MGT 314.
19
Production Management
Individual Assignment on Zara
Submitted to:
Wasif Sayed Choudhury (WSC)
Submitted By:
Abdullah Al Sakib 1620832630
Executive Summary:
Zara, a Spanish apparel retailer was founded in 1975 by Amancio Ortega and his ex-spouse Rossalia Mera
and the biggest brand of Inditex Group. Zara is best known for its specializations in fast fashion and
dramatically introduce trends two weeks after being launched in runaways. The secret of being successful
in a dying industry is certainly their specialization in supply chain of 30 years. For any students of supply
chain management Zara is an icon for integrating the whole supply chain process which starts with the
preference and research about latest trend. They have a prime example of a fast fashion retailer who is
experiencing a significant growth in a dying industry. The purpose of this paper is shed some lights to the
supply chain practices of Zara and how their SC is playing an important role in their big success. Their
supply chain consists of 4 processes design, sourcing and manufacturing, distribution and retailing. The
vertical integration of the process, just-in-time production has made their supply chain a competitive
advantage that is impossible to copy by the competitors even if they are given all the right technology.
Contents
Executive Summary:...................................................................................................................................... 2
Company Overview: ...................................................................................................................................... 4
Supply-chain Practices at Zara: ..................................................................................................................... 5
Design: .......................................................................................................................................................... 6
Manufacturing and Sourcing: ....................................................................................................................... 7
Distribution: .................................................................................................................................................. 8
Retailing: ....................................................................................................................................................... 9
Key Findings of Supply Chain Practices of Zara:.......................................................................................... 10
Conclusion: .................................................................................................................................................. 11
Bibliography: ............................................................................................................................................... 11
Company Overview:
Zara, a Spanish apparel company that is known for its specializations in fast fashion and being one of the
fastest growing clothing retailer was founded in 1975 by Amancio Ortega and his ex-spouse Rossalia Mera.
It was initially named as Zorba which was inspired by the movie “Zorba the Greek”, but later they renamed
it to Zara. ZARA started their journey in overseas market by opening their retail store in Porto, Portugal in
1985 and later entered American market in 1989.By 2004 they were able to spread their stores in all parts
of the world even in Japan. Zara is the biggest flagship chain of the world’s largest apparel retailer “Inditex
Group” and 75% of the annual revenue ($18.9 billion) is contributed by Zara. And of the numerous fashion
retailers that belong to Inditex Group, Zara has the highest number of retail stores on a global scale. As of
the first half of 2018, Zara had 2338 stores in 96 coutries and 306 stores only in Spain.. Zara is known for
its fast fashion and their USP is to create and distribute the latest fashion to the end customers within 2
weeks of time. According to the 2018 report of Brand Finance Zara is the 3rd most valuable apparel brand
behind Nike and H&M.
Supply-chain Practices at Zara:
Zara is highly known for their specialization in fast fashion strategy which involves adapting style,
manufacturing and providing the customers with clothes within two-three weeks after they are released
in runaways four to six weeks from a sketch to store. They closely monitor the fashion trends and
preferences of customer to gives insights to help the designers design clothing that aid can the customers’
just in time production, their supply chain is has become a competitive advantage and the heart of their
success of selling more than 450 million products a year.
4 steps in the supply chain management of Zara
Design:
Zara’s supply chain process starts by their creative teams consisting of desginers, pattern maker, sourcing
speaclist and development personnel. With the help of advanced information system , a designer being
in Zara’s headquarter can take input of customers preference and style from different store managers and
design clothes way before the start of a season. He/she then picks up the fabrics and other
complementary accessories that may aid the clothes the most and try to determine a price. Then a pattern
maker creates a prototype and forwards it to a sourcing spealist who decides whether the clothes will be
insourced and outsourced and set a timeline. Product development personnel plays the final role in the
designing process by creating room for modifications in style and ensuring mass production of the clothes
after reviewing the reactions or receiving feedbacks from the store manager of the customers from the
sample stores.
Manufacturing and Sourcing:
In order to ensure the delivery fashionable and trendy clothes that can cater the tastes and preferences
of d different people, Zara follows “Just in Time Production” system. They heavily rely on outside sources
fabric, complementary accessories and finished goods with they help of the puchasing office in Barcelona,
co-subsidiary “Comditel” and the sourcing personnel. Zara keeps the cost of fabric minimum by purchasing
fabrics of only 4 colors and mostly of grey which account for more than 50 percent of their total fabric.
Zara’s success relies heavily on ensuring a significant amount of finished goods are being producted in-
house. It allows them to make sophisticated clothings, modification on current lines, and be flexible and
increase the frequency of launching new products.Zara owns 11 factories in Spain and which are located
in a 16km radius of the The Cube. Zara tries to outsource their production of most trendy and risky
apparels to factories near to their headquaters which allows the designer to be present while making
sophisticated clothings. The most time sensitive and cost sensitive basic products are outsourced to Asian
countries where the wage rate is significantly low than European markets. With the establishment of Just-
in-time production in 1990 Zara was able to design and manufacturing more than 50 percent of their
apparel in the middle of the season.
Distribution:
The Cube
One of the main reasons why no other competitors can’t copy Zara’s supply chain is because of their huge,
highly automated global distribution center “The Cube” which is located in Artexio, Spain. All the fabric,
complementary accessories pass through the cube through the underground monorail on its way to the
factories and all the finished goods pass through it on their way to the respective stores. Zara uses mobile
tracking system and RFID system to track the product, organize delivery allocation and identify the
shortage of particular clothing. Zara have designed their schedule of delivering shipments based on the
time zone of the destination. The cube operates in a two shift basis, where deliveries for America, Middle-
East, and Asia are made in the early morning where deliveries for the European stores are made in the
afternoon. The deliveries in European stores are made twice a week and it helps the store manager to
place order for hot selling products based on the customer demand. With highly evolved freight system
both by road and air Zara is able to deliver their product within 24 hours in European stores, 36 hours in
American and Chinese stores.
Retailing:
Zara is a prime example of a fast fashion retailer who is experiencing a significant growth in a dying
industry. Through effective and efficient supply-chain management Zara was able to increase their sales
volume by 12% a year for the last 15 years. With Zara’s integrated supply chain it takes only three weeks
for a new concept to hit the market. This part of the supply chain process includes the merchandising and
store operation policies. Their merchandising policies state that their product line should rapidly change
with high fashion content and reasonable physical quality that should make someone to wear the clothes
only 10 times. Zara tries to bring up the demand of their apparel by creating an artificial sense of scarcity
of their product by holding the inventory and make people buy it now instead of buying it a week later.
Zara tries to invest and open their retail stores in prime location which will help to bring a large number
of customers and increase customer turnover. Zara puts high value on the visual presentation of their
store mostly of their window display. With their main retailing tactic of creating a sense of scarcity they
are able to 85 percent profit of the full price which is at least 15 percent higher than the industry average.
Zara is also trying to create an omni-channel retailing by letting the customers order from retail stores
when the online inventory runs out.
Key Findings of Supply Chain Practices of Zara:
Process Findings
Designing 1. Creative team consists of designers, sourcing manager, pattern maker,
product development personnel.
2. Integrated SC helps designers to design keeping the customer
preference in mind.
3. Products initially launch at specific stores as test runs.
Manufacturing and 4. Just in time production system and vertically integrated supply chain.
Sourcing
5. Has more than 200 external suppliers.
6. Buys only four colors of fabric to keep the cost in check
7. Trendy products are manufactured in in-house production.
8. 50 percent of their apparel are designed and produced during the
season.
Distribution 9. Huge highly automated distribution center “The Cube” in Artexio.
10. Schedule delivery time based on the time zone of the country.
11. Delivery made twice a week to aid the demand of the customers.
Retailing 12. Stores are opened in prime locations and decorated aesthetically.
13. 2338 stores have been opened in 96 countries.
14. Main retailing tactic is to create sense of scarcity to make customers
“buy now”.
15. Building omni-channel retailing by integrating online and offline
orders.
Conclusion:
Zara is all about staying up to date with hottest trend, excluding the wait of 2-3 weeks before the trend
hits the market. With the help just in time production and agile supply chain management Zara is able to
provide the customers with clothes within two-three weeks after they are released in runaways four to
six weeks from a sketch to store. Their supply chain is surely the heart of their success in dying industry.
Bibliography:
Roll, M (2019). Zara supply chain analysis - the secret behind Zara's retail success. [online] Available at:
https://www.tradegecko.com/blog/supply-chain-management/zara-supply-chain-its-secret-to-
retail-success [Accessed 23 Aug. 2019].
Hanbury, M. (2018). We went inside one of the sprawling factories where Zara makes its clothes. Here's
how the world's biggest fashion retailer gets it done. [online] Business Insider. Available at:
https://www.businessinsider.com/how-zara-makes-its-clothes-2018-10 [Accessed 23 Aug. 2019].
Gorrepati, K. (2016, March 3). Zara's Agile Supply Chain Is The Source Of Its Competitive Advantage.
Retrieved from Digitalist Magazine: https://www.digitalistmag.com/digitalsupply-
networks/2016/03/30/zaras-agile-supply-chain-is-source-of-competitive-advantage04083335
[Accessed 23 Aug. 2019].
Hanbury, M. (2018). We went inside one of the sprawling factories where Zara makes its clothes. Here's
how the world's biggest fashion retailer gets it done.. [online] Business Insider. Available at:
https://www.businessinsider.com/how-zara-makes-its-clothes-2018-10 [Accessed 23 Aug. 2019].
En.wikipedia.org. (2019). Zara (retailer). [online] Available at:
https://en.wikipedia.org/wiki/Zara_(retailer) [Accessed 24 Aug. 2019].
Word Count: 1338 excluding Executive Summary and Bibliography
