Zara Supply Chain Case Study

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  • Published : April 4, 2012
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Introduction
 
 
Zara
 is
 a
 fashion
 retailer
 established
 in
 1975
 by
 the
 Spanish
 group
 Inditex
 founded
 by
  Amancio
 Ortega
 Gaona.
 Inditex
 runs
 over
 more
 than
 5400
 stores
 worldwide
 and
 owns
  brands
  other
  than
  Zara
  such
  as
  Massimo
  Dutti,
  Breshka,
  Oysho,
  Pull
  and
  Bear
  and
  Stradivarius.
  Inditex
  headquarters
  are
  located
  close
  to
  La
  Coruña
  in
  northwestern
  of
  Spain.
  The
  old
  shipbuilding
  town
  of
  La
  Coruña
  seems
  an
  unlikely
  home
  to
  a
  tech-­‐charged
  innovator
  in
  the
  fashion
  industry.
  But
  that’s
  where
  the
  Inditex
  Corporation
  built
  its
  headquarter
 called
 “The
 Cube”.
 
 

Zara’s
 Business
 Model
 and
 Its
 Success
 Factors
 
Zara
 is
 the
 most
 profitable
 (75%
 of
 Inditex
 total
 profit)
 brand
 of
 Inditex
 with
 2,044.7
  million
 euros
 in
 2000.
 Zara
 has
 developed
 a
 business
 model
 based
 on
 following
 criteria:
  1. 2. 3. 4. 5. Short
 lead-­‐time
  Scarce
 supply
 
  Large
 varieties
 of
 style
 and
 colors
  Limited
 Advertising
 Cost
  High
 turnover
 

The
 brand
 succeeds
 to
 make
 moderate
 prices
 with
 a
 large
 choice
 of
 new
 clothes
 every
  time.
  Zara’s
  short
  lead-­‐time
  system
  depends
  on
  continuous
  exchange
  of
  information
  throughout
 every
 part
 of
 Zara's
 closed
 loop
 feedback
 system
 (Figure
 1).
 This
 chain
 goes
  from
  customers
  to
  store
  managers,
  then
  to
  market
  specialists
  and
  designers,
  then
  to
  production
  staff,
  from
  buyers
  to
  subcontractors,
  from
  warehouse
  managers
  to
  distributors,
  and
  so
  on.
  Unlike
  other
  retailers
  Zara's
  organization,
  operational
  procedures,
  and
  even
  its
  office
  layouts
  are
  all
  designed
  to
  make
  information
  transfer
  easy.
  Zara's
  employs
  200
  designers
  who
  sit
  in
  the
  center
  of
  production
  center.
  Zara
  produces
  about
  11,000
  styles
  each
  year-­‐
  perhaps
  five
  times
  as
  many
  as
  competitors.
  This
  allows
  Zara
  to
  supply
  its
  stores
  with
  new
  styles
  every
  two
  weeks.
  The
  store
  specialists
 work
 in
 the
 same
 room
 as
 designers
 and
 review
 store
 sales
 and
 speak
 with
  store
 managers
 to
 get
 their
 feedback.
 
 
 


 
Figure
 1
 

Zara’s
 production
 center
 consists
 of
 three
 spacious
 halls:
 women's
 clothing
 lines,
 men's
  and
 children's.
 Unlike
 most
 companies,
 which
 try
 to
 excise
 redundant
 labor
 to
 cut
 costs,
  Zara
  makes
  a
  point
  of
  running
  three
  parallel,
  but
  operationally
  distinct,
  product
  families.
  Accordingly,
  separate
  design,
  sales,
  and
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