Zara-supply chain management

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Zara’s Supply Chain

Ankit Saha – 2012ME20765

Group-3

ANKIT SAHA2012ME20765



Zara! Supp"# $hain

The fashion industry is known to run on a high degree of uncertainty. With ever

changing trends it is even harder to predict the market and hence forecast the required

raw materials and supplies. In the past the apparel industry has been categorized as

more of a push model where the retailer outlets push styles and new outfits to the

market. However, the same strategy is doomed for failure as of today, with new entrants

and competitors at every corner, brands are being forced to listen to their customer. Its

important to recognize what chimes with the consumer and quickly respond by

satisfying this need. !dditionally, every geographic location differs in spending patterns,

styles, per capita income etc. and all the clothing lines need to accurately evaluate the

demand that will e"ist in every market.

What increases the comple"ity of the supply chain is the dependence on e"ports from

other developing countries. !lmost #$% of all garments produced in the world are

e"ported in developing nations. Hence, there is a large cost involved in transporting

materials and finished goods.

&ara has maintained its stand as a leader in the apparel industry and what makes it so

profitable is its unique supply chain strategies. &ara uses the following principles to

increase their net income and maintain a standing of being a brand that is both fashion

forward and affordable'

1) Produce in small lot' small lot is the unique characteristics of lean manufacturing

which is not the case here. The logic behind this is that small lot creates the sense of

e"clusivity. (ustomer need to make a quick decision otherwise the ne"t day the

products they want will be gone. )o customer visits &ara*s stores to see new products

more often and this creates the huge amount of traffic and revenue.

2) Centralize design and product development' the norm in the apparel +and some

other industries is to develop new products by both in-house staffs and through

merchandisers. In the latter case, suppliers need to send samples +through

merchandisers to buyers many times. limination of this back-and-forth communication

reduces the time to market drastically.

3) Utilize wor cell organization' each new product development team has its own

designers, sales, and procurement and production planners the same way as in a

cellular manufacturing. This help &ara to streamline the internal communication a lot.



!) Control scheduling strictly' at &ara, store managers can place order / times a

week, shipments are prepared and delivered within /0 hours +in urope and products

will be on displayed at stores the same day they arrived. )ince everything runs in a

steady pace, they can reduce a waiting time at every step of the way.

") #eep production in$house' &ara tries to stay away from low-cost country sourcingand make an investment in the in-house manufacturing as much as possible. The

reason is that they believe the in-house production help them to increase the overall

fle"ibility.

%) &utomate production and warehouse 'acilities' since &ara believes in time based

competition, automation is the key to help them to increase the speed and the accuracy

of the operations.

() &dhere to all rules' implementing any one of these rules alone is not quite effective.

Then, they have to stick to all rules so the whole supply chain is running like the well-

oiled machine. (onclusion &ara*s supply chain is a very good e"ample of the strategic

alignment because people, processes and practices support time-based strategy

perfectly

1ull 2escription of &aras )upply chain'

3 esign* &ara designs all products. The headquarters of &ara has a commercial

team that consists of designers, market specialists and buyers. The designers for

mens, womens and childrens wear are sitting in different halls in a building

attached to the Indite" headquarters.

/ +rder &dministration' There are a number of market specialists and each one

is responsible for dealing with a number of certain &ara stores. These market

specialists are in regular contact, in particular via phone, with the store managers

of 4their5 shops. They discuss sales, orders, new lines etc. 1urthermore, the store

managers are equipped with special devices to make quick and accurate

e"change of market data possible. The salespersons in the &ara stores are

equipped with wireless handsets to communicate the inventory levels to the store

manager at the closing time in the evening. The store managers use internet-

connected phone lines to pass the numbers on to the design6order anddistribution departments. &ara stores hold very low levels of inventory. 7ecause

of this, it happens very often that the shelves are empty at the end of the day. )o,

the stores are dependent on regular replenishment with the newest designed

products. 2esigners, market specialists and buyers make final decisions about

the products. !fter the decision is made, the buyers are responsible for the order

fulfilment process, which includes



monitored warehouse inventories, allocated production to different factories and third

party suppliers and kept track of shortages and oversupplies. It follows that the

headquarters, where all the data from the stores flow together starts the production,

when the when consumer requirements are identified +through the support of the

stores.

3% Production* 0$ % of the fabrics are supplied by Indite" part owned mills. The rest of

the fabrics is produced by /8$ other suppliers. To minimize the dependency on single

suppliers and support ma"imum responsiveness from them, the amount on &aras total

production of each supplier accounts not more than 0 %. 9ore than half of the fabrics

are purchased undyed to make faster response to midseason color changes possible.

1or all sewing operations, &ara has sub suppliers +around :$$ under contract. These

are workshops that are not owned by Indite" and employ informal economy workers

+mothers, grandmothers, teenage girls. They are located in )pain and ;ortugal and

strictly monitored by &ara. The 3 / # 0 : 2istribution center in <a (orun= 2esign by

&ara >rder administration +by &ara in headquarters -? designers, market specialists,

buyers ;roduction :$ % by &ara -? manufacturing in // factories in )pain :$ % by 0$$

outside suppliers -? @$ % of the suppliers are in urope +many in )pain and ;ortugal

-? most of the rest in !sia 0$ % of fabric supply from other Indite" owned subsidiaries

subcontractors for all sewing operations +A:$$ close to the Balicia region in-house

(!2 controlled piece cutting dyestuff producer 1ibracolor +part owned by Indite" to

facilitate quick changes in printing and dyeing 2istribution by contractors, using trucks,

bearing &aras name small warehouse in 7razil small warehouse in !rgentina small

warehouse in 9e"ico Cetailing )tores place their orders and receive shipments twice

per week

0 istri-ution* The maDor distribution center of &ara is located in <a (orun=, where allproducts pass through. The distribution center is equipped with the most sophisticated

and up-to-date automated systems. 1or every store, the orders are packed in separated

bo"es and racks and are ready to ship within E hours after the order arrived. The

apparel is then transported directly to &aras stores in urope by contractors, which use

trucks bearing &aras name. 1or deliveries over sea, the trucks drive to airports, which

are close to <a (orun= +mostly )antiago di (ompostela. The orders arrive in the stores

in urope normally within /0 hours, in the F)! within 0E hours and Gapan within 0E to

@/ hours.

: .etailing' ! &ara store normally places the orders and receives its shipments twice

per week. The stores have to place orders at determined times. )tores in )pain and)outhern urope have to place the orders on Wednesdays before # p.m. and on

)aturdays before 8 p.m. 7y keeping the production voulmes low when the season starts

and reacting fast to orders and new trends during the season, &ara tries to minimize the

risk of oversupply.



Conclusion*

&ara*s supply chain is a very good e"ample of the strategic alignment because people,

processes and practices support time-based strategy perfectly.

Zara-supply chain management

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