William Navarro • Jamie Nordby • Marvin Avilez • Brian Nelder • Michele Harman

Introduction

Agenda: • Introduction to the company Zara• Quick industry overview • Zara’s unique approach to fashion• Supply chain strategy• Production & Distribution • Questions

Company Overview

About Zara:

• Manufacturing & retailing

• Clothing & accessories • Subsidiary of Intidex • Founded in 1975 by

Amancia Ortega & Rosalia Mera

• First store was in A Coruña, Spain

• Controls the supply chain, design, manufacturing, and distribution of all products, worldwide.

Size & Locations

• Zara has over 2,000 stores strategically located in leading cities across 88 countries.

• Produces approximately 450 million items each year

• Creative team of 200 designers produce around 18,000 different designs each year

Mission & Vision

• “Through Zara’s business model, we aim to contribute to the sustainable development of society and that of the environment with which we interacts.”

• Focus on the variability and uniqueness of the products

• Eliminate waste by being in the right place at the right time

Zara vs. Industry Conventional Business Model Zara’s Business Model

Supply Chain Reliant on outsourcing production. Highly responsive, vertically integrated supply chain

Time to market High due to outsourcing. Industry avg. is 6 months.

Lead times and time for new product launches are less. 2-4 weeks.

Marketing Ads primarily for publicizing the assortment

Ads only for yearly sales & to announce new stores.

Design Teams Design conceptualized by small elite team common for all segments

Dedicated teams for different segments.

Product Life Span

Average new items per year 2000-4000 Classic collections

Short life span but more product launches. Avg. 11K yearly

Sales Forecast It is done. Not done due to flexible factories

IT Spending 2% of revenue as IT applications are outsourced to vendors.

0.5% of revenue due to in-house applications developed

Supply Chain Strategy

Responsive Supply & Logistics• Provide shipments globally within 24-48 hours

Vertical Integration• Toyota helped Zara install JIT systems in Spain Factories

Communication• High communication from stores to headquarters means lower inventories & correct merchandising

Fast Inventory Turnover• Small batches and can turnout product in as little as 2 weeks.

Production

“We find out what the customer wants and then we make it” – Mercedes Domeq, Zara PR

• Zara’s production process is a key component of the organization’s competitive advantage.

• Responsiveness and speed are prioritized over cost reduction.

Production

Consumer Driven

Production Process

Investment into high-

tech equipment and extra capacity

Commitment to continuous feedback and improvement

Distribution • Centralized distribution system

located in Arteixo, Spain.

• 150 million garments pass through the distribution center a year

• Every item made in the local factories are sent directly to the distribution center via an automated underground monorail that has 124 miles of track

• Basic items like t-shirts are ordered on a traditional schedule

• Zara maintains strong relationships with contractors and suppliers

Distribution

• Mobile tracing system directs items along automated carousels to specific areas for packaging and shipping

• IT integration from stores and distribution centers ensures that short supply is allocated to factories or redistributed from other stores

• Automation and IT help ZARA schedule shipments going out by time zone, reducing time clothing spends a the distribution center

Conclusion

• Unconventional approach to fashion supply chain strategies has been Zara’s key competitive advantage

• Responsive supply and logistics, vertical integration, communication, & fast inventory turnover are some of Zara’s most unique and effective strategies

• Having a centralized distribution and JIT Production schedule creates a more efficient process

• High investment into technology enables Zara to operate the way they do.

Sources & Questions “A Visit to Zara's Headquarters in Spain 2013 - FLARE." Flare. N.p., n.d. Web. 30 May 2014. <http://www.flare.com/fashion/a-visit-to-zaras-headquarters-in-spain/>. Berfield, Susan, and Manuel Baigorri. "Zara's Fast-Fashion Edge." Bloomberg Business Week. Bloomberg, 14 Nov. 2013. Web. 28 May 2014. "Flexible Manufacturing & IT Makes Zara the World’s Largest...." Tech Page One. N.p., n.d. Web. 1 June 2014. Hansen, Suzy. "How Zara Grew Into the World’s Largest Fashion Retailer." The New York Times. The New York Times, 10 Nov. 2012. Web. 28 May 2014. "Innovation Lessons from Fashion Leader, Zara | Destination Innovation." Destination Innovation. N.p., n.d. Web. 29 May 2014. Petro, Greg. "The Future Of Fashion Retailing: The Zara Approach (Part 2 of 3)." Forbes. Forbes Magazine, 25 Oct. 2012. Web. 30 May 2014. "Zara International, Inc." International Directory of Company Histories. Ed. Jay P. Pederson. Vol. 83. Detroit: St. James Press, 2007. Business Insights: Essentials. Web. 8 June 2014.

Ghemawat, Pankaj, and Jose Luis Nueno. "Zara: Fast Fashion." Harvard Business School, 21 Dec. 2006. Web. 8 June 2014. <http://cc.sjtu.edu.cn/G2S/eWebEditor/uploadfile/20130316155348364.pdf>.

"Zara Annual Report 2012." Investor Relations. Grupo Inditex, 2012. Web. 9 June 2014. <http://www.inditex.com/en/investors/investors_relations/annual_report>.Zara.com. Grupo Inditex, n.d. Web. 9 June 2014. <http://www.zara.com/us/en/company/our-mission-statement-c18001.html>.

Susan Berfield and Manuel Baigorri, Zara’s Fast-Fashion Edge, November 14, 2013, Web 20114, http://www.businessweek.com/articles/2013-11-14/2014-outlook-zaras-fashion-supply-chain-edge

Ghemawat, Pankaj and Jose Luis Nueno, Harvard Business School, ZARA: Fast Fashion, December 21, 2006, Web 2014, http://cc.sjtu.edu.cn/G2S/eWebEditor/uploadfile/20130316155348364.pdf