Download - Zara; the inditex group
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Zara: The Largest Spanish Clothing Company Owned by Inditex
Prepared by: Shaheen Sardar
SCM Lab. Department of Industrial and Management Engineering, Hanyang University, South Korea.
Zara, global fast-fashion retailer and largest chain in Inditex group
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ZARA “Vision”
“ZARA is committed to satisfying the desires of its customers.
As a result we promise to continuously innovate our business
and to provide new designs made from quality
materials that are affordable.”
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ZARA “Mission Statement ”
“Through its business model, Zara aims
to contribute to the sustainable development of society and that of the environment with
which we interact.”
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What we know about Zara and its history?
• Zara’s founder is the first richest person in Spain and the third richest person in the world (2013). This person is Amancio Ortega (Born: March 28, 1936).
His doughter:
Marta Ortega
Inditex founder
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What we know about Amancio Ortega?
Amancio began working as a tailor's assistant in his hometown
In 1963 he decided to start a business and he thougt the clothing company Goa. This business began to progress and that in addition to selling began to distribute.
Amancio Ortega was born in La Coruna.
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THE CHAIN’S NAME:
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In 1975, the first Zara store was foundedin La Coruna.
In 1988 Zara’s company opened the first store outside Spain.
In 2010 Zara’s company opened his first online shop.
portugal
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Perceptual Map
Fashion Value
Pri
ce
Everyday Low quality
XX
prices
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Zara
Armani
Hilfiger
Design
Feedback
Cut
Production
Sale
Promotion
Display
Shipment
Outsource
None
Outsource
Outsource
Outsource
Promotion
Outsource
Outsource
Design
Outsource
Outsource
Outsource
Sale
Outsource
Display
Co-OP
CONTROL
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Head Office & Design lab.
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Manufacturing
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Logistics
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Europe Production Asian Production
Cost: $$$$$$$$$$
Fashion Value: ZZZZZZZZZZ
Cost: $$
Fashion Value: ZZZZZ
High fashion suits & skirts Commoditized eyewear and plain shirts
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Competitors Copying Zara Management
H&M Once a week shipments
Target Limited supply designers
Benetton Mid-season lineup adjustments
Patagonia Increased seasonal shipments
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0
5
10
15
2003 2004 2005 2006 2007
Zara
Gap
H&M
Benetton
Sales in Billions of $
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Profit in millions
0
1000
2000
2003 2004 2005 2006 2007
Zara
Gap
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More about ZaraZara’s company is owned by Inditex group.
Inditex group contains Zara and more different brands.
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Zara clothing offers quality trend to an audience:
femalemale adolescent child.
From Zara derive other shops like:
Zara home
Zara shoes
Zara accesories
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This chain of Spanish fashion stores has more than 200 designers and a higher number of models.
Zara’s collections are small and sell out quickly.
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Zara has no advertising, the only trade exhibition is based on trucks ,storefronts,catalog and in the zara bag.
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ZARA STORES:
In Zara:
customer first
ZARA
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• In Spain Zara’s company has:452 stores and 131 of them with Zara
kids (2013)
452
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Zara Global expansion:
1947 stores around the World in 87 countries in 2013
1925 stores around the World in 86 countries in 2012
Online stores in 21 countries in 2012
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ZARA “Production Facilities”
60%Spain
20%Europe 20%
Asia
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ZARA “Summary”
Owned by Inditex
• Based in La Coruna, Spain• 1947 stores in 87 countries• Fast fashion strategy• 30,000 designs per year• 40% of designs produce in-house• Stock updated twice a week• Vertical Model – limited outsourcing• Zero advertisement
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Where are Zara stores in 2013?
• 1947 stores in 87 countries.• 77% of stores are outside Spain.• 166 Kiddy's Class stores out of 1947 stores.
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Where are Zara stores in 2013?
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Where are Zara stores in 2013?
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Where are Zara stores in 2013?
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• Zara’s consumers are young, highly sensitive to latest fashion trends .
• Zara sells apparel, footwear and accessories for women, men and children .
• Zara offers fashion at affordable price by following the most up to date fashion trends .
Zara Target & price
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Inditex
• Founder: Amancio Ortega Gaona• He Thought:
Consumer would regard clothes as a perishable commodity just like yoghurt,
bread or fish to be consumed quickly, rather than
stored in cupboards, and he has gone about building a retail business that provides “Freshly
Baked Clothes.”
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Inditex CompaniesNumber of
Stores (2013)Year of
Creation1. Zara 1781 19752. Pull and Bear 825 19913. Massimo Dutti 634 19954. Bershka 910 19985. Stradivarius 816 19996. Oysho 533 20017. Zara Kids (Kiddy's Class) 166 20018. Zara Home 363 20039. Uterque 87 2008
Total Stores (2013) 6115
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INDITEX
2012Revenue 13.79 billionOperating income 2.522 billionProfit 1.932 billionTotal Assets 10.95 billionTotal equity 7.455 billionEmployees 120,000
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INDITEX “Growth”
Fiscal Year 2012 2011 12/11
Net sales (millions of euros) 15,946 13,793 16%Net profit (millions of euros) 2,361 1,932 22%No of stores 6,009 5,527 482No of markets 86 82 4Employees 120,314 109,512 10,802
Total Stores (2013) 6115
Fiscal Year 2013 2012 13/12Net sales (millions of euros) 7,655 7,239 6%Gross profit (millions of euros) 4,486 4,313 4%Net income (millions of euros) 951 944 1%
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INDITEX “Gross margin and Operating expenses”
% on sales 2013 2012 2011Gross margin 58.6% 59.6% 58.4%
Gross profit growth of 4% or € 4.5 billion
Millions of euros 2013 2012 13/12Operating expenses 2,861 2,690 6%
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INDITEX “Strong Growth”
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INDITEX “Strong Growth”(millions of euros)
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INDITEX “Net profit”(millions of euros)
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INDITEX “Sales by geographical area”(%age)
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INDITEX “Employees by Geographical area 2011-12”
Employees 2012
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INDITEX “Employees by Gender 2011-12”
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INDITEX “Employees by Gender 2012”
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Waste Management
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Garments released on the market VS total industrial waste
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INDITEX “Number of Employees”
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INDITEX “Results”(millions of euros)
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INDITEX “Stores”
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INDITEX “Markets”
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INDITEX “Sales by Concept”
Concept Name 2013 13/12CAGR (2 year)
1. Zara 5,004 4% 11%2. Pull & Bear 530 13% 13%3. Massimo Dutti 575 17% 12%4. Bershka 702 5% 8%5. Stradivarius 463 2% 8%6. Oysho 152 6% 4%7. Zara Home 196 30% 21%8. Uterque 33 - 3%
CAGR = Compound Annual Growth Rate
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INDITEX “Global Sales Platform”
Store sales (%) 2013 2012Europe excluding-Spain 45% 44%Asia & RoW (Rest of World) 22% 20%Spain 19% 22%Americas 14% 14%
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INDITEX “Zara Sales”
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INDITEX “Global Online Sales” • Europe• US• China• Japan• Russian Federation• Canada
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INDITEX “Supply Chain Management”
Clusters of suppliers
Morocco
SpainPortugal
ArgentinaBrazil
Turkey
BangladeshChinaIndia
87% of Inditex's total production
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INDITEX “Supply Chain Management”
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“Geographical Distribution of Suppliers to the Inditex Group” 2012
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Inditex's Supply Chain in 2012-13
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INDITEX “Principal Indicators”
Principal indicators in 2012 ZARA Pull &
BearMassimo
Dutti Bershka Stradivarius Oysho Zara Home Uterque
Net sales (in millions of euros)
10,541 1,086 1,134 1,485 961 314 350 74
Number of stores 1,925 816 630 885 780 524 357 92Net openings 120 69 57 74 96 41 47 3Markets 86 59 60 62 52 35 35 18New markets in 2012 5 11 10 6 7 4 5 1
ZARA “Sales” • Zara sales increased by 18% in 2012, up to
€10,541 million
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INDITEX (Business Structure)
• Name: Industria de Diseno Textil, S.A. (Inditex)
• Inditex Group: Inditex and its subsidiaries
• Centralized management: Applying policies and strategies at group level
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INDITEX (Business Structure)
Head office: La Coruna (Spain)
• Sets Inditex strategy
• Co-ordinates brands
• Provides centralized IT, HR, Logistics, design and real estate functions
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Textile Sourcing
Comditel S.A (La Coruna)
Tempe S.A. (Alicante)
Nikole S.A (La Coruna)
Zara Asia Ltd (Hong Kong)
ITX Trading S.A (Freiburg, CH)
Uterque S.A (La Coruna)
Lefties Espana (La Coruna)
E-commerce
ITX Fashions Ltd 100% (Ireland)
Manufacturing
InternalChoolet SA,
Confecciones Fios, Gonfecciones Goa, Denlio, Hampston,
Jema Creacione Infantiles, Samlor,
Stear, Trisko, Zintura, Glencare, Indipunt
(all based in La Coruna)
ExternalInditex works with
around 1,500 external suppliers around the
world.
Logistics (Zara)
Zara Logistica SA (La Coruna, Spain) - 50%
of Zara women and menswear, serving
Iberia, Americas and Middle East
Plataforma Europa SA (Zaragoza, Spain) - 50% of Zara women
and menswear, serving non-Iberian Europe,
Russia and Asia
Plataforma Logistica Leon SA (Leon, Spain) Zara Home and Zara
distribution
Plataforma Logistica Meco SA (Madrid,
Spain) manages Zara childrenswear
Tempe, Inditex’s footwear company is
only 50% consolidated at corporate level, but is
solely responsible for sourcing,
manufacturing and distributing footwear
for the group.
Brand Divisions
Zara
Oysho
Stradivarius
Pull & Bear
Bershka
Massimo Dutti
Zara Home
Uterque
Each Inditex brand is managed
independently with its own logistics and production facilities.
INDITEX (Business Structure)
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Traditional model
Design
Sourcing
Store
Customer
Inditex model Opposite of traditional clothing cycles
Pull type production process Quick response Real-time sales information from
its stores Small batch quantities allow the
retailer to see what items are working with shopper
A central distribution centre in Arteixo, with strong IT systems developed by Inditex and third parties, supports its supply chain model
All items are shipped back to Spain where they are then shipped out to stores around the world
Sourcing
Design
Store
Customer
INDITEX (Business Structure)
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INDITEX'S “Waste Management”ZNormativa: Set of rules and regulations common to all suppliers to optimize • Packaging process • Waste management • Distribution and logistics
Good Waste Management Practices: Methodology of work used to manage waste to• Reduce content of packaging material• Improve waste separation and storage • Facilitate recycling
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ZARA “Business Model”
1. Develop system that requires short lead times
2. Decrease quantities produced to decrease inventory risk
3. Increase the number of available styles and/or choice
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ZARA “Competitive Advantage”
Cost LeadershipFashionable (quality) at reasonable price
1. Based on Product Positioning:“ZARA is cheaper price than Benetton and GAP, and still being fashionable”
Fast Production2. Ability to Design and get finish goods in stores
within 4 to 5 weeks3. Very quick to get designer-influenced
products into their storesProduct Variation
4. Ability of ZARA to launch new trends, design and variation of product5. Low Level of Inventory6. Efficient Distribution System7. Turnover of Product is High
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ZARA “Objectives”Maximize Profit:• Maintain an ability to go further fashionable
(quality) at reasonable price ZARA positioning
ZARA fashion
Price
Fashion
ZARA(New)
-
+
--
+-
BeforeTransform
Objective/Expectation+ Price +
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ZARA “Objectives”
Analysis map of ZaraAdapted from the Survey.
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ZARA “Objectives”• Continuous design, production and distribution
Creative Departments: Staff = 200+
Sewing: Cut fabric isshipped to workshops
to be stitched
Samples: Prototypesmade in-house and
by suppliers
Spreading: Material for garments laid out in layers and marked
Cutting: A machinecuts the fabric according
to the patterns
Finishing: Garments are pressed, dressed and quality checked
Shipping: FromLogistics centres to stores, road and air
Delivery: Garmentsarrive in store within 48 hours of ordering
Design, Productand market Cycle; 1. Final design : 1 day2. Manufacture : 3-8 days3. Transport : 1 day4. Selling : 17-20 days TOTAL : 22-30 days
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ZARA “Strategies”
Objectives
MIS
Marketing
Design
Production &
distribution
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ZARA “Strategies”
Production & distribution• Maintain quality• Cost leadership• High bargaining power to suppliers• Fast distribution system
Design• Coordinate with R & D and stores to get the
new trends• Ability to produce new trends
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ZARA “Strategies”
MIS• Product distribution system• Improving inventory system• Order information flow stores ordering system
Marketing • R & D • Market penetration• Market , location of stores , consumer behavior
analysis
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ZARA “Value Chain”
Production :Factory & distributor
Store Store
Store Store
Store
Marketing :Market Research and Analysis
Design
Inventory
Check theMaterial availabilitythen decidingHow much thisproduct will be Produce
MIS
MIS
MIS
Close watchOn trend andBuying Behaviors
MIS
Commercial Team & designer
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Strengths
• Ability to recreate fashion• Owned 1947 stores and Active use of stores• Cost leadership strategy• Differentiated in high price fast fashion
industry• Dedicated supply chain process• Vertical systematization of production process• Efficient distribution and High turnover.
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Weaknesses
• Centralized distribution system• Doesn't spend much money on advertising• Lack of online stores in many countries• Repeated sales of out-of-stocks• Low quality
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Opportunities• Growth of fashion market• Diverse cultural area• Constant use of social media marketing
strategy• Online marketing strategy• Global market penetration • Distribution center in US • Expanding into potential new market e.g.
China, Australia
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Threats• Emerging new comers
• Local and Global competitors
• Cheaper alternatives may be available in economic downturn
• Zara based in Spain and has a great no of stores in Europe will dent in revenues
• Limitation of design copies
• Product Cannibalism
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ZARA “International Strategy”• Combined Strategy:1. Cost Leadership is usualy captured in mass production
(mass product, less differentiation) Standardization 2. Differentiation Strategy is ussualy captured to produce
goods that are more value added fashionable, fast delivery customization
• Good Consideration:1. Market selection2. Marketing approach3. Market entry
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ZARA “International Strategy”
Market Selection
Marketing Approach
Market Entry
InternationalStrategy
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Market Selection:
ZARA “International Strategy”
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Market Selection:
ZARA “International Strategy”
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Market Selection:• Consideration
• Characteristic or behavior of Consumers
ZARA “International Strategy”
Country Character of Consumers
French More Fashionable (Quality Oriented)
German Price Sensitive
Italian More Fashionable
USA Less Trend
Japan More Trendy
British Stores Based on Social Affinity
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Market Entry:
ZARA “International Strategy”
Barriers Factors
Market EntryConsideration
Economics Factor
Market Entry Government
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Market Entry:
• Consideration• Economics
• Macroeconomics Factor :• tax, political condition, export tariff
• Microeconomics Factor :• Local Competitors• Demand • Location of Store
• Government• Regulation from Government
• Barriers• Local producers protection issues
ZARA “International Strategy”
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ZARA “International Strategy”
Marketing Approach:
• Consideration• 4 P consideration Product, Price, Promotion
and Placement. Each Country has different marketing approach.
• Product local preferences, design, trends• Price different pricing strategy for each
country. For example: Italy and Paris has no problem for price but quality-oriented, but German has sensitive price.
• Promotion different promotion strategy for each country
• Placement efficient distribution, location of stores
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ZARA “Financial Position as Compared with Competitors”
GAP H & M Benetton Inditex
Net Margin -0.06% 9.60% 7.05% 10.46%
Asset Turnover 1.82 1.96 0.74 1.25
ROA -0.11% 18.78% 5.25% 13.05%
ROE -0.27% 24.85% 11.93% 22.88%
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ZARA “Inventory Management”
• Focus on reducing response time
• Approximately 11,000 new items per year, compared with 2,000-4,000 for H&M and Gap.
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ZARA “Inventory Management”
• Stock outs: Common
• Short shelf life: More customers
• Inventory holding: • ZARA: 6 days • H&M: 52 days• Cortefiel (Spain): 94 days
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ZARA “Forecasting”• Extensive market research
• Quick input and output response
• Frequent new styles
• Near-term forecasts
• Customer feedback
• Short product life cycles Reduce errors Improve current products
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ZARA “Procurement”• In-house production: Half
• Each clothing line: Separate staff
• Basic textiles: Global suppliers
• Simple items: Outsourced to China.
• Difficult items: Zara factories and domestic outsourcing
• Most suppliers: Close to distribution centers
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ZARA “Production Planning”• Design & Production Centre:
Centralized
• Supply chain: Constant data flow
• Retailers: Have authority to change 40%-50% orders
• Factories:Single-shiftChange quickly according to
demands
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ZARA “Warehousing”• High-velocity shipping: Rapid
information flows
• Stores: Electronically connected to headquarters
• Logistics system: Speed and flexibility
• Products: Selected Sorted Routed Delivered Local distribution centers Retail store stockrooms
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ZARA “Transportation”
• Distribution: 2 weeks
• Supply chain: Quick response
• Transportation network: Effective and efficient
• Zara Promotes: Service quality
• Zara Coordinates: All aspects of logistics
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Production Commitment and Markdown
6-monthPre-season Start of season In-season
Sales%Not at full
price
TraditionalIndustryModel
45-60% 80-100% 0-20% 30-40%
AdvertisementAdvertisement
+Markdowns
Zara 15-25% 50-60% 40-50% 15-20%
Fresh items
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Recommendations to ZARAKEY PROBLEMS:Emphasize on high efficiency and
fast production processes
Demotivation of workers
Quality drops
Lack of inventory tracking
Inability to check inventory within stores
Real time counts and scan must be done.
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Recommendations to ZARA• ZARA SEEMS TO:Go in the right directionGrow at a remarkable rateShow no signs of slowing down
• ZARA SHOULD: Expand in each district/region Expand into North American and Asian markets Continue growth throughout Europe Increase its production and reduce costs by outsourcing to
Asian countries
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Recommendations to ZARA
• CHANGE THE SYSTEMCentralizedTransform DecentralizedBuild decentralized distribution & Production
in each region (Asia, Europe & America, more is better) toPenetrate new market & trend Decrease the complexity of process
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Recommendations to ZARA
INCREASE ADVERTISEMENT• Part of marketing• Bridge between customers and companies
INCREASE NETWORKING CAPABILITIES:Ineffective communication between its stores and the
home office. Currently used POS terminals are not connected to
other store POS terminals or to corporate headquarters.
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Recommendations to ZARA
Improve IT Infrastructure • Efficient for past operations
• Insufficient to deal with modern technology
• Ineffective in future as company continues to grow and expand internationally
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References
1. Bureau of Labor Statistics (2011). International comparisons of hourly compensation costs in manufacturing, 2010. http://www.bls.gov/news.release/pdf/ichcc.pdf
2. Werner International management consultants (2012). Comparison of the hourly labor cost in the primary textile industry winter 2011.
3. Verlina N. Whatley (2011). Case Analysis of Zara: IT for Fast Fashion http://www2.uhv.edu/luj/MGT6352/ Samples/Student%20Sample%202.pdf
4. http://en.wikipedia.org/wiki/Zara_(retailer)5. http://en.wikipedia.org/wiki/Inditex6. http://www.inditex.com
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ANY QUESTION?