Zara Vertical Supply Chain

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Zara has thrived by employing a vertical supply chain. This chain has developed a strategy that has led Zara to create a fashion empire. In 2008, Zara had over 1520 stores and produced €6,8 billion in sales. The supply chain is depicted in figure 1.

The chain starts at the headquarters were the designers produce nearly 30,00 different designs per year. Typical competeitors produce about 2000-4000. Zara employs a quick response system (discussed later) in wich informnation about trends, store needs and cosmurer demand is given to the designers who quickly produce many different fashionable designs. Some of the designs are shameless knock offs of whatever brand the hottest cleberaties are wearing and while others are a slight change to a staple product. After settling on the designs they are sent to manufacturing.

Zara manufactures 49% of its own products and this number is growing. By owning its own production Zara can be flexible with variety, amount, how often and the various atyles they produce. Another key component to Zara’s manufacturing is that much of it is done through season. Most traditional retailers manufacture products just several times a year. Since Zara is constantly producing new and updated designs they are in affect purposely creating a “rapid product” turnover. This in turn produces a climate of scarcity in Zara stores in which the consumer feel they are getting a piece of clothing that is not only fashionable but one in which they know they will not run into anybody wearing the same outfit they just bought. The climate also ensures consumers visit the stores to buy products again and again. In addition, Zara’s scarcity climate allows the company to sell more items at full price.

Zara’s managers and sales associates play a large role in communicating sales information, store trends and product cycles to the designers and managers in the corporate office. This practice has allowed the company to consistently meet customer demand...
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