Inditex: Scm Strategy

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I.The textile industry

Inditex is a textile group, which owns the famous brand Zara. It has published its last figures testifying of its growing share value on the market. The group is leader in the European textile market and owns more than 4000 stores around the world and generates more than 85 000 jobs. Its headquarters are located in Arteixo in the North of Spain where most of the production is done. The group owns 8 brands: Zara, Bershka, Massimo Dutti, Pull & Bear, Stradivarius, Oysho, Zara Home and Uterque. For each of these brands the group designs and produces most of the collections, and the clothes are shipped twice a week in the stores. One of the key factors of success of Zara is its adaptability to the market. Indeed the strategy developed by its creator Amancio Ortega wants the shelves to be renewed once every two weeks, that is why controlling the supply chain is very important for the group.

1.The unique context and characteristics of textile industry

Textile industry is highly competitive. Competition has hardened with globalisation trend. Thus, outsourcing became recurrent question in the eighties especially when it came to cost management issues. In addition to that, fashion industry has to come up with solutions regarding its own characteristics: oscillating and erratic demand, complex forecast process, fluctuating customer's expectations, short lifecycle of items, complexity to manage portfolio. These are not impossible to handle, but fashion industry has to manage its own issues and monitor a flexible structure to be efficient, profitable and be able to respond to customers demand in a very short time. Indeed what matters when it comes to supply chain management is to use all resources to satisfy customers' demand: delivering in quantity, matching quality standards required by customers, reducing lead time between batches in stores, offering a reasonable price. Still the fashion industry is not different from others in a sense that it has to remain viable, able to compete and grow on the market. Thus, whoever wants to survive in the fashion market industry has to innovate, whether with product innovation or with strategic innovation processes. The textile industry embodies more than 170 producers. Therefore there is plenty of choice for companies willing to produce at a very low cost, which leads to an outsourcing trend, especially as such a production doesn't need skilled workers. The textile industry is so competitive that it has been protected from the 1st January 1995 by what we call "the Agreement on Textiles and Clothing". The ATC are quotas limiting importation in Europe, Canada and the United States on textile from the rest of the world. This agreement was abolished in 2005, and Europe started to fear the consequences of the rising importation of Chinese textile. In addition to that China has entered WTO in 2001 and is currently issuing 30% of the European importation on textile products.

At a worldwide level Inditex is leader on the market. To remain best in class manage to adapt to theses threats, producing not only in China, but also by selling on this growing market. Indeed the group has opened more than 20 Zara stores and 4 Massimo Dutti stores.

2.The textile industry affected by the crisis

Spain remains the first market for Zara. Nevertheless Spain is currently hit by the crisis. Indeed Spain economy has been decreasing for more than 2 years now and could predict difficulties for the company on its country market. In France activities forecast are not good either. The recession in the textile industry is happening in France as well. The sector forecasts show a decrease of 9% on the total volume of sales in the textile industry. This figure is mainly due to the massive movements of outsourcing to the low cost producing countries. Though, worldwide Zara and its main competitors as Gap and H&M to quote but them manage to back off. They chose a low price segment and...
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