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Group 2

Ann Mary
Arpit Nim
Arjun T S
Jeeth Raju
Mohsin Mohamad

Case Study Nikhita Renchi


Tiasha Halder
A rapid success
Zara, part of Inditex worlds largest apparel retailer today, was at
the verge of bankruptcy in 1975
Today they have 650 stores in 50 countries
Inditex receives 70% sales from Zara alone
Sales of Inditex grew 12 fold to 4.6 billion from 367 million
14 fold profit growth from 31 million to 447million
25% share sole for 2.3 billion
Current annual growth rate of 20%
- USPs

Identification of a trend to the display in a shop takes merely 30 days


Fresh designs on display twice every week
Encourage empty space and occasional stock outs in retail shops the
feeling of scarcity tempts the customer to buy quick
Provides latest fashion at less than premium price
Design, Production, warehouse, distribution and logistics done in house
Increases reliability of the customer
Customers frequently visit shops as new designs will stay only for 4
weeks
Principles
1. Close the communication loop
GOAL: To close communication loop between the end users and the upstream
operations as quickly and directly as possible.
Centralized design and production center:
Zaras single, centralized design and production center runs three parallel, but
operationally distinct, product families (mens, womens and children).
Though it is more expensive to operate 3 channels, the information flow for each channel
is fast, direct and encumbered by problems in other channels, making it more responsive.
The physical and organizational proximity of the three groups increases both speed and
quality.

Supply chain:
Organized to transfer data quickly from shoppers to designers and production staff.
Constant exchange of information throughout every part of the supply chain mitigates the
so-called bullwhip effect (the tendency of supply chains to amplify small disturbances).

Customized handheld computers (PDAs):


Zara uses latest information technology tools to facilitate these information exchanges.
2. Stick to Rhythm
Designs, distributes and owns all of its retail shops-enhanced flexibility
Careful timing and level of control set the pace for information and
product flow
Zara's certainty level pulls customer regularly
Managers to ensure responsiveness of system on a daily basis
Pre-priced and tagged garments is directly put on display after delivery
Produces garments in small batches
Adheres to deliver only 2 shipments per week
Transportation by air and truck rather than ships and trains
Ships garments in hangers rather than in boxes
3. Leverage Your Assets

Produces roughly half the products in its own factories


Unlike competitors it exercises vertical integration
Ownership of the production assets give Zara greater control over
schedules and capacities.
Simple products are outsourced and complicated ones made in-house
Uses Just-In-Time systems which enhances innovation and speed
Adds temporary staffers during peak seasons to meet demands
Very large capacity for factories, distribution centres and storage
centres to increase responsiveness
Comparison with Convention
Supply chain:
Super-responsive supply chain: Takes mere 15 days to design produce, deliver and
display new garments.
Production:
Almost of production in-house unlike other retail chains.
Producing in small quantities helps them move unsold items after 2-3 weeks without
incurring much cost.
Storing and shipment in racks saves space.
Communication:
Constant direct and fast exchange of information throughout supply chain unlike
most companies that insert layers of bureaucracy that can bog down
communication.
Flexibility:
Retailers can adjust 40-50%. Others- Max 20%.
Vertical integration:
buys 40% of fabric and dyes from other Inditex companies.
Learnings from Zara
React Rather Than Predict: Company can design ,produce and deliver a new garment in stores
within 15 days, where they beat big Fashion houses comprehensively.

Inventory management: The stock delivered is strictly limited, ensuring that each store only receives
just want they need. This goes towards the brand image of being exclusive while avoiding the build
up of unpopular stock.

Reducing Risks: the less its availability, the more desirable the object becomes.

Strong Distribution network: enables the company to deliver goods to its European stores within 24
hours, and to its American and Japan outlets in less than 48 and 72 hours respectively.

Fast fashion success: its vertically integrated supply chain, enables limited production under control,
leading to well managed inventories, lower markdowns, higher profitability, and value creation for
shareholders in the short and long term.

Synergy between business and operations strategy: Extensive market research paired up with
cutting edge IT, let them manage the huge variety product portfolio easily.
Strengths Weaknesses
1.Cost leadership strategy 1.Zara only has one manufacturing and
distribution centre in the world
2.Efficient distribution
2.Doesn't spend much money on
3.Information technology advertising
4.Fast delivery of new products ,and 3. Limited stocks and removing the
trends unsold items within 2-3 weeks , piles
up on inventory

SWOT
Analysis

Opportunity Threats
1.Global market penetration 1.Local competitors
2.Increase in Outsourcing for expansion 2.Global competitors
in Asian countries. 3. Zara based in Spain and has a huge no
3.Opting for Omni channel mode of of stores in Europe, and exchange rate
Distribution fluctuations may dent its revenues.
Conclusion
Vertical Integration: It manages design, production, shipment, display, promotion, sales, and feedback itself,
relying only diminutively on outsourcing

Limited Production: The logic behind this is that small lot creates the sense of exclusivity. Customer need to make
a quick decision otherwise the next day the products they want will be gone. So customer visits Zara's stores to
see new products more often and this creates the huge amount of traffic and revenue.

Centralize design and product development: Stream lining the back-and-forth communication between store
managers, market specialists and other eminent heads reduces the time to understand market needs drastically.

Control scheduling strictly: At Zara, store managers can place order 2 times a week, shipments are prepared and
delivered within 24 hours (in Europe) and products will be on displayed at stores the same day they arrived. Since
everything runs in a stead pace, they can reduce a waiting time at every step of the way.

Automate production and warehouse facilities : Zara believes in time based competition, automation is the key
to help them to increase the speed and the accuracy of the operations.

Adhere to all rules: Implementing any one of these rules alone is not quite effective. Then, they have to stick to
all rules so the whole supply chain is running like the well-oiled machine.
Thank You

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