Zara Case

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Zara is a Spanish clothing and accessories retailer based in the Galicia port of La Coruna that was originally founded in 1975 by Amancio Ortega Gaona after a German customer cancelled a sizeable order that might have lead to the bankruptcy of his small apparel manufacturer. Their business model and strategy relates to its super responsive buyer-driven supply chain. The customer plans an active role in the business model. Their design and production activity begins with customer demand in the retail stores. The information is continuous and instantaneous back to headquarters, where the team and designers use real-time information to create new designs and price points. They also don’t use economies-of-scale and outsource production, instead they carry out a large part of production in factories belonging to the Group at centers close to the corporate headquarters. They prioritize time over production costs; which helps them reduce risk and lead-time. Products are shipped directly from central distribution centers to stores twice a week in small batches. This helps keep the inventories low and stores fresh. Their system helps them have a turnaround time that can be shorter than two weeks.

One of their strategies focuses on tight communication loop and IT infrastructure. Zara puts its focus primarily on creating highly responsive communication channels where business operations meet demand. Trend info flows in daily, which keeps the company aware of fast changing fashion trends. Because of this real time information, Zara is able to create new lines to modify existing ones. The constant flow of updated data helps to lessen the bullwhip effect. Some downsides would obviously have to be price of keeping it local and constant changes when it comes to materials and labor.

Another aspect to Zara’s strategy is that it has total control over sourcing and distribution. They don’t rely on third-party partners. The company carries out all design, warehousing,...
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