ZARA

Baki USLU

Barış BOZOĞLU

Outline

History of Zara The Textile and Apparel Industry The Zara Model The Problem (outsourcing benefits and risks) Questions

History of ZARA

1963The founder of Zara, Amancio Ortega Ganoa Started his career as a clerk 1975First Zara store opened in La Coruna, Spain 1989There were 82 Zara stores in Spain Ortega began international expansion in Portugal, Paris, New York

Inditex

Zara Pull&BearMassimo

DuttiBerska

Oysho(2001)

In 2001 Zara was a world brand with 1200 stores in all around the world

Most of the products were produced in Spain

The Textile and Apparel Industry

Global textile and apparel industry was 5.7% of the whole manufacturing output of the world.(1999)

The clothing market in the major countries $580 bilion

40% labor cost in textile 60% labor cost in apparel Apparel production is related to the fabric

.

Apparelindustry

High qualitysegment

Medium qualitysegment

Low quality segment

The Textile and Apparel Industry in the E.U and Spain

Textile and apparel workers consist of 7.6% percent of total E.U manufacturing workers

Italy 31% U.K 15% Germany 14% France 13% Spain 9% Portugal 6%

E.U is the second textile exporter in the world

Spain Spanish textile and apparel industry was

comprimised mostly of many very small firms and had not been strong in R&D.

Wages increase

THE ZARA MODEL

Zara’s Planning and Design Cycle Designers start to work on designing

collection a year ago for initial collection There are 200 designers They made 11.000 designs every year

Patterns and Samples

In some cases designs made by 3rd party suppliers

Production Sourcing and Scheduling

50% of the garments are outsourced Garments with fashion styling manufactured

in Spain basics and knits are outsourced Zara’s season inventory In the beginning of the season 60% of the

collection is ready while others are 80% 25% of the season’s collection is stored in

stores in the beginning of the season 85% of the inhouse production is that

season’s production

In-house Manufacture

İn-house manufacture

Fabric procurementGarment assembly

And finishing

In-house Manufacture

40% of fabric produced in-house

Cutting

Sewing

In Season Production

Modified in response to market demand

If an item was not selling

If an item sells

If a product sell very well

If a product’s sale is not satisfactory

Distribution

Zara’s distribution center in Arteixo

New distribution center in Zaragoza

Shipment

Retailing

Store managers decide for the items from the distribution center

Stores receive new inventory several times a week

Sale

Pricing Strategy

Pricing strategy= cost + target margin

Single Tag to Bar Code

Growth Strategy

Stores operated by Zara, franchise, alliances

USA market

Sourcing Dilemma?

Increase outsourcing vs. keeping current model

Benefits and Risks of Outsourcing

Economies of Scale; Manufacturing costs is reduced with

outsourcing by aggregating orders from different buyers

Focus on Core Competency; A careful decide on what to outsource helps

the buyer to focus on its core competency Zara has the ability to give a quick response

Increased Flexibility; Ability to better react to changes in customer

demand Ability to use the supplier’s technical

knowledge to accelerate product development cycle time

Ability to use the supplier’s technical knowledge to accelerate product development cycle time

Conflicting Objectives; Flexibility vs. cost reduction

Questions?

Thank You