaming up-to-date trend information to
the people making the product and business decisions.
At the leading edge of research are the sales associates and store managers in Zara
stores, who zap orders on customised hand held computers over the Internet to
Zara headquarters based on what they see selling. And not just orders, but ideas for
cuts, fabrics or even a whole new line. They draw upon customer comments, or

even a new style that a customer might be wearing that could be copied for Zara's
stores. Traditional daily sales reports can hardly provide such a dynamically
updated picture of the market.

3) React Rather than Predict

What sets Zara apart from many of its competitors is what it has done to its
business information and business process. Rather than concentrating on
forecasting accurately, it has developed its business around reacting swiftly.
What a typical retailer or brand might do? Designers may start looking at fashion
trends, and start designing a look for summer 2010. Information and inspiration
comes from forecasting agencies, trade shows, and various other places. Over a
period of 3-5 months they develop the ideas into physical samples. Sales budgets
and stock plans are developed based on what is going on in the business right then
(roughly one-year ahead of the targeted style). At various times during this
seasonal process, there are decision-making meetings, where styles are accepted,
rejected or changed, pricing and margin decisions taken and orders finalised. Based
on a host of factors, the orders might then be placed with vendors in one or more
countries around the world. Typically vendors may take a few weeks to two
months to procure fabrics, have them approved by the retailer, and then produce a
number of samples, and only once all approvals are finished, put the style
into production. From beginning to end, the process of defining a concept to
receiving goods in the retail store might take anywhere from 9 to 12 months for a
typical retailer. This one-year advance decision making on what merchandise and
how much to stock is a bit like driving a car at speed by just looking in the rear
view mirror! Amazingly, it seems to work 60-65 per cent of the time.
Zara, on the other hand, largely concentrates its forecasting effort on the kind and
amount of fabric it will buy. It is a smart hedging by Zara because of two reasons fabric (raw material) mistakes are cheaper than finished goods errors
the same fabric could be turned into different garments.
In fact, for an extra degree of flexibility Zara buys semi-processed or un-coloured
fabric that it colours up close to the selling season based on the immediate need.
With that edge, anda super-fast garment design and production process, it takes to
the market what its customers are looking for.

4) Quick-Bake Recipe: Well Mixed Ingredients

Garment styling for Zara actually starts from the email or phone call received from
the stores. Thus, from the beginning Zara is responding to an actual need, rather
than forecasting for distant future. Based on the store demand, Zara's commercial
managers and designers sit down and conceptualize.

what the garment will look-like

what fabric it will be made out of
what it will cost
and at what price it will sell

As soon as approvals are received, instructions are issued to cut the appropriate
fabric. The cutting is done in Zara's own high-tech automated cutting facilities. The
cut pieces are distributed for assembly to a network of small workshops mostly in
Galicia and in northern Portugal. None of these workshops are owned by Zara. The
workshops are provided with a set of easy to follow instructions, which enable
them to quickly sew up the pieces and provide a constant stream to Zara's garment
finishing and packing facilities. Thus, what takes months for other companies,
takes no more than a few days for Zara. Finally, Zara's high-tech distribution
system ensures That no style sits around very long at head office. The garments are
quickly cleared through the distribution centre, and shipped to the stores, arriving
within 48 hours. Each store receives deliveries twice a week, so after being
produced the merchandise does not spend more than a week at most in transit.

5) Information Technology Keeps It Boiling Keeping Costs Down

Information and communications technology is at the heart of Zara's business.
Four critical information-related areas that give Zara its speed include:
Collecting information on consumer needs:
trend into information flows daily, and is fed into a database at head office.
Designers check the database for these dispatches as well as daily sales
numbers, using the information to create new lines and modify existing ones
thus, designers have access to real-time information when deciding with the
commercial team on the fabric, cut, and price points of a new garment.
Standardisation of product information different or incomplete
specifications

And varying product information availability typically add several weeks to a

typical retailer's product design and approval process, but Zara warehouses
the product information with common definitions, allowing it to quickly and
accurately prepare designs, with clear cut manufacturing instructions.
Product information and inventory management being able to manage
thousands of fabric
and trim specifications, design specifications as well as their physical
inventory, gives Zara's team the capability to design a garment with
available stocks, rather than having to order and wait for the material to come
in.
Distribution management:
its State-of-the-art distribution facility functions with minimal human
intervention. Approximately 200 kilometres of underground tracks move
merchandise from Zara's manufacturing plants to the 400+ chutes that ensure
each order reaches its right destination. Optical reading devices sort out and
distribute more than60,000 items of clothing an hour. Zara's merchandise does

not waste time waiting for human sorting.

Keeping Costs Down

Even while manufacturing in Europe, Zara manages to keep its costs down. None
of its assembly workshops are owned by the company. Most of the informal
economy workers the workshops employ are mothers, grandmothers and teenage
girls looking to add to their household incomes in the small towns and villages
where they live. Further, in terms of marketing costs, Zara relies more on having
prime retail locations than on advertising for attracting customers to its stores. It
spends a meagre 0.3 per cent of sales on advertising compared to an average of 3.5
per cent of competitors according to the company, choosing highly visible
locations for its stores renders advertising unnecessary.

Apart from designing to the fashion-of-the-day, Zara's strategy of producing low

volumes per style and changing products quickly in its stores enables it to cut
down on the discounts as well. Only about 18 percent of Zara clothing doesn't
work with its customers and must be discounted. That's half the industry average of
35 percent. Zara also has two clearly time-limited sales a year rather than constant
mark downs. Lastly, since it spends effort on producing what are current fashion
trends, it spends its design effort on interpreting rather than creating afresh
. In fact, Zara has been constantly alleged to have knocked-off top designers'
ranges, thus spending less on product development and design.

Do Zara follow JIT?

Most JIT system (even Toyotas) focus on manufacturing but Zara has a true justin-time system From customer to design, production and fabric manufacturing
Customers pull not designers push drives the system
This helps Zara to have an edge over most of its competitors strategy by having
very low Inventory to Sales Ratio. A comparison (of Zara and its Competitors) is
given in the following graph

Zaras Production Commitment and Markdown

Markdown is phenomenon of selling the product in sale at the season end or sale
during off-season.
Traditional Industry Model
6-month
Pre-season

45-60 %

Start of season

In-season

Sales% not
at full price

80 100 %

0 - 20 %

30 40 %

Advertisement

Advertisement
+
Markdowns

50 60 %

40 - 50 %

Zara

15 25 %

15 - 20 %

Fresh items

Procurement
Every organization purchases items, meaning, every organization requires to
purchase supplies, perhaps as raw materials, components, sub-assemblies,
spares,equipment, services and consumables. The procurement of these is either

buying or leasing them. Procurement interacts with every single unit in the
organization, going from marketing and sales to engineering, design and
manufacturing, therefore is to important for the organization.
Procurement is important for the company for a number of reasons: Materials
change The global markets and agile supply can provide various materials very
briefly on different price. This affects directly the final product, making it more
competitive, possible cheaper and more appealing to the customers.
Customer demand Lately there is a growth in companies product mix, while
shortening products life cycle. A good example is Zara designs, they produce small
quantities and wide variety, that way updating the shop outlook every week and
cutting down on promotions and reductions.
Price variation - The new technologies allow a product price to change couple of
times a day, depending on supply and demand. The same technologies allow
monitoring that process.
Procurement is value adding process and not a cost centre.
Manufacturing - It is important for the manufacturing materials to be delivered
on time, with the correct quality, to the correct place, in correct condition and at the
right total cost.
SCM - Supply chain management puts great emphasis on procurement.
subcontracting and outsourcing - become more cost effective.
Procurement has direct connection with company profit. Every penny saved in
purchasing is a profit, while every sales brings cost of sales. In fast fashion,
purchasing activities play a critical role through supplier selection and product
decision-making, and indeed, buying is arguably changing from purely operational
to much more strategic (Bruce and Daly, 2006). Bititci (2010) describes the
difference between strategic and operational procurement in the table below.

Strategic procurement

Operational Procurement

Goals:
1. Right Place
2. Right Quantity
3. Right Quality
4. Right Time
5. Right Price
6. Right Supply

Goals:
1. Mamage uninterrupted flow of materials
and services
2. Manage cost of operational activities
3. Minimise inventory investment and lost

Activities
Developing procurement strategy and
aligning it with the overall organizational
strategy
Assessing the supply market
Gathering information, identifying
suitable suppliers
Selecting supplier
Negotiate companys supply contracts
Evaluating supplier
Management critical commodities
Managing relationships with critical
suppliers and the rest of company
Monitoring procurement performance
Improving the procurement processes
Developing an electronic procurement

Activities
Preparing forecasts with quantities and
delivery times required
Collecting demands
Controlling authorization issues
Placing purchase orders
Follow-up purchase orders
Communicate with suppliers
Taking care of administration: delivery, tax
and regulatory issues, invoices
Monitoring the shipments
Managing transaction with suppliers
Source items that are unique to the
operating unit
Generate and forward material releases
Provide suppliers performance feedback
system
Implement companys best practises

Production
Supply Chain Operations (SCO) manages three clear aspects: maximize resource
used, minimize inventory and lead times. Those three directly affect pricing,
customer satisfaction, and overall business values like profit, turnover, sales, etc.

Zhang (2008) argues that production lot in Zara should be kept as small as
possible, leaving the extra capacity in the products which are mostly needed in the
manufacturing. He argues that big orders will result in inventory increase. On the
other hand Tiplady (2006) highlight the raising problem that with the increased
number of Zara stores around the world, lead times cannot be kept so short. The
two factors in a product manufacturing are: complexity and uncertainty. Depending
on those two, products fall into four categories shown below (Bititci, 2010):

High Uncertainty

High Complexity

Low Complexity

Fitness for purpose

Timeliness / Flexibility
Example:
cosmetics
textiles

Example:
aerospace
shipbuilding

Low Uncertainty

Key competences:
1. Product design
2. Construction

Key competences:
1. Time To Market
2. Supply flexibility
3. Product design

Value for money

Price

Example:
automotive
white goods

Example:
simple components
stationary

Key competences:
1. Product quality
2. Supply flexibility
3. Efficiency

Key competences:
1. Manufacturing
2. Logistic productivity

Timeliness Zara is producing fashion outfits, this has low complex, but high
uncertainty. Cai-feng (2009) argues that uncertainty is also a characteristic of
competition among organizations and will increase due to a combination of factors

in future supply chain environment. However, Zara is minimizing its uncertainty

by focusing on a limited range of and basic shapes, so that it deals with a rather
narrow product range. In that case even if a product does not sell well, a small
number has been shipped and it is going to be markdown and replaced with new
one shortly. Bruce and Daly (2006) said that fast fashion does not apply to the
whole range in stores, and as much as 80 per cent of goods may be core and basic
lines, with fast fashion accounting for up to 20 per cent . Zara does not do
different, it also has its runners and repeaters. The Zara basic label is daily
commodities with no shelf life, e.g. underwear, basic t-shirts, socks, etc. and are
mainly produced in China, which presume cheaper production and longer lead
times. On the other hand the high-end trendy Zara labels like Zara RTF, mainly
consisting of up-to-date fashion outfits are produced in Portugal and Spain,
meaning higher production cost and shorter lead times, but helping fast reaction on
demand.

Product distribution
Cai-feng (2009) said that marketing success was based upon strong brands and
innovative technologies. Nowadays, next to them we can place ASC, which is
capable of responding faster to the changeable demand. This new addition changes
the business to enhance competition on time by efficient supply chain (SC). There
are various ways the business can influence the SC. Delivery time influences the
company image. Lack of companys product on the shelf, turns the customer to
competitor's product and around 20% never come back. In other words, short
delivery times can increase market share (Bititci, 2010) .
Zara is consider to be the pioneer in fast fashion, with its twice a week supply to its
stores with new fashion items. For comparison, the usual times are from six to nine
months for far east clothing industry, 4 months for an international brand and only
a week for Zara (Zhang, 2008). This way Zara can react immediately on demand
changes and even if an item is not salable, there are small number of it in a store.
The new items in store keep people coming back every week and find new goods
to buy. It helps to keep the stores fresh and minimize the risk of wrong
forecasting.

ASC is critical for the fashion business success. In order to manage supply chain
correctly retailers should take into consideration all possible variables. Those can
be: weather conditions, specific customer requirements, shelf life, raw materials
supply lead times, sales forecasts, market specific requirements, etc.
Zara's success is due to many reasons, e.g. efficient supply chain, efficient
organization management, and one of the most important customer orientation.
When the movie Marie Antoinette was released October 2006 in the cinemas and
become total hit in EU and US, Zara's stores were populated with puffy ball gowns
and jackets from velvet with golden buttons. Another example of listening to its
customers' voice was after 9/11 act in New York. For a week the colorful outfits
were replaced with back and dark colored clothes in Zara's stores.
Another important aspect is that rapid turnover, eliminates working capital needs,
consequently number of short term loans is decreased. In that sense, the efficiency
of Zara originates from a small scale in operation, small batch of production and
transportation, many times of distribution in small quantities. If order is big,
inventory increases and the ability to comply with customer demand decreases .

Sales and Feedback

An early and constant communication between customer and supplier can ensure a
better SCM. Another rule is if customer treats his suppliers well, inform them,
being involved with their process is likely that less issues raise and usually is a
guarantee for a longtime partnership.
These facts are well known by Zara and used in its daily operations. Zaras
designers gather data on sales and inventory from each of its stores on a daily basis
and use this to inform their view of the situation. This process is named Shared
Situation Awareness by Sull and Turnocni. It consist of three steps: observe the raw
data, making sense of raw data and testing hypotheses (Sull and Turconi, 2008).
The raw data comes from quantitative and qualitative approaches. Sales and
replenishment reports are examined hourly by the Zaras store managers. On the
other hand store managers order items themselves instead of relying on what has

being sent from the headquarters. The accuracy of their forecasting affects their
compensation, which makes them more responsible.
Part of the qualitative data gathering is direct customer feedback given to shop
assistants daily. Another one is after shop closes, the store manager and assistants
turn to a recovery team and try to recall what happen during this day, as well as
sort out tried, but unsold items in fitting rooms and try to find a pattern, which can
be fed to the design team.
The gathered raw data is analyzed in Zara's headquarter, where design team, fast
prototyping team, market specialists and buyers sit together in tightly coupled
teams. The discussions are located in three halls with open layouts: one for man,
woman and children clothes. Based on feedback new designs are made, prototyped
and rated by the team. Depending on the outcome, there are trowed away or send
to store to test if customers will buy them.
In order to test if an item matches with the overall collection, in terms of materials,
colors, fabrics, etc. Zara's headquarter has a facility called Fashion street. It is an
underground floor resembling the high streets of Milan or London, where not only
windows are up to date, but also interior, lights and even background music. This is
all carefully designed by architects, visual merchandisers and designers.

IS ZARAs COMPETITIVE ADVANTAGE

SUSTAINABLE?
Zaras core competencies mainly revolves around

The high turnover of its products

Low level of inventory due to Fast supply chain - 1 week final production
cycle, two day out bound logistics, fast adaptation of leading trends
Efficient distribution system
Commitment of its employees

 Scanning the fashion trends, market trends and meeting the consumer
demands relating to fashionable clothes.
Flexible production system
Zara achieved its competitive advantage through Mass Customization
Elements of Mass Customization
Information elicitation
Communication network
Flexible technology
Tracking system
Make-to-order
Zara has actually developed its structure in such a way that it supports the
methodology of Mass Customization (an in between situation of Mass Production
and Customization). This Mass Customization is a combination of Job Shop and
Continuous Flow of Production System with high efficiency and low volume, a
scenario rare to find in real world. But Zara has developed it and this has added to
its Competitive Advantage.

LEARNING
Reduction in mark-down can more than make up for the increase in labour
cost
Planned shortages can induce more future demand
Good store location, layout and product display can be a substitute for
advertising
Faster response eliminates inventory risks
Excess capacity pays for itself by faster response

ZARA IN SUM
By taking a new and aggressive approach to fashion risk management through
current, small job shop production in continuous flow of fashion items, Zara not

only achieved high margins NOTWITHSTANDING higher local labour costs

but turned the production design into a compelling marketing story with the help of
its Supply Chain Management, an effort worth more then appreciation.

http://www.scribd.com/doc/19488507/Supply-Chain-Practices-at-Zara#