Zara

Supply Chain Management Practices

Group members
Arslan Asghar (L1S10MBAM0170)

Muhammad Sohail (L1S10MBAM0205)

Maryum Kabeer (L1S09MBAM2043)

Introduction
Zara was founded in 1975. It was subsidiary of Inditex

Zara is a high fashion concept

Its offerings are footwear, apparel and accessories
Its target market are women, men and children from new born to adult
aged 45

Zara has 853 outlets all over the globe till 2005

Problems
The design function of Zara is centralized due to which;
It is time consuming in terms of new design development and design
approval.
It is difficult to analyse the needs of all the regions.

Zara production is partially done in house and partially outsourced

due to which;
The production cost is high
The production time is more

Problems
Centralized distribution system leads to;
High distribution cost
High distribution time

Low shelf time leads to;

Lower sales

Solution
Three prong strategy

Decentralization Outsourcing production

Retail strategy

Decentralization

Design Strategy
Design Function Decentralization:
Establish regional design offices based on two criteria;
Region should be selected based on cultural similarities
Specific countries should be selected based on largest number of retail outlets/style &
fashion

Individual retail outlets will share data on demand & trends to

regional design offices
The design decisions and design approval will be made at regional
design offices
The suppliers will be connected to the regional offices of Zara through
portal

Design Strategy

Design Strategy
Advantages:
Less time in analysing the regional demand and trend data. Design time will
be reduced from 3 days to 1 day
More effectiveness in analysing the demands of individual regions

Disadvantages:
High cost
Loss of control

Distribution Strategy
Distribution centres at central location for all regions will be developed
Products from the suppliers will reach these distribution centres and then will
be cross docked to the individual retail outlets

Distribution Strategy

Distribution

Hong Kong

Mexico

Saudi Arabia

Spain

Asia

Brazil/America

Middle
East/Africa

Europe

Distribution Strategy
Advantages:
Products will not have to be sorted as at central distribution centre. It will
save time. Distribution time will be reduced to 2 days
Cost will be saved as these distribution centres will be located relatively near
to their destinations

Outsourcing production

Outsourcing production
Suppliers will be selected in low cost countries like china.
In order to be flexible parallel suppliers will be developed;
Low cost suppliers in villages and town areas of Spain & Portugal will continue
to produce for Zara
Zara will develop value added partnership with these suppliers by investing in
their human resource development, partnering with them for cutting edge
technology, investment in IT in order connect with suppliers.

Outsourcing production
Suppliers

China

Mexico

Spain

Middle
East/Africa

Brazil &
America

Europe

Outsourcing production
Advantages:
Low production time
Low cost. Cost will be reduced to 5 to 7 percent for China

Disadvantages:
Design imitation by suppliers
Inconsistent quality in different regions

Retail Strategy

Retail strategy
Due to the shelf time of 4 weeks only early adopters can buy the product. By
increasing the shelf life of hot selling designs to 8 weeks, late adopters and
laggards can also buy the products.

Retail strategy
Late
adopters

Retail strategy
Advantages:
Average visit of customers may increase from 17 times to 25 times per year.
This means more sales.

Disadvantages:
Cost will be high because inventory will have to be maintained for hot selling
designs.

Comparison of old & new supply chain

Old supply chain:
Purchase undyed
fabric

Dye/print fabric

Design

Prototype/Sample

Retailing

Distribution

Sewing

Cutting

Comparison of old & new supply chain

New supply chain
Design

Prototyping

Manufacturing

Distribution center

Retailing

Estimation of lead time with new supply

chain

Style, idea quantity conveyed to head quarters

1 day

Design

1 day

Style approval

Few hours

Prototype development

1 day

Garment production

5 days

Shipment

2 days

Total

10 days