Zara supply chain and satrategy

1. Rapid-Fire Fulfillment
Mubasher fiaz
Zishan aslam
Abdul basit
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2. The Story of Zara
 When a German wholesaler suddenly canceled a big lingerie order in 1975, Amancio Ortega
thought his fledgling clothing company might go bankrupt. All his capital was tied up in the
order.
 Zara fashion brand was founded in Spain in 1975
 Under the Spanish clothing giant Inditex Group.
 Apprentice-born Amancio Ortega Gaona
 Open a small clothing store in a remote town in northwestern Spain - Zara, pioneering

3. Amancio Ortega Gaona
 Founder - Amancio Ortega Gaona, Mar 28 1936
 14-year-old contact with the apparel industry, as a deliveryman at La
Coruña clothing store
 Established a small manufacturing factory for pajamas and shirts in
1963.
 Established the first Zara in La Coruña in 1975
 Inditex Group was founded in 1985 with Zara as the core
 The richest man in Spain in 2001
 2010 Forbes ranked 9th in the world

4. Zara Parent Group - Inditex
Stylish, quality and reasonably priced Zara
For young women, avant-garde street style Bershka
High-quality materials, urban style design Massimo Dutti
Green Girl Costume oysho
Young people market, sports and leisure style Pull and Bear

5. Development path
1975: Opening of the first retail store in La Coruña, Spain, selling backlogs.
1976 -1988: Opening Zara stores in major cities in Spain.
1989: Opened the first store in the United States and entered the US market.
1990: Opened the first store in Paris, France, and entered the French market.
2001/5/23: The Inditex Group went public; the subscription amount exceeded the circulation of 26 times on the
day, raising funds of 2.1 billion euros.
2004: Opened the group's 2000th store in Hong Kong.
2006: Opened a store in Shanghai and entered China for the first time.
2006/6: The Group has opened more than 2,899 specialty stores in 64 countries and regions around the world.

6. Competitive Advantage at Zara
Quickly respond to the ever-changing fashion trend
General clothing takes 6 to 9 months from design to delivery to the store, while Zara only takes 5 weeks.
Breaking the rules of apparel operation
Zara has its own factory, maintaining half of its production in its own factory, unlike other industry
outsourcing Zara has its own designer and physical store
Create a rare sense of value
The garments are first delivered to the Zara warehouse and then delivered to the physical store every
week.

7. Competitive Advantage at Zara
Instant information system
Designers stay in touch with the store to understand real-time sales Hot commodity information, and the
actual consumption
Capital-intensive production activities are carried out at their own factories
Using computer control equipment to cut clothing Not mass production for economies of scale, small batch
production Labor-intensive activities are manufactured by contract factories
Less inventory, higher profit margin
Achieve results through strategies such as design, information systems, and logistics management support:

8. Rapid-Fire Fulfillment
 In an industry which is extremely fast paced and demanding, Zara has got a great competitive advantage
over the rest of the industry.
 Their innovative supply chain is responsible for this rise to glory.
 There are two important steps to become successful in the fashion retail business –
I. Keep up with fashion and make clothes that the customers want and
II. Have an effective marketing strategy. This has enabled them to be fast and market responsive with the
clothes taking less than 4 weeks to reach from the designers to the customers which is usually around 2-5
months for other companies.

9. Rapid-Fire Fulfillment
 The lesson Ortega learned from his early scare was this:
 To be successful you need to have five fingers touching the factory and five touching the customer.
 Translation: Control what happens to your product until the customer buys it.
 In adhering to this philosophy, Zara has developed a super-responsive supply chain.
 The company can design, produce, and deliver a new garment and put it on display in its stores worldwide in a
mere 15 days

10. Rapid-Fire Fulfillment
 During the last three years
 We’ve tried to discover just how Zara designs and manages its rapid-fire supply chain.
 We didn’t find any. Instead, we found a self-reinforcing system built on three principles:
I. Close the communication loop
II. Stick to a rhythm across the entire chain.
III. Leverage your capital assets to increase supply chain flexibility.

11. Close the communication loop
The goal is to close the information loop between the end users and the
upstream operations of design, procurement, production, and distribution as
quickly and directly as possible.

12. Close the communication loop
This Fast Fashion System
 Depends on a constant exchange of information throughout every part of Zara’s supply chain
 From customers to store managers, from store managers to market specialists and designers, from designers
to production staff, from buyers to subcontractors, from warehouse managers to distributors, and so on.
 Most companies insert layers of bureaucracy that can bog down communication between departments.
transfer easy.

13. Stick to a rhythm across the entire chain.
 At Zara, it spends money on anything that helps to increase and enforce the speed and responsiveness
of the chain as a whole.
 The entire chain moves to a fast but predictable rhythm that resembles Toyota’s “Takt time” for
assembly
 By carefully timing the whole chain, Zara avoids the usual problem of rushing through one step and
waiting to take the next.
 Because regular customers know exactly when the new deliveries come, they visit the stores more
frequently on those days.

14. Stick to a rhythm across the entire chain.
 The precise rhythm begins in the retail shops.
 Store managers in Spain and southern Europe place orders twice weekly, by 3:00 pm
Wednesday and 6:00 pm Saturday
 And the rest of the world places them by 3:00 pm Tuesday and 6:00 pm Friday.
 These deadlines are strictly enforced: If a store in Barcelona misses the Wednesday
deadline, it has to wait until Saturday.
 Order fulfillment follows the same strict rhythm

15. Leverage your capital assets to increase
supply chain flexibility
 Technical machines,buildings, and other property belonging to a company
 Zara has made major capital investments in production and distribution facilities and uses them
to increase the supply chain’s responsiveness to new and fluctuating demands.
 It produces complicated products in-house and outsources the simple ones.

16. Leverage your capital assets to increase
supply chain flexibility
 It took Zara many years to develop its highly responsive system
 But your company need not spend decades bringing its supply chain up to speed. Instead, you can
borrow a page from Zara’s playbook.
 Zara’s practices may be directly applicable only in high-tech or other industries where product life
cycles are very short.

17. Leverage your capital assets to increase
supply chain flexibility
 In a volatile market where product life cycles are short, it’s better to own fewer assets --thus goes the
conventional wisdom shared by many senior managers, stock analysts, and management gurus.
 Zara subverts this logic: It produces roughly half of its products in its own factories.
 It buys 40% of its fabric from another Inditex firm, Comditel (accounting for almost 90% of Comditel’s
total sales), and it purchases its dyestuff from yet another Inditex company.

18. Leverage your capital assets to increase
supply chain flexibility
 So much vertical integration is clearly out of fashion in the industry; rivals like Gap and H&M, for
example, own no production facilities.
 But Zara’s managers reason that investment in capital assets can actually increase the organization’s
overall flexibility.
 Owning production assets gives Zara a level of control over schedules and capacities that, its senior
managers argue, would be impossible to achieve if the company were entirely dependent on outside
suppliers, especially ones located on the other side of the world.

19. Leverage your capital assets to increase
supply chain flexibility
 Even though there’s ample (more than enough) capacity in this distribution center during most of the
year, Zara opened a new €100 million, 120,000-square-meter logistics center in Zaragoza, northeast
of Madrid, in October 2003.
 Why is Zara so generous with capacity?
 Zara’s senior managers follow a fundamental rule of queuing models, which holds that waiting time
shoots up exponentially when capacity is tight and demand is variable
 See the exhibit “For Fast Response, Have Extra Capacity on Hand”

21. Reinforcing Principles
 None of the three principles outlined above—closing the communication loop, sticking to a rhythm,
and leveraging your assets—is particularly new or radical.
 Each one alone could improve the responsiveness of any company’s supply chain.
 But together, they create a powerful force because they reinforce one another.

22. Reinforcing Principles
 Perhaps the deepest secret of Zara’s success is its ability to sustain an environment that optimizes the entire
supply chain rather than each step.
 They have hardwired into the organization the lesson Ortega learned almost 30 years ago: Touch the
factories and customers with two hands.
 Do everything possible to let one hand help the other.
 And whatever you do, don’t take your eyes off the product until it’s sold.