Zara has been successful due to its unique procurement and outsourcing strategies. It sources fabric and finished products from external suppliers with purchasing offices in Barcelona and Hong Kong. Zara owns factories that apply Just-In-Time to help reduce costs. It also competes on fashion and quick response time, being able to design, produce, and restock products in 4-5 weeks compared to competitors' 6 months. Looking ahead, Zara may need to change its supply chain model and move more manufacturing to lower-cost countries like India and China to remain competitive while controlling costs.

1. Bino JosephKishore Thomas JohnSaranya MVygha N KProcurement & Outsourcing Strategies at Zara

2. History of Zara

3. Case Facts

4. Contd…

5. Contd…

6. Competitive advantage

8. Strategies

11. 4 P ApproachProduct Local preferences, designs and trendsPrice Different pricing strategies for different countriesPromotion Different promotion strategies for different culturesPlacementEffective distribution and location of stores

12. Analysis

13. 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.

14. 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 .

15. 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.

16. Global scenarioBuild 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.

17. Looking aheadCurrent 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