 Industry Overview
 Zara Overview
 Zara Supply Chain
 Zara Challenges
 Recommendations

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High Demand Uncertainty
Push vs. Pull Method
30% of world production exported from developing countries
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Geographic Differences
Per capita spending and preferences different in any given market

Gap, Inc.
H&M Benetton Zara
Production Outsourced Outsourced In-House
40% In-House
60% Outsourced
Production
Lead Times
High High High Low
Net Margins -.06% 9.6% 7.05% 10.47%

Price +
Benetton
Gap
Fashion -
ZARA
H&M
Fashion +
Price -

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Owned by Inditex (Industria de Diseno Textil)
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
Largest of 6 Inditex Chains
500 stores in 30 countries
 For women, men, and youth
$2,500
$2,000
$1,500
$1,000
$500
$0
 From infants to age 45

Zara starts with “Z”
Zara vs. 5 other Inditex Chains
(2001 exchange rate: 1.15 Euro=$1)
Zara
$2,153
$782
Massimo Dutti + Bershka
+ Pull and Bear +
Stradivarius + Oysho

The “yoo-goo-goo-lizer” – you know, the guy that speaks at funerals!

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• Vertical Integration
Quick Response to Demand (Pull System)
Small Batch Production
High Product Turnover
Central Distribution Center / Strong IT System

ZARA OVERVIEW:
SUPPLY CHAIN
Manufacturing
Design
ASIA
(20%)
Low QR
Low Cost
INDITEX
MANAGEMENT /
DESIGNERS
Determine apparel designs and manufacturing locations
IN-HOUSE
(40%)
High QR
High Cost
EUROPE /
N. AFRICA
(40%)
High QR
High cost
System is designed for short production cycles, quick response (QR) to demand, and reduced number of markdowns
Distribution
DISTRIBUTION
CENTER
Increased shipment frequency increases QR
Small batch production lowers cost of demand uncertainty
Returns from stores either rerouted or disposed of in local stores near dist. center
IT SYSTEMS
Provides accurate demand information to determine manufacturing locations and production levels
Sale
STORES
Decentralized store management supplements
QR
Managers determine products to sell and return

 Aggressive growth strategy needed
 76% of equity value based on future growth expectations
 Need to maintain competitive advantages in new geographic markets
 Data collection, Quick response, High product turnover, Strong IT
System

 Short-Term Solution: Expand in Europe
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
Focus on Italy (63 Billion Euro Market)
Implement “Oil Stain” expansion method
 Long-Term Solution: Expand Outside of Europe
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Establish operations in North America
North American Distribution Center (Mexico)
Initially focus on coastal cities
Implement “Oil Stain” expansion method
 Culturally Diverse Management Team