CASE # 1

Zara Owner Prepares for Expansion

COURSE:
SUPPLY CHAIN MANANGEMENT

PROFESSOR:
EDGAR RAMOS

STUDENTS:
-

[Escriba aqu]

JOSE AGUADO
BILLY BONILLA
ANNA MARIA DI BENEDETTO
CARLOS CAVERO
GIANMARCO COSTALES
ERICK GAONA

1. BACKGROUND

ABOUT ZARA

Zara is a Spanish
clothes
and
accessories brand, it
is the flagship brand
of
the
Spanish
fashion retail giant,
Inditex (Industria de
Diseo Textil S. A.).
Amancio
Ortega
founded Zara in 1975
in order to better
understand
world
markets
for
his
fashion merchandise.
A decade later, he
formed Inditex as a
parent company for
Zara, as well as
several other retail
concepts
and
suppliers that he had
built.
Amancio
Ortega
started off the first
small store that was named Zorba, located in La Coruna, where he sold
women`s, men`s and children`s clothes. He then changed the name as Zara
with no particular intention.
Over time the company grew slowly with the idea of selling the fashion that
the customer desire. Because of this, in 1988 Amancio Ortega managed to
open its first international store in Oporto belonging to the country of
Portugal.
In 2012, Inditex reported total sales of US$20.7 billion, with Zara
representing 66 percent of total sales (US$13.6 billion). Zara became the
main flagship chain conformed by Inditex group, generating revenues of
13.628 billion euros by 2015.
From there, Zara was well received in the international fashion market,
positioning itself on 5 continents: Europe, America, Africa, Asia and Oceania.
The company currently has 2,162 stores in 88 countries of which 449 are in
Spain. Zara produces about 450 million items a year.
It is important to note that Zara's expansion strategy is to select carefully
where new stores will be opened; they focus mainly on the streets most
luxurious and best placed to give a better reputation to its brand.
The secret to Zaras success largely was because of the way it kept up with
street fashion with the changing times. The brand takes a look at how
fashion is changing every day. It makes new designs and puts them into
stores in a week or two. Most other fashion brands would take a whole six
months to get their new designs into the market: Thats where Zara beat the
rest of them and became the favorite brand among people who liked to keep
up with the fashion.

2. SUPPLY CHAIN PROFILE

Zara has 4 distribution centers located in Spain which are responsible for
supplying all stores worldwide twice a week. The supply capacity of Zara is
so big that at most within 72 hours, the requested order is delivered.
Because of the need to manage orders more quickly and simultaneously to
supply the different stores, INDITEX is trying to implement the RFID system
to achieve greater flexibility in distribution and greater precision in managing
garments.
The Supply Chain Profile from Zara contains:
Just in time production
Inventory Management
Centralized Logistics and Distribution
Solid distribution network
Just in time production
Zara delivers trendy cloth through a controlled design and integrated process
Just in Time.
Just-in-time (JIT) is an inventory strategy that companies employ to increase
efficiency and decrease waste by receiving goods only as they are needed in
the production process. This method requires producers to forecast demand
accurately. An advantage of Just-in-time is the reduction of costs by
eliminating warehouse storage needs. Companies also spend less money on
raw materials because they buy just enough to make the products and no
more.
Inventory Management
Inventory optimization models are put in place to help the company to
determine the quantity that should be delivered to every single one of its
retail stores via shipments that go out twice every week. The stock delivered
is strictly limited, ensuring that each store only receives just what they need.
This goes towards the brand image of being exclusive while avoiding the
buildup of unpopular stock.
Centralized Logistics and Distribution
Centralized Logistics allows Zara to have a clearly defined rhythm to satisfy
the requirements of the customer. The timeline is strictly planed.
Each Zara outlet sends in two orders per week on specific days and timing.
Trucks leave at specific times and shipments arrive in stores at specific
times.
Solid distribution network

Zaras strong distribution network enables the company to deliver goods to

its European stores within 24 hours and to its American and Asian outlets in
less than 40 hours.
According to a case study in 2010 about Zara, the retail giant can get a
product out from concept to store in just 15 days, while the industry standard
is 6 months.
-

Model for Structure Process:

Design

Retailing

Distribution

Sourcing

Manufacturi
ng

Value Chain
Support activities

Organization

human
resources

Purchasing
Primacy activities

Technology

Inboun
d
logistic

Materials

Operatio
ns
Manufacturi
ng
Assembly

Outbou
nd
logistics

Order
processing
Shipping

Marketi
ng and
Sales
Product
Pricing
Promotion
Place

Service
customer
service

Actual Metrics:
o ROI (Return On Investment):
Zaras company said that its plans to raise its 2013 dividend by
10% to 2.42. Also Inditex is spending 500 million on a logistics
upgrade; this is big invested for the company.
o Balance Score Card.
The company wants to expand its business because plans to
open as many as 500 new stores this year while closing roughly
100 smaller ones. Also its expanding online stores.
o Customer lifetime value
In this metric the company will understand the priority of the
client.

m= Monthly payments
r= Monthly retention rate
d= Discount rate
t= monthly periods
o Client Loyalty
o Lead time products
This is an important metric because is important to deliver goods
on time. Also the company rotates its products with high
frequency.
o Process efficiency
o Use of the system

3. SOLUTION AND RESULT:

-

New SC Model

Strategies and Methods

The company Zara, today, stands out for its flexibility at every stage of its
supply chain, allowing you to have both rapid and efficient processes. This is
because they themselves are responsible for designing almost eighty percent
of the production season; and in turn have a provisioning system in
proximity, ie that part of production that is outsourced develops in local
factories or nearby countries. Likewise, Zara works maintaining a zero stock
and, nevertheless, is capable of sending new designs to stores in less time
than their competitors need to perform that action.
Despite having features that make its supply chain one of the best, this could
be improved by developing an integrated logistics system which can
automate which allow deliveries to its stores include not only the right
products but delivered in a way that is more efficient and faster placement in
stores for sale, which would allow greater mobility of money as soon as it

arrives merchandise can be placed on the counter and then be sold. Thus,
the count with an integrated logistics system will enable the supply chain
Zara faster to follow the orders of consumers, adapt to changes and identify
the results of the supply chain to analyze and take considerations.
A case which can corroborate that implement an integrated system allows
for benefits in supply chain logistics system is the company's retail Sprit,
which applied this system has increased its speed in getting orders from
consumers shortening production time collections in less than half.
On the other hand, an integrated logistics system and to analyze whether
the results are beneficial to the company should have indicators to allow
proper monitoring and control of it. These indicators should consider the
following aspects:
Shopping according to the design; It refers to achieve and have what it
takes to design garments according to the season and fashion to be
imposed.
Compliance with an order; It refers to the ability of the supply chain to
meet the characteristics established in the main order. These may be time,
quantity, quality, etc.
Changes in transport costs; It is to consider the means by which orders will
be sent depending on the need of response that has the final distributor.
Responsiveness is to analyze the efficiency and effectiveness with which
the chain can act against any adversity.

4. CONCLUSION:
In short, the success of the internationalization of the company Zara is based
on the mixture of the following aspects:
Quality product.
Innovation.
Competitive price.
New business style to suit customer needs.
Constant investment in the areas of the company
Integration of advanced technology
Customer communication with the designer

Also, good management of its suppliers allows the company to produce

different products and stock appropriately input.

5. BIBLIOGRAPHY:
https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retailsuccess
http://www.academia.edu/6500115/Zaras_operations_strategy
http://evolution.skf.com/es/la-cadena-de-suministro/
http://static.inditex.com/annual_report_2013/retos-objetivos-yoportunidades/integridad-de-la-cadena-de-suministro/evaluacion-de-lacadena-de-suministro.php