Procurement & Outsourcing

Strategies at Zara

Bino Joseph
Kishore Thomas John
Saranya M
Vygha N K

History of Zara

Case
Facts
Two seasons Spring/Summer and Fall/ Winter

Contd

Sewing was subcontracted to a network of 400 smaller firms within

Contd
Zara experienced only15-20% markdown sale of season volume.

Competitive advantage

Fast production

Strengths
Efficient distribution
Fast deliverytechnology
of new products, design and trends
Information
Strengths
Fast delivery of new products, design and trends
Different
Cost
leadership
strategy
strategy
Information
Different
strategy
technology
Cost leadership
Efficient
distribution
strategy

Strategies
MIS

product
ion

Objecti
ves

design

marketi
ng

Production & distribution

Maintain quality
Cost leadership
High bargaining power to
suppliers
Fast distribution system

Design

Coordinate with R & D and stores

to get the new trends
Ability to produce new trends

MIS
Product distribution system
Improving inventory system
Order information flow-> stores
ordering system

Marketing

R&D
Market penetration
Market , location of stores ,
consumer behavior analysis

4 P Approach
Product
Local preferences, designs and trends

Price
Different pricing strategies for different countries

Promotion
Different promotion strategies for different

cultures
Placement
Effective distribution and location of stores

Analysis

Zara sources fabric, other inputs and

finished products from external suppliers.

Purchasing offices in Barcelona & Hong
Kong.
Buying more from China might reduce the
cost of goods sold in future.

Inditex owned Comditel that managed

dyeing, patterning and finishing of grey

fabric and supplied it to external and inhouse manufacturers.
Vertical integration helped to reduce the
bull whip effect.
It also owned 20 other factories for internal
manufacturing that apply Just In Time .

Zara does not compete on prices.

They compete only on fashion for which

quick response capability is a must.

Zara can originate a new design and have
it as finished goods in 4 to 5 weeks and just
2 weeks for restocking or modifying the
existing products.
The same takes 6 months for its
competitors.

Global scenario
Build a decentralized distribution &

production in each region to highly

penetrate the market and to reduce the
complexity of the process.
Value chain should be extended in each
region effectively.

Looking ahead
Current supply chain model must be

changed, cant be continued for long.

In order to remain competitive and control
costs Zara might have to move
manufacturing to India, China.
This might prevent Zara from refurbishing its
product lines in quick succession.
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