Supply Chain

Management
PPM 138
PROF GD SARDANA

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ZARA- APPAREL MANUFACTURING AND RETAIL

Presented By 1. Dhruv Mahajan
2. Arka Pal Bera

Course- MBA (BS)

3rd Semester

Introduction

ZARA is the largest, most profitable and most internationalised of the chains.

It is a chain of fashion stores owned by Inditex, Spains largest apparel manufacturer and retailer.

Its marketing techniques lies with product variety, speed to market and store location.

ZARA success is based upon vertical integration of its organisation system.

In house production, quick

response, more designers and most importantly technology oriented fashion

hub.

With the technology stores and create more information about customer preferences and increases
efficiency at supply chain.

ZARA faces competition from H&M, GAP, Benetton.

1.What advantage does Zara gain against its

competitors by having a responsive supply chain?

It allows Zara to match demand for fickle trends more accurately.

This in turn means that they can sell products at full price and thus secure their
margins and make a profit.
It also increases customer loyalty to the brand as Zara builds a reputation for being
up to date on trends which increases demand products.
It also allows Zara to reduce inventories and forecast error.

2. Why has Inditex chosen to have both in-house and

outsourced manufacturing?
In-house manufacturing is used as part of a responsive pull supply chain strategy and
also as the final leg of its manufacturing process.
After the sales season has started Inditex begins to use in-house manufacturing as a
way of quickly responding to trends.
It either makes new products or turns incomplete products made from its outsourced
manufacturers and turns them into specific finished-goods in response to market
demands.
Outsourced manufacturing is used to create non-specialised products that can be
produced in bulk.

3. Why has Inditex maintained manufacturing capacity

in Europe even though manufacturing in Asia is much
cheaper?

Flexibility and Quick Resources- so that they adapt quicker to new trends and
demands.
Inditex has maintained large fraction of manufacturing capacity in Portugal and Spain
(Europe) despite the higher cost there because this allows Zara to respond quickly to
changing Fashion trends in Europe.

4. Why does Zara source products within uncertain

demand from local manufacturers and products with
predictable demand from Asian manufacturers?
Products with uncertain demand will most likely be produced at a lower volume to
products with a certain demand and therefore sourcing from local manufacturers
provides Zara the speed it needs to test and deliver these products before they
become obsolete and have to be sold at a discount. It is part of a responsive PULL
STRATEGY.

Predictable demand products are made in Asia due to low labour costs and high
volume of products needed. It is more cost effective to manufacture in bulk due to
the fact that predictable demand products have a larger window with which to deliver
products without becoming obsolete. It also means that they can be made before the
season starts as part of a PUSH STRATEGY.

5. What advantage does Zara gain from replenishing its

stores multiple times a week compared to a less
frequent schedule?

This makes sure that store inventory is always up to date and that new designs can
be introduced often to meet trends.
It also means that products can be replenished if demand is high and can be taken
away if demand is low.
Furthermore, it is responsive to the fickle nature of the fashion market if a new trend
comes into fashion Zara need to be able to adapt their quickly and change their in
store merchandise to meet customer demand.

6. How does the frequency of replenishment affect the

design of Zaras distribution system?

The frequency of replenishment has made Zara increase the size and also centralise
its distribution design by handling its global operations through 8 Distribution canters
based in Spain.
This centralised structure means that products can be distributed rapidly from in
house manufacturing in order to meet worldwide demands in as little time as
possible.

7. Do you think Zaras responsive replenishment

infrastructure is better suited for online sales or retail
sales?
Whilst its quick distribution system allows Zara to respond to trends very quickly its
lack of decentralised distribution means that it is better suited to retail as online sales
tend to have more a diverse product demand and customers expect quicker delivery
times.
For Example- Companies such as Amazon are able to respond quicker to online sales
due to the fact that they have distribution centres all around the world and can offer
same day delivery.
Zaras 24 hour delivery times from Spain to outlets all around the world may not be
as efficient with online sales as it is with retail sales.

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