Bino Joseph Kishore Thomas John Saranya M Vygha N K Procurement & Outsourcing Strategies at Zara
History of Zara
4 P Approach Product Local preferences, designs and trends Price Different pricing strategies for different countries Promotion Different promotion strategies for different cultures Placement Effective distribution and location of stores
Zara sources fabric, other inputs and finished products from external suppliers. Purchasing offices in Barcelona & Hong Kong. Buying more from China might reduce the cost of goods sold in future.
Inditex owned Comditel that managed dyeing, patterning and finishing of grey fabric and supplied it to external and in-house manufacturers. Vertical integration helped to reduce the bull whip effect. It also owned 20 other factories for internal manufacturing that apply Just In Time .
Zara does not compete on prices. They compete only on fashion for which quick response capability is a must. Zara can originate a new design and have it as finished goods in 4 to 5 weeks and just 2 weeks for restocking or modifying the existing products. The same takes 6 months for its competitors.
Global scenario Build a decentralized distribution & production in each region to highly penetrate the market and to reduce the complexity of the process. Value chain should be extended in each region effectively.
Looking ahead Current supply chain model must be changed, can’t be continued for long. In order to remain competitive and control costs Zara might have to move manufacturing to India, China. This might prevent Zara from refurbishing its product lines in quick succession. Zara pioneered the concept of customized retailing and was able to conceptualize the garment, develop, and deliver it to the stores within two to three weeks