For the study of supply chain management of ZARA

2. Content
• Introduction
• Company profile
• Statics
• Supply Chain
• Vertical Supply Chain

3. Introduction
• ZARA: Company Profile
• ZARA: The Supply Chain
– Vertically Integrated

4. COMPANY PROFILE
• ZARA is the flagship
chain store of Inditex
Group owned by
Spanish tycoon
Amancio Ortega
• HQ in Coruna, Spain,
where the first ZARA
store opened in
1975.

5. Inditex : 2012 Global Sales Breakdown
•

6. Statistics on ZARA's Supply Chain
• 15 days from designs to products VS. industry average of 6-9 months
• 12 inventory turnovers/year VS. industry average 3-4 times
• 12,000 designs/year
• 30,000 Stock-Keeping Units (SKUs)/year
• Unsold items account for 10% of stock VS. industry
average 17%~20%
• Commits 50%~60% of production in advance of the
season VS. 80%~90% for other

7. Supply Chain
• ZARA buys fabric in
only 4 different
colors;
• designs and cuts
its fabric in-house
Suppliers are all close
to their factories so
ZARA can order on a
need-basis
Clothes are ironed in
advance and packed on
hangers, with security
and price tags affixed
Overnight trucks are used
to deliver to European
stores and airfreight is
used to ship to other
countries

8. The Key to ZARA's Success
• Vertically integrated supply chain where
design, production, distribution, and retailing
were integrated.
– “The vertical integration of our production system
allows us to place a garment in any store around
the world in a period between two to three
weeks.”

9. THE AWKWARD FACTOR IN THE PROFITABILITY
FORMULA
• Buy low, sell high; Buy on credit, sell on cash.
• Zara, which contributes around 65 per cent of
group sales , concentrates on three winning
formulae to bake its fresh fashion:
Short Lead Time = More fashionable
Lower quantities = Scarce supply
More styles = More choice, and more chances of
hitting it right?

10. ZARA: Vertically Integrated Supply
Chain
In Spain, 200 fashion designers are in
charge of new designs for the clothing
line. They select the most cost effective
fabric for the new designs.
Designs will be made into models when
sent to the factory. The computer then
decide how to shear fabrics in order to
waste as little as possible.
Fabric will be sent to the factories.

11. ZARA: Vertically Integrated Supply
Chain
After the sewing process,
products will be sent back to
the factory for button nailing,
ironing and inspection.
Up to tens of kilometers of
underground transmission
channel connects all the
processors.
Label trademarks for different
countries.

12. Increase Revenue
Reduced product discounting
Books 85% of the full ticket price for
its merchandise, while the industry
average is 60%
Flexibility to respond to change in
consumer demands
Unsold items account for <10% of
stock, as opposed to the industry
average of 17-20%
Faster time to the market/extending
product life
4-5 weeks from conception to
distribution
Tailored products
Produces 11,000 designs annually
Competitors only have 2,000 to 4,000
items
Improved product availability
Stores Twice-weekly shipments

13. Decrease Costs
• COGS
Outside the distribution center in La Coruña, ZARA has
twenty-three highly automated factories.
• Cost of logistics
Since nearly 60 percent of ZARA's merchandise is
produced in-house, decreased transportation costs
• Management and administration
Plants use just-in-time systems developed in
cooperation with logistics experts from Toyota Motor
(TM)
• Cost of capital/assets
ZARA owns 40% of their production facilities in Europe

14. THANK YOU !!!