ZARA: FAST FASHION

BY
SAWAD

BAHADUR
SANGITA SHRESTHA
DAIVIK PATEL
MOHAMMAD NAVEED

ZARA: FAST FASHION

AGENDA

Industry Overview

Zara Overview

Supply Chain

Zara Supply Chain

Conclusion

INDUSTRY OVERVIEW

High Demand Uncertainty

Push vs. Pull Method

30% of world production exported from developing

countries

INDUSTRY OVERVIEW:
COMPETITION
Gap, Inc.

H&M

Benetton

Zara

Production

Outsourced

Outsourced

In-House

40% In-House
60% Outsourced

Production
Lead Times

High

High

High

Low

Net Margins

-.06%

9.6%

7.05%

10.47%

INDUSTRY OVERVIEW:
POSITIONING
Price +

Benetton
Gap

Fashion -

Fashion +
ZARA
H&M

Price -

ZARA OVERVIEW

Owned by Inditex (Industria

de Diseno Textile)

Largest of 6 Inditex Chains

500 stores in 30 countries

For women, men, and youth

From infants to age 45

Targets woman

ZARA OVERVIEW:
ADVANTAGES

Vertical Integration

Quick Response to Demand (Pull System)

Small Batch Production

High Product Turnover

Central Distribution Center / Strong IT System

ZARA OVERVIEW:
SUPPLY CHAIN

Manufacturing

Design
INDITEX
MANAGEMENT /
DESIGNERS
Determine apparel
designs and
manufacturing locations

ASIA
(20%)
Low QR
Low Cost

System is designed for short production

cycles, quick response (QR) to demand,
and reduced number of markdowns
Distribution

Sale

DISTRIBUTION
CENTER
IN-HOUSE
(40%)
High QR
High Cost

EUROPE /
N. AFRICA
(40%)
High QR
High cost

STORES

Increased shipment
frequency increases QR

Decentralized store
management supplements
QR

Small batch production

lowers cost of demand
uncertainty

Managers determine
products to sell and return

Returns from stores either rerouted or

disposed of in local stores near dist.
center

IT SYSTEMS
Provides accurate
demand information to
determine
manufacturing locations
and production levels

 Zaras

digital promotional activities

including internet online 29 marketing,
attending different social media
platforms like Facebook, Twitter,
Instragram, Pinterest, Youtube,
smartphone apps and a newsletter.
It has 23,538,220 likes on Facebook,
8.5 million followers on Instagram, 1.07
million followers on Twitter and 174.4k
followers on Pinterest. In 2013, Zaras
online sales jumped by 42% to 553
million (Burgen, 2014).

Activity

Zaras Value Chain

PRIMARY ACTIVITIES
Inbound Logistics

IT-enabled Just-in-Time (JIT) strategy results in inventory being received when

needed. Most dyes are purchased from its own subsidiaries to better support JIT
strategy and reduce costs.

Information systems support decisions about the fabric, cut and price points.
Operations
Price tags are already on the products.
Zara produces 60% of its merchandise in-house.
Fabric is cut and dyed by robots in 23 highly automated Spanish factories.

Outbound Logistics

Clothes move on miles of automated conveyor belts at distribution centers and reach
stores within 48 hours. Distribution cost is high but timely.

Limited inventory allows low percentage of unsold inventory (10%); POS at stores
Marketing and Sales linked to headquarters to track how items are selling;
Customers ask for what they want and this information is transmitted through cloud
computing daily from stores to designers over handheld computers.
Customers can scan any barcode in the store and view product details via the mobile
application. It is really convenient for a customer who is in a hurry.

Service

Zara spends only 0.3% of sales on advertising, in comparison to other apparel

retailers who spend 3-4% (Pearson, 2007).
Customer satisfaction is very high. Zaras customers visit its store 17 times per year,
whereas its competitors stores -three times per year (SCM Globe, 2015).

SUPPORT ACTIVITIES

Organization
IT supports tightly-knit collaboration among designers, store managers,
market specialists, production managers and production planners.

Human Resources
Zara has more than 200 young talented designers, who create designs
based on the latest fashion from the catwalk and fashion hotspots and
adapt them for the mass market (Kumar and Linguri 2006, p.80-84).
Zara uses laser barcode scanners to deliver its products punctually to
different destinations; these scanners operate with less than 0.5%
error (Zhelyazkov, 2011).
Technology
Technology is integrated to support all primary activities. Zaras IT staff
works with vendor to develop automated conveyor to support
distribution activities.
Purchasing
Vertical integration reduces amount of purchasing needed. Zara buys
raw fabric from suppliers in Italy, Spain, and Greece and suppliers
deliver to Zara within 5 days (SCM Globe, 2015). It has short
production runs which creates scarcity of a particular design and
creates a sense of agility to purchase while supplies last.

Using Web 2.0 technologies,

every order or transaction can
be traced in a Digital Operating
Model.
Tagging technologies such as
barcodes provide real-time data
feeds for physical movements.

CONCLUSION

Zara is leading the fast fashion company for their vertical

integration of the supply chain, which is able to produce a new
product in 14 days and deliver it from manufacture to the store.
In todays digital world advertising is a heart of business success
in terms of customer relationship.
Aggressive growth strategy needed to capture more market
Zara should be more concentrate on advertising and spend little
bit more to attract customers.
Digital touch point in heart of the city like main train station and
various shopping centre.
It is more about aligning digital initiatives with supply chain goals
and adopting a Digital Operating Model to realize the untapped
potential of existing resources and capabilities resulting in a
higher level of performance.

REFERENCES

Burgen, S. (2014). Zara owner's online sales jump to 42% to 553m. THEGURDIAN. [Online]. Available:
http://www.theguardian.com/business/2014/nov/19/zara-owner-onlinesales-553m-inditex
Kumar, N. & Linguri, S. (2006). Fashion sense. Business strategy review,17(2), pp.80-84.
SCM Globe. (2015). Zara clothing company supply chain. SCM Globle. [Online]. Available:
http://blog.scmglobe.com/?page_id=1513 [Accessed 24 December 2015].
Zhelyazkov, G. (2011). Agile Supply Chain: Zara's case study analysis. Design Manufacture & Engineering
Management. [Online] Available:
http://galinzhelyazkov.com/wpcontent/uploads/2011/09/AgileSupplyChainZaracasestudyanalysis.pdf

THANK YOU
FOR
LISTENING