group 12a zara scm

Supply Chain ManagementZARA

Presented By :- Group 12(a)Arman Anand

Charvi PuriMohit Sewani

• ZARA is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega.

• HQ in Coruna, Spain, where the first ZARA store opened in 1975.

• Zara has 1700 stores, 78 countries worldwide.

• Zara practices fast fashion – trends moves from the runway to stores within weeks, as opposed to months.

• Zara’s supply chain has undergone tremendous changes in order to sustain its competitive advantage in today’s market

• Zara has continually maintained its mission to provide fast, affordable, and fashionable items

Inditex : 2012 Global Sales Breakdown

Inventory Management at

• Focus on reducing response time.

• 12 inventory turnovers/year VS. industry average 3-4 times.

• Launched approximately 12,000 new items per year, compared to 2,000 - 4,000 for H&M and Gap.

• 30,000 Stock-Keeping Units (SKUs)/year

• Short shelf life attracts more customers more often

• Stock outs are not uncommon• Zara holds 6 days worth of

inventory, while H&M holds 52 days, and Spanish retailer Cortefiel holds 94 days of inventory

Inventory Management at

Zara, which contributes around 65 per cent of group sales , concentrates on three winning formulae to bake its fresh fashion:

1. Short Lead Time = More fashionable

2. Lower quantities = Scarce supply3. More styles = More choice, and

more chances of hitting it right?

Success winning Formulae

ZARA’s Rate for the Global

Distribution from Spain

Japan - 72 Hrs

Europe – 24

Hrs

U.S. – 48 Hrs

China – 48 Hrs

• The company's strategy involves stocking very little and updating collections often.

• Instead of other brands that only update once a season, Zara restocks with new designs twice a week.

• That strategy works two ways:– First, it encourages customers to come back to the store often. – It also means that if the shopper wants to buy something, he or she feels that

they have to buy it in order to guarantee it won't sell out.• They broke up a century-old biannual cycle of fashion. Pretty much half of

the high-end fashion companies - Prada and Louis Vuitton, for example - "make four to six collections instead of two each year. That's absolutely because of Zara.”

Success winning Formulae

Suppliers are all close to their factories so ZARA can order on a

need-basis Clothes are ironed in advance and packed on hangers, with security and price tags affixed

Overnight trucks are used to deliver to European stores and airfreight is used to ship to other

countries

• ZARA buys fabric in only 4 different colors;

• designs and cuts its fabric in-house

How it Works ?

Vertically Integrated Supply Chain

• “Vertical integration is a strategy used by a company to gain control over its suppliers or distributors in order to – increase the firm’s power in the marketplace, – reduce transaction costs – secure supplies or distribution channels.”

• This enabled ZARA to establish a business model that allows self-containment throughout the stages of materials, manufacture, product completion and distribution to stores worldwide within just a few days.

• ZARA - “The vertical integration of our production system allows us to place a garment in any store around the world in a period between two to three weeks.”

Supply chain Components

For Zara stores to be able to offer cutting edge fashion at affordable prices requires the firm to exert a strong influence over almost the entire garment supply chain:

DesignProduction

DistributionRetailing

•

• The company ensure product quality by designing its own products. Zara has almost 300 people working in its headquarters in Spain.

• These talented people include designers and specialists. Together they produce designs for approximately 40,000 items per year from which 12,000 are selected for production.

Design and Order Administration

Production

50% of the products Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in Asian and African countries and the rest of the world.

Zara makes its most fashionable items half of all its merchandise at a dozen company owned factories in Spain and Portugal, particularly in Galicia and northern Portugal where labour is somewhat cheaper than in most of Western Europe.

Distribution

Distribution Centre – all products pass through Zara’s major distribution centre in La Coruña. The 5-storey, 50,000 square meter distribution centre employs some of the most sophisticated and up-to-date automated systems.

Logistics (Contractors) – In 2012, the distribution centre shipped 130 million pieces. 75 percent of these shipments were to stores in Europe. Fashion garments represent around 80 percent of Zara’s products and the rest are more basic items.

Retailing

•

Stores usually place their orders and receive shipments twice per week. Orders have to be placed at pre-designated times.

The overall experience of the customer in the store in considered. Apart form the fashion supply, the interior design of the store, coordination of collections, maximum care over window displays and customer care are some of the elements that guarantee this experience.

Conclusion

• Zara is an example of how a firm can design and manage its supply chain to gain competitive advantage.

• Zara makes sure that each element of the supply chain network adds value to the entire operation.

•

• Zara makes sure that it streamline its supply chain, removing steps that does not contribute to the achievement of the company’s goals and developing those elements that add value.

• https://www.youtube.com/watch?v=9n0mikF1Esw

References

• http://www.supplychain-forum.com/documents/articles/Zara%20Case%20Study%20.pdf

• www.businessweek.com%2Farticles%2F2013-11-14%2F2014-outlook-zaras-fashion-supply-chain-edge&ei=pE0AVL6wCYmLuAShqoKgDg&usg=AFQjCNEGEVmiebxJ4wDUuIFG-yJiZb-EQA

• http://www.zara.com/in/• http://en.wikipedia.org/wiki/Zara_(retailer)• https://www.youtube.com/watch?v=9n0mikF1Esw

Thanks