ZARA

Baki USLU
Bar BOZOLU
Outline
History of Zara
The Textile and Apparel Industry
The Zara Model
The Problem (outsourcing benefits and risks)
Questions
History of ZARA
1963
The founder of Zara, Amancio Ortega Ganoa
Started his career as a clerk
1975
First Zara store opened in La Coruna, Spain
1989
There were 82 Zara stores in Spain
Ortega began international expansion in
Portugal, Paris, New York
Inditex
Zara Pull&Bear
Massimo
Dutti
Berska
Oysho
(2001)

In 2001 Zara was a world brand with 1200
stores in all around the world
Most of the products were produced in Spain
The Textile and Apparel Industry
Global textile and apparel industry was 5.7%
of the whole manufacturing output of the
world.(1999)
The clothing market in the major countries
$580 bilion
40% labor cost in textile
60% labor cost in apparel
Apparel production is related to the fabric
.
Apparel
industry
High quality
segment
Medium quality
segment
Low quality
segment
The Textile and Apparel Industry in
the E.U and Spain
Textile and apparel workers consist of 7.6%
percent of total E.U manufacturing workers
Italy 31%
U.K 15%
Germany 14%
France 13%
Spain 9%
Portugal 6%
E.U is the second textile exporter in the
world
Spain
Spanish textile and apparel industry was
comprimised mostly of many very small
firms and had not been strong in R&D.
Wages increase

THE ZARA MODEL
Zaras Planning and Design Cycle
Designers start to work on designing
collection a year ago for initial collection
There are 200 designers
They made 11.000 designs every year
Patterns and Samples
In some cases designs made by 3rd party
suppliers
Production Sourcing and Scheduling
50% of the garments are outsourced
Garments with fashion styling manufactured
in Spain basics and knits are outsourced
Zaras season inventory
In the beginning of the season 60% of the
collection is ready while others are 80%
25% of the seasons collection is stored in
stores in the beginning of the season
85% of the inhouse production is that
seasons production
In-house Manufacture
n-house
manufacture
Fabric procurement
Garment assembly
And finishing
In-house Manufacture
40% of fabric produced in-house

Cutting

Sewing
In Season Production
Modified in response to market demand

If an item was not selling

If an item sells

If a product sell very well

If a products sale is not satisfactory



Distribution
Zaras distribution center in Arteixo

New distribution center in Zaragoza

Shipment

Retailing
Store managers decide for the items from the
distribution center
Stores receive new inventory several times a
week
Sale

Pricing Strategy
Pricing strategy= cost + target margin


Single Tag to Bar Code
Growth Strategy
Stores operated by Zara, franchise, alliances


USA market


Sourcing Dilemma?
Increase outsourcing vs. keeping current
model


Benefits and Risks of Outsourcing
Economies of Scale;
Manufacturing costs is reduced with
outsourcing by aggregating orders from
different buyers
Focus on Core Competency;
A careful decide on what to outsource helps
the buyer to focus on its core competency
Zara has the ability to give a quick response

Increased Flexibility;
Ability to better react to changes in customer
demand
Ability to use the suppliers technical
knowledge to accelerate product development
cycle time
Ability to use the suppliers technical
knowledge to accelerate product development
cycle time
Conflicting Objectives;
Flexibility vs. cost reduction







Questions?







Thank You