ZARA

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ZARA
Baki USLU
Barış BOZOĞLU
Outline
 History of Zara
 The Textile and Apparel Industry
 The Zara Model
 The Problem (outsourcing benefits and risks)
 Questions
History of ZARA
 1963
The founder of Zara, Amancio Ortega Ganoa
Started his career as a clerk
 1975
First Zara store opened in La Coruna, Spain
 1989
There were 82 Zara stores in Spain
Ortega began international expansion in
Portugal, Paris, New York
Inditex
Zara
Pull&Bear
Massimo
Dutti
Berska
Oysho
(2001)
 In 2001 Zara was a world brand with 1200
stores in all around the world
 Most of the products were produced in Spain
The Textile and Apparel Industry
 Global textile and apparel industry was 5.7%
of the whole manufacturing output of the
world.(1999)
 The clothing market in the major countries
$580 bilion
 40% labor cost in textile
 60% labor cost in apparel
 Apparel production is related to the fabric
.
Apparel
industry
High quality
segment
Medium quality
segment
Low quality
segment
The Textile and Apparel Industry in
the E.U and Spain
 Textile and apparel workers consist of 7.6%
percent of total E.U manufacturing workers
 Italy 31%
 U.K 15%
 Germany 14%
 France 13%
 Spain 9%
 Portugal 6%
 E.U is the second textile exporter in the
world
Spain
 Spanish textile and apparel industry was
comprimised mostly of many very small
firms and had not been strong in R&D.
 Wages increase
THE ZARA MODEL
Zara’s Planning and Design Cycle
 Designers start to work on designing
collection a year ago for initial collection
 There are 200 designers
 They made 11.000 designs every year
Patterns and Samples
 In some cases designs made by 3rd party
suppliers
Production Sourcing and Scheduling
 50% of the garments are outsourced
 Garments with fashion styling manufactured
in Spain basics and knits are outsourced
 Zara’s season inventory
 In the beginning of the season 60% of the
collection is ready while others are 80%
 25% of the season’s collection is stored in
stores in the beginning of the season
 85% of the inhouse production is that
season’s production
In-house Manufacture
İn-house
manufacture
Fabric procurement
Garment assembly
And finishing
In-house Manufacture
 40% of fabric produced in-house
 Cutting
 Sewing
In Season Production
 Modified in response to market demand
 If an item was not selling
 If an item sells
 If a product sell very well
 If a product’s sale is not satisfactory
Distribution
 Zara’s distribution center in Arteixo
 New distribution center in Zaragoza
 Shipment
Retailing
 Store managers decide for the items from the
distribution center
 Stores receive new inventory several times a
week
 Sale
Pricing Strategy
 Pricing strategy= cost + target margin
 Single Tag to Bar Code
Growth Strategy
 Stores operated by Zara, franchise, alliances
 USA market
Sourcing Dilemma?
 Increase outsourcing vs. keeping current
model
Benefits and Risks of Outsourcing
 Economies of Scale;

Manufacturing costs is reduced with
outsourcing by aggregating orders from
different buyers
 Focus on Core Competency;


A careful decide on what to outsource helps
the buyer to focus on its core competency
Zara has the ability to give a quick response
 Increased Flexibility;
 Ability to better react to changes in customer
demand
 Ability to use the supplier’s technical
knowledge to accelerate product development
cycle time
 Ability to use the supplier’s technical
knowledge to accelerate product development
cycle time
 Conflicting Objectives;
 Flexibility vs. cost reduction
Questions?
Thank You
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