OPER/055
IBS Center for Management Research
Zara’s Supply Chain Management Practices
This case was written by Indu P, under the direction of Vivek Gupta, IBS Center for Management Research. It was compiled
from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or
ineffective handling of a management situation.
License to use for the Class of 2025,
MBA-Semester – II, IBS Hyderabad.
Course: Operations Management
 2006, IBS Center for Management Research. All rights reserved.
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OPER/055
Zara’s Supply Chain Management Practices
“Zara has managed to fill a hole and seize an opportunity in Spain. It has done for fashion what
IKEA did for furniture, filling the gap between hypermarket and designer clothing in a very
desirable way.”1
- Valerie Van den Boffche, Head Wolff Olins, Spain, in 2004.
“Zara is nimbler and faster to the market. This will be important as fashion trends globalize.”2
- Keith Wills, European Retail Analyst, Goldman Sachs3, in 2000.
ZARA’S FAST FASHION STRATEGY
In 2004, a famous pop star toured Spain to give a series of concerts. Her outfits attracted instant
attention from teenagers and young girls across Spain. By the time the pop star had reached the last
leg of her tour, Spanish girls were sporting outfits similar to the ones she had worn during her first
concert. The outfits were designed and distributed by apparel retailer Zara, which quickly gauged
the demand for them and stocked up its stores across Spain in less than two weeks.
According to a survey conducted by Interbrand4, Zara was the only Spanish brand to be featured in
the list of ‘The 100 Top Global Brands’ in 2005. It was featured at the 77th position in the list that
featured Coca-Cola, Microsoft, and IBM in the first three positions. The survey featured only those
brands with a value of more than US$ 1 billion, which derived around 33% of their revenues
outside their country of origin and whose financial data was publicly available. Interbrand
describing Zara, said, “Cutting-edge Spanish apparel retailer epitomizes cheap chic knocking out
mass-produced copies of catwalk fashions almost overnight.”5
Zara introduced about 12,000 designs every year; the shelf life of each design was about four
weeks. In January 2006, Zara had 853 stores, located across the world (Refer to Exhibit I for the
geographical spread of Zara’s stores). These stores received two deliveries from Zara’s central
distribution center every week. The deliveries were customized in accordance with the data sent by
them every day. Zara pioneered the concept of customized retailing and was able to conceptualize
the garment, develop, and deliver it to the stores within two to three weeks. The key to Zara’s
success was its vertically integrated structure where design, production, distribution, and retailing
were integrated. Maria J. Garcia, spokeswoman for Zara, said, “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.”6 (Refer to Table I for the time taken for Zara to make garments) Zara’s
1
2
3
4
5
6
Doonar, Joanna, “Branding España to the Rest of the World,” Brand Strategy, March 2004.
Echikson, William, “The Mark of Zara,” BusinessWeek, May 29, 2000.
Goldman Sachs Inc. is one of the world’s oldest investment banks founded in 1869. It is a primary dealer
in the US treasury securities market. Goldman offers its clients mergers & acquisitions advisory, provides
underwriting services, engages in proprietary trading, invests in private equity deals and also manages the
wealth of affluent individuals and families.
Interbrand Corporation is a leading brand consultancy, serving clients worldwide. Founded in London,
Interbrand is headquartered in New York.
“Global Brand, The 100 Top Brands,” BusinessWeek, August 01, 2005.
Schapiro, Stephan A., “Flying Off the Rack,” Air Cargo World Online, September 2001.
1
Zara’s Supply Chain Management Practices
vertically integrated supply chain received the attention of industry players and analysts.
According to Richard Hyman of Verdict7, a retail consultancy in London, “Vertical integration has
gone out of fashion in the consumer economy, Zara is a spectacular exception to the rule.”8
Table I
Zara’s Supply Chain – Time Taken from Start to Finish
Process
Time Taken
Style idea, quantity etc., conveyed to Head quarters
One day
Fabric from Stock
One day
Design
Three days
Style Approval
One day
Prototype Development / Fit Sample / Approval
Three days
Garment Production
Ten days
Shipment
Five days
Adapted from Devangshu Dutta, “Brand Watch Zara, Images Fashion Forum,” www.3isite.com, February
12, 2004.
ABOUT ZARA
Zara was founded by Amancio Ortega Gaona (Ortega). Ortega worked as an assistant in an apparel
shop and in 1963 he set up his own fashion retail business named Confecciones Goa, in Arteixo-La
Coruña, to manufacture housecoats9. In 1975, when a German retailer cancelled a major order,
Ortega started selling the clothes from a small outlet in his factory and called the outlet Zara. Zara
went on to become the flagship brand of the holding company, Industria de Diseño Textil, SA,
popularly called Inditex, which was founded in 1979.
Ortega was credited with democratizing fashion in Spain; he was responsible for making designer
clothing accessible to the masses. Between 1976 and 1984, Zara’s presence was extended to major
Spanish cities. The first store outside Spain was opened in 1988 in Portugal. The next international
ventures were New York in 1989 and Paris in 1990. By the end of 1990, Zara had operations in 82
cities across Spain and three cities internationally.
In the late 1990s and early 2000s, Zara continued its global expansion and opened stores in several
countries. These included the UK, Japan, Chile and Uruguay (1998), Canada, Germany, Poland,
Brazil, UAE, Saudi Arabia, and Bahrain (1999), Australia and Denmark (2000), Holland,
Luxembourg, Iceland, and the Czech Republic (2001). In 2002, Zara entered Italy, Switzerland,
Finland, Malta, Singapore, the Dominican Republic, and El Salvador. In 2003, the new markets in
which the company established its stores were Sweden, Russia, Ireland, Slovenia, Malaysia and
Jordan. Zara entered Hungary, Romania, Estonia, Latvia, Lithuania, Hong Kong, Morocco, and
Panama in 2004.
In 2004, Inditex owned about 100 companies engaged in several activities related to textiles, such
as textile purchasing, textile manufacturing, and logistics. Through these companies, Zara was able
integrate its operations. For example, Comditel specialized in procuring undyed fabrics which
7
8
9
Verdict Research is one of the leading publishers that carry out analyses of the retail industry. Through its
reports, it presents forecasts and analyses, which are used by retailers, manufacturers, analysts and media.
“Floating on Air,” Economist, May 19, 2001.
A woman’s garment, usually long and loose, used for informal wear at home.
2
Zara’s Supply Chain Management Practices
could be dyed or printed as per the orders obtained. Zara procured 40% of the fabric from
Comditel, and finished the processes of dying and printing in about 4 to 5 days. Dyestuff was
obtained from another company, Fibracolor. Synthetics were supplied by external suppliers.
By 2005, Zara had become the third largest clothing retailer in the world in terms of revenues. As
of January 2006, Zara operated in 57 countries. For the year ending January 2005, the company
accounted for 67.4% of Inditex’s turnover with sales of € 3819.6 million. About 65.8% of Zara’s
revenues came from international markets.
According to Inditex, “Zara is a high-fashion concept offering apparel, footwear, and accessories
for women, men, and children, from newborns to adults aged 45. Zara stores offer a compelling
blend of fashion, quality, and price offered in attractive stores in prime locations on premier
commercial streets and in upscale shopping centers. Our in-house design and production
capabilities enable us to offer fresh designs at our Zara stores twice a week throughout the year.”10
Zara always had something new to offer its customers and the supply of these products was
limited. By not resorting to mass production, Zara was able to maintain the exclusivity of its
products. This also helped in creating a scarcity value -- shoppers were not sure if they could get
the same product later and went ahead with buying the product instead of postponing their
purchase. Zara also scored high on offering garments similar to those created by famous fashion
houses at a fraction of the price. In order to maintain a constant flow of new supplies, the garments
needed to be created at quick intervals according to the demands of customers and had to be
replenished rapidly. Commenting on Zara, Richard Perks, retail analyst with Mintel11, said,
“They’ve got to get the design. They’ve got to engineer it for low-cost production. They’ve got to
take the gray fabric and print it. They’ve go to get it out to their outworkers to be made up and
they’ve got to ship it from Galicia right across Europe. That is an unbelievable achievement.”12
SPOTTING TRENDS
One of the secrets behind Zara’s success was its ability to spot emerging trends and react quickly.
Zara had a dedicated design team in Arteixo, A Coruña, in northern Spain. Ideas for new designs
or for modifications to be made in existing designs mainly came from Zara’s stores. The store
managers and sales staff updated the head office every day about the moving stock and about
customers’ demands. Across all the stores, Zara’s sales staff was equipped with wireless handsets
which provided data to the store manager about the pieces sold. The manager consolidated the data
and sent it to the company headquarters through the Internet. The staff also provided inputs
regarding the new lines, colors, styles, and fabrics that customers were demanding. It was quite
common for Zara’s sales personnel to inform headquarters about a new style that a customer had
been wearing. This could eventually become part of Zara’s line.
The store managers were selected carefully as they had an important role to play in providing the
crucial information which formed the base for new designs. People with retailing experience, who
could spot the right trends, and possessed a design sense were selected for the position. The store
managers followed the trends in local fashion carefully. According to a store manager in London,
“I follow trends in London very closely. If Sienna Miller is doing boho, Zara will do boho. We’re
on top of every new style.”13
10
11
12
13
“Offer Document Inditex,” 2001.
Mintel provides consumer, media, and market research services. It has several clients across the globe.
The company was recognized as a business super brand in the UK for four years. Mintel provides market
and consumer research reports and interactive reports.
“Zara: A Model Fashion Retailer,” CNN, July 22, 2004.
Saini, Angela and Ryle, Sarah, “New Kids on the High Street Cut a Dash with Fast Fashions,”
www.observer.guardian.co.uk, June 05, 2005.
3
Zara’s Supply Chain Management Practices
Another source for the new designs was the team of designers who traveled across the world
looking for new designs and the emerging trends. Zara kept scouting around at fashion shows,
discotheques, universities, movies and music videos to spot new trends.
DESIGNING
Zara had a team of 200 designers, with each designer churning out about 60 styles a year on an
average. The designers were encouraged to experiment, but within Zara’s defined parameters.
They were expected to adapt haute couture14 styles to the mass market, while not bringing in their
own styles or influencing the designs. According to Ken Watson (Watson), Director of a London
based Industry forum, who conducted an in-depth study of Zara, “Zara doesn’t want any prima
donna designers. They want young 26-year-olds who will work within their system.”15 Zara had
three design centers -- one each for men’s, women’s, and children’s apparel. Each line had
separate procurement, design, and production planning staff.
The store managers across Zara’s stores placed orders twice a week, on Wednesdays and
Saturdays in Southern Europe and Spain and on Tuesdays and Fridays in the other parts of the
world. At the Zara headquarters, the store specialists collected the information obtained from
different stores across the globe. This was then fed into a database. Each of the store specialists
was responsible for a group of stores. They obtained informal feedback from the store managers
and also visited the stores periodically to assess the trends. Most of the store specialists had
worked as store managers and had a deep knowledge about managing stores.
Based on the feedback from the stores, the store specialists provided the designers with an outline
of the new styles, designs, and fabric as demanded by the stores. The procurement and production
managers provided inputs regarding the capacity and manufacturing costs. The designers came out
with the design specifications and the technical brief. With all the teams working in tandem, the
prototypes were ready within a few hours. Commenting on the fact that several teams worked
together, spokeswoman from Zara, Carmen Melon, said, “We have five different teams sharing the
same space, so design people work together with product people and merchandising, as well as the
people who provide the samples and patterns.”16
Once the team came out with a prototype, designers used CAD17 to further enhance the color and
textures. Sampling did not take much time as the fabric was already available with Zara. The
approvals were also obtained in quick time since the whole team was at one place. As soon as the
approvals were obtained from the team and the final consent from Ortega, the fabric was sent for
cutting. Ortega was involved in the day to day operations of the company. According to Martín
Varsavsky, founder of Spain’s Jazztel telecom, “He is very hands-on about the designs. Everything
creative is passed on by him.”18
Zara also brought out its own collections periodically, one during spring/summer and another
during fall/winter. The designers started working on the designs, colors, and fabric about eight
months in advance. Several patterns were deliberated upon before the final designs were decided
on. Once the designs had been decided upon, fabric procurement and production planning began.
14
15
16
17
18
The term ‘haute couture’ is French. Haute means ‘high’ or ‘elegant.’ Couture literally means ‘sewing,’
but has come to indicate the business of designing, creating, and selling custom-made, high fashion
women’s clothes.
Thomas, Ryan J, “Uncovering Zara,” Apparel Magazine, January 2006.
“Zara: A Model Fashion Retailer,” CNN, July 22, 2004.
Computer-aided design (CAD) is the use of a wide range of computer-based tools that assist engineers,
architects, and other design professionals in their design activities.
Heller, Richard, “Inditex Index, Inside Zara,” Forbes, May 28, 2001.
4
Zara’s Supply Chain Management Practices
PRODUCTION
Depending on the styles and sizes to be produced, the fabric was cut at Zara’s own high-tech
automated cutting facilities. Several layers of fabric, meant for garments of a particular design,
were laid out on cutting tables, vacuum sealed, and cut by machines, based on a computer layout
of the sample pieces. The layout was prepared so as to minimize wastage. The fabric was then
marked for sewing.
The pieces cut in Zara were distributed for sewing among 350 small workshops in Galicia and
northern Portugal. These workshops, which were not owned by Zara, employed about 11,000
workers and were provided with a set of instructions. The garments were generally ready within a
week or two, depending on the number of garments. With the fabric in stock, Zara was ready with
the final product, including designing, pattern making, and cutting within 10 days.
Due to this flexibility in production processes, when the demand for any design was low, Zara was
able to stop its production. At the same time, it was able to modify its processes to produce more
of the designs in demand. Analysts opined that it was Zara’s ability to respond quickly that put the
company on a different plane as compared to the other fashion retailers.
After the stitched garments arrived at the manufacturing centers, they were checked twice for
quality, ironed, tagged, and then wrapped in plastic bags and sent to the distribution centers. About
60% of Zara’s total production was carried out in Portugal and Spain. The company considered
several factors like expertise, cost, and especially time sensitivity before opting for outsourcing.
Zara carried out some of the capital intensive manufacturing processes including dyeing and
cutting the fabric indigenously while the labor intensive steps like sewing were outsourced.
Garments that required styling and reflected fashion trends were made by Zara while the basic
designs and knitting were outsourced. On the flip side, the people cost that Zara had to incur was
higher compared to other retailers who outsourced their production to Asia (Refer to Exhibit III for
Zara’s production process).
DISTRIBUTION
The distribution of garments was carried out at Zara’s 500,000 square meter distribution center in
Arteixo. This center was located centrally among 14 manufacturing plants in La Coruña. Zara had
its own railway track of 211 km through which the goods moved from the manufacturing plants to
the distribution center. In 2002, another distribution center was opened at Zaragoza in Spain to
complement the existing facility.
The merchandise moved through optical reading devices that sorted out more than 60,000 items
every hour. The distribution center had two levels and was fully automated. On one level was the
section on folded apparel packed into cardboard boxes. The boxes were dropped through a shaft
according to their destination. On the other level were garments placed on hangers. These
garments were sorted based on their styles. There were two belt systems -- one for folded and one
for hung garments. The garments were then routed using automatic routing devices. All the
garments were pre-priced and the lots labeled according to their destination.
At the loading docks, fleets of trucks took the goods to their destinations. Twice a week, the
garments were shipped out of the distribution center. Non-European consignments were sent to the
airport at Santiago di Compostela. For stores within Europe, they were sent through trucks, which
received the consignments within 24 to 36 hours. The stores located outside Europe received the
consignment within two days.
The distribution center was used to select, sort, reroute, and resort merchandise between
manufacturing units and stores and was not used to store merchandise. About Zara delivering its
products twice a week, The New Yorker19 wrote, “Twice-weekly deliveries may be common in the
19
The New Yorker is an American magazine that publishes reports, criticism, essays, cartoons, poetry, and
fiction. The first magazine was published in 1925. Earlier, the magazine was published every week.
Later, the format was changed to forty weekly magazines and six special issues.
5
Zara’s Supply Chain Management Practices
grocery business, but in fashion retailing they’re unheard of. The curse of the rag trade, after all, is
the enormous lag time between the initial sketches of that new A-line skirt and its arrival in stores.
Instead of reacting quickly to what customers want now, most retailers must guess what they’ll
want six or nine months hence. That’s hard enough if you’re selling televisions or bicycles. In the
fashion business, it’s close to impossible.”20
Once the trucks reached the stores, the garments could be put on display straight away as they
were pre-priced and already ironed. Zara was able to achieve an accuracy level of 98.9% in its
shipments. The items sent to a particular store had the items that the store managers had asked for
and sometimes new items that were proving popular with stores at other nearby locations. With
new stock arriving twice a week, the stores always had something new to offer and the customers
waited eagerly for the new arrivals. According to Zara, on an average, customers visited Zara’s
stores 17 times a year, compared to the three to four visits its competitors received.
STORE OUTLAY
Zara was very particular about the location of its stores. The stores were mostly located in prime
locations across the world. For example, Zara outlets were located in 34th Street, Fifth Avenue,
SoHo in New York; Regent Street in London, and Champs Elysées in Paris. All of Zara’s stores
were uniform in outlay, including lighting, fixtures, window display, and arrangement of garments.
A typical store had a floor space of 1200 square meters.
The stores were brightly lit with a mix of halogen and fluorescent lighting. The back walls were
fully lit and the lights placed around and above the merchandise diffused light from all sides. Color
was not used much in the interiors, which were mostly in white, natural pine, mill work, and
brushed stainless steel hues. The glass paneled façade was brightly lit with a prominent display of
products, mannequins, and posters showing Zara’s clothes.
Zara planned its store windows and displays carefully. At the company’s headquarters, there were 25
full length display windows. These windows had display platforms and variable light, which helped
Zara in determining how the display unit would look on bright days, on cloudy days, and during the
night. A team of window designers worked to arrive at the look of the windows at each of their stores.
The window presentation designs were then sent to the stores and most of Zara’s stores across the
world sported those designs. On Zara’s store designs, Domenico De Sole, the CEO of Gucci21 said,
“What always strikes me is the very high quality of their store presentation.”22
The display of clothes was given prominence in the stores. When the shipments arrived, there were
codes on all the items which conveyed to the staff where exactly the items needed to be placed. In
the stores, the clothes were organized by color rather than type of garments. This was done in
order to encourage customers to spend more time at the stores and to spot the matching items.
According to a sales assistant in one of Zara’s stores, “We always have something that looks like
what the customer wants. If the flowery dress sells out, there will be a white one of the same
design in stock. Customers won’t leave the store empty-handed.”23
All of Zara’s stores were located at places where there was constant pedestrian flow and they had huge
windows to display the merchandise. This acted as a major pull factor in attracting customers. Zara
believed that these locations themselves provided the required advertising -- the company spent very
little (about 0.3% of its total revenues) on advertising or on the launch of new stores.
20
21
22
23
Surowiecki, James, “The Most Devastating Retailer in the World,” The New Yorker, November 2000.
Italy-based Gucci Group NV is one of the world’s leading multi-brand luxury goods companies. The
group companies design, produce, and distribute high-quality personal luxury goods, including ready-towear apparel, handbags, luggage, small leather goods, shoes, timepieces, jewellery, ties and scarves,
eyewear, perfumes, cosmetics and skincare products.
Heller, Richard, “Inditex Index, Inside Zara,” Forbes, May 28, 2001.
Saini, Angela and Ryle, Sarah, “New Kids on the High Street Cut a Dash with Fast Fashions,”
www.observer.guardian.co.uk, June 05, 2005.
6
Zara’s Supply Chain Management Practices
Zara’s huge stores presented the ambience of upscale boutiques, with marble floors and effective
lighting. One of the customers visiting Zara in New York commented, “You feel like you’re in a
classy European boutique.”24 Most of the stores were company owned and in some markets
particularly in Asia, Zara adopted the route of alliances and franchises. All the franchise operations
were controlled by strict quality procedures laid out by Zara. It provided the franchise partners
with extensive training in human resources and logistics. Even while entering into agreements with
franchisees, Zara retained the right to open its own stores in the location and buy out franchised
operations in case it experienced any problems with running the stores.
REAPING THE BENEFITS
Instead of projecting sales for a certain color, fabric, or style and launching such products, Zara
reacted swiftly to emerging trends in the fashion industry. The company ensured that its stores
were stocked with the products that the customers wanted at that point of time. In contrast, other
retailers took between 8 and 12 months to forecast and arrive at a style and send it for production.
Zara’s initial forecast was limited to the kind of fabric and the amount of fabric it would buy. The
fabric thus procured was unprocessed and undyed and Zara colored the product only before selling
it, based on the need and demand by consumers. Zara sourced undyed fabric from the Far East,
Morocco, and India.
When Zara opened stores in new locations, the shop assistants clearly told the customers that the
styles changed every week and that they might not find the same piece in the stores again. Once a
product was in the stores, Zara quickly moved on to the next style. With new styles being
introduced every week, consumers were likely to visit the store more often.
Producing a product in limited quantity had another advantage. If the style did not sell as expected,
Zara did not lose much, as there was not much stock to be discounted. On an average, Zara sold
only 18% of the clothes through discount sales twice a year, as against the industry average of 36%
and constant markdowns. Analysts opined that Zara’s main advantage was its ability to respond
during the season. If any collection was not doing well during the season, Zara could immediately
realign its resources, whereas the other retailers had to resort to discounts and advertising to clear
their stocks.
Zara used the pull process instead of forecasting to gauge market trends. As soon as a product was
sent to the stores, Zara would know if the new design was going to succeed or not, based on
immediate feedback from the sales force and store managers. Products that did not sell as expected
were immediately discontinued. According to Watson, “The fundamental thing about using small
batches and this model is that (you) are continually making decisions based on consumer demand.
And if you cut your demand to your supply and are able to do it quite quickly as it begins, you’re
always on the upward start of the demand curve, which is the highest rate of sales.”25
Defying conventional wisdom, Zara adopted practices that resulted in higher costs. These included
three product lines, deliveries twice a week, using planes and trucks to transport its goods instead
of cheaper alternatives like trains and ships, and shipping some of the garments on hangers, which
occupied more space, thus increasing freight charges. However, these practices helped Zara
maintain a low inventory and higher profit margins. Analysts opined that Zara’s supply chain did
not minimize costs but worked towards maximizing revenues.
When most of the European retailers were moving their production processes to low cost countries
like China and India to minimize their costs, Zara made efforts to keep its costs low, despite
manufacturing in Spain and other European countries. The company did not own any of the
workshops where the sewing was done. These workshops employed women from villages and
small towns. Their average wage was around US$ 500 a month as against the US$ 1,300 per
24
25
Echikson, William, “The Mark of Zara,” BusinessWeek, May 29, 2000.
Thomas, Ryan J, “Uncovering Zara,” Apparel Magazine, January 2006.
7
Zara’s Supply Chain Management Practices
month paid to industrial workers. However, these wages were still 5 to 7 times higher than those
paid in India or China. Zara was thus able to achieve the flexibility of making and distributing the
garment in a few days, something which would have not been possible if the manufacturing was
done in these low cost countries. According to David Bovet of Mercer Management Consultant,
“The dominant way of thinking for a while now has been, find the cheapest country out there and
get it to produce your stuff, but what Zara has said is that proximity matters. Even if you save a
couple of bucks an hour by shipping the stuff off to the Third World, you end up paying more in
the end, because it destroys your flexibility.”26
Zara’s use of information technology (IT) was limited. According to Andrew McAfee, specialist in
the corporate use of IT at Harvard Business School, “The company keeps its technology simple –
even a little old-fashioned – but as a result spends five to ten times less on information technology
than its rivals.”27
LOOKING AHEAD
Industry analysts were of the opinion that Zara could not continue with its supply chain model for
too long. With many retailers moving their manufacturing processes to India and China to control
costs, Zara would have to follow suit sooner or later in order to remain competitive. However, if
the production was to move out to low cost countries, Zara could lose its advantage and might not
be able to refurbish its product lines in quick succession, the analysts felt
By 2008, the quotas28 imposed on the Chinese textile industry by the US and the European Union
would be removed. Most of the leading European textile companies were expected to move their
manufacturing processes to Asia, particularly to China, due to lower costs. Several luxury apparel
brands would also start sourcing from China. According to Nathan Cockerll, analyst with Credit
Suisse First Boston (CSFB)29, “The economics of Asian sourcing actually work better for some
luxury companies than fast-fashion retailers, because the margins on more expensive goods aren’t
affected as much by the cost of putting them on a plane.”30
Analysts cautioned Zara against aggressive expansion. They pointed out that the farther Zara
moved its operations from Spain, further away it would be from its centralized distribution system,
which would lead to higher costs. Analysts warned that vertical integration, which was Zara’s
strength, could also turn out to be its weakness, if it continued expanding to far off locations in
Asia and America. One of the disadvantages of vertical integration was the lack of economies of
scale, where Zara was unable to reap the advantage of producing large quantities of products to
sell them at competitive prices.
Retail experts suggested that Zara should complete its expansion in the European markets before
expanding into the Asian markets. In case Zara wanted to expand further, analysts opined that it
needed to decentralize its production processes and have a production center for a cluster of
countries along with distribution centers.
26
27
28
29
30
Surowiecki, James, “The Most Devastating Retailer in the World,” The New Yorker, November 2000.
“The Future of Fast Fashion,” Economist, June 18, 2005.
In order to protect European manufacturers from Chinese imports, a quota was imposed on 10 categories
of clothes from China. Under the terms, the quotas restricted the annual imports of the specified items till
2008. America also entered into a similar agreement for 34 categories of clothes. After the quotas are
removed, the European manufacturers who are not able to manufacture garments in China would be able
to manufacture them and source their products from China.
CSFB is a New York based investment banking and financial services firm. It is a division of the Credit
Suisse group and has started operating under the the name Credit Suisse since January 16, 2006. The firm
caters for three different categories of clients – institutional, investment banking and investment
management clients.
Foroohar, Rana, “Fabulous Fashion,” Newsweek International, October 17, 2005.
8
Zara’s Supply Chain Management Practices
Exhibit I
Zara – Global Presence (January 2006)
America
Country
Europe
No. of Stores
Argentina
Country
No. of Stores
6
Andorra
1
Brazil
14
Austria
8
Canada
14
Belgium
18
Chile
5
Cyprus
3
Costa Rica
1
Czech Republic
3
Dominican
Republic
1
Denmark
4
El Salvador
1
Estonia
1
Mexico
39
Finland
4
Panama
1
France
90
Uruguay
2
Germany
41
Venezuela
9
Greece
38
USA
19
Total
112
Hong Kong
Japan
2
Ireland
5
Italy
Asia
Country
Hungary
No. of Stores
4
18
36
Latvia
1
Lithuania
2
Luxembourg
2
Malaysia
3
Malta
1
Singapore
3
Monaco
1
Indonesia
2
Netherlands
6
Philippines
1
Poland
Total
31
Middle East & Africa
Country
No. of Stores
Portugal
46
Romania
1
Russia
7
3
UAE
5
Slovenia
Bahrain
1
Spain
Israel
14
Jordan
1
11
259
Sweden
4
Switzerland
8
9
Zara’s Supply Chain Management Practices
America
Country
Europe
No. of Stores
Country
No. of Stores
Kuwait
4
Turkey
13
Lebanon
2
UK
45
Morocco
1
Total
665
Qatar
1
Grand Total
853
Saudi Arabia
16
Total
45
Source: www.inditex.com.
Exhibit II
Inditex – International Expansion
Year
Countries
1988
Portugal
1989
USA
1990
France
1992
Mexico
1993
Greece
1994
Belgium, Sweden
1995
Malta
1996
Cyprus,
1997
Norway, Israel
1998
Argentina, Japan, UK, Venezuela, UAE, Lebanon, Kuwait, Turkey
1999
Netherlands, Germany, Poland, Chile, Saudi Arabia, Bahrain, Canada, Uruguay
2000
Austria, Denmark, Qatar, Andorra
2001
Puerto Rico, Jordan, Ireland, Italy, Iceland, Luxembourg, Czech Republic
2002
El Salvador, Finland, Singapore, Dominican Republic, Switzerland
2003
Russia, Slovakia, Slovenia, Malaysia
2004
Hong Kong, Morocco, Estonia, Latvia, Romania, Hungary, Lithuania, Panama
2005
Morocco, Indonesia, Philippines, Costa Rica
Source: www.inditex.com.
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Zara’s Supply Chain Management Practices
Exhibit III
Manufacturing Process of Zara
Sales personnel & store
managers obtain customer
feedback, monitor local trends
and update the headquarters
daily
Undyed
fabric
supplied
from
far-east
Designers travel across the world
scouting for trends, ideas and
designs
Data obtained used to decide on price, fabric
etc.
Store specialists, designers, procurement and
production managers work in tandem to arrive
at new designs
Sampling and approval
Fabric is dyed, cut and sent to workshops for
stitching
Stitched garments are checked for quality and
sent for distribution
Garments are sorted out and sent to Zara stores
across the world
Adapted from J. L.W. Lo, B. Rabenasolo and A-M. Jolly-Desodt, “Leveraging Speed as a Competitive
Advantage: A Case Study of an International Fashion Chain and its Competitors,” Fashion Net,
International Conference 2004.
11
Zara’s Supply Chain Management Practices
Additional Readings & References:
1. Echikson, William, The Mark of Zara, BusinessWeek, May 29, 2000.
2. Folpe, Jane M, Zara Has a Made-to-Order Plan for Success, Fortune, September 04, 2000.
3. Echikson, William, The Fashion Cycle Hits High Gear, BusinessWeek, September 18, 2000.
4. Surowiecki, James, The Most Devastating Retailer in the World, The New Yorker,
November 2000.
5. Floating on Air, Economist, May 19, 2001.
6. Heller, Richard, Inditex Index – Inside Zara, Forbes, May 28, 2001.
7. Zara, a Spanish Success Story, www.cnn.com, June 15, 2001.
8. Zara Tests Market with Brand Launches, Estates Gazette, June 08, 2002.
9. Dutta, Devangshu, Retail @ The Speed of Fashion Part I and II, www.3isite.com, 2002
and 2003.
10. Bainbridge, Jane, High-Speed Retail is Quick to Answer Customers' Needs, Marketing
(UK), April 03, 2003.
11. Spain’s Best Brands, www.brandchannel.com, February 16, 2004.
12. Doonar, Joanna, Branding España to the Rest of the World, Brand Strategy, March 2004.
13. Ferdows, Kasra; Lewis, Michael A. and Machuca, Jose AD, Rapid-Fire Fulfillment,
Harvard Business Review, November 2004.
14. Pepper, Robert, Loyalty’s Missing Link, Marketing (UK), March 23, 2005.
15. The Future of Fast Fashion, Economist, June 18, 2005.
16. Global Brand, The 100 Top Brands, BusinessWeek, August 01, 2005.
17. Murphy, Robert, Strong Sales at Zara Boost Inditex Profit, Women’s Wear Daily,
September 23, 2005.
18. Foroohar, Rana, Fabulous Fashion, Newsweek International, October 17, 2005.
19. Thomas, Ryan J, Uncovering Zara, Apparel Magazine, January 2006.
20. www.inditex.com.
21. www.zara.com.
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