SP JAIN SCHOOL OF GLOBAL MANAGEMENT

Assignment on
The Case of Spanish Fast Fashion Retailer Inditex- Zara

Submitted to

Dr Pieter Nagel

Date: 07th February, 2020 CEO: Priyanshi Dalal: MS19CMM072

COHORT: MGB SEC-A 1. Ayush Mishra : MS19GF028
Group No. 4 2. Harshit Agarwal: MS19GF015
3. Roma Sawant : MS19GL085
1. INTRODUCTION

In this era of global competition, there is an extreme pressure over the companies to come up with
new creative ways in order to provide value to their customer. The various development in the
markets along with the combination of the global competition has led to an extreme over capacity
among these industries. As a result, having more effectiveness and efficiency is required into the
business environment. It’s beyond these conditions that the integration of the supply chain
management has come into the highlight in the past few years. The main forces of these supply chain
are to effectively serve its customer and also reduce the cost of services.

Zara known for its flagship chain of various number of stores of the Inditex group, is formally owned
by the Spanish business tycoon Arancino Ortega. Zara is considered as the most internalized projects
of the Inditex chain, having its head office in A Coruña, Spain. The company has been able to change
the whole paradigm, by bring about 20 seasons in a year. The company can develop new products
within short span of time as well as make them available into the stores and can launch around 40,000
new designs every year. Zara has been able to make the latest trends and fashion available at the low-
cost countries. The company mainly believes in spending and investing their money over opening new
stores rather than over advisement.

2. INTEGRATED SUPPLY CHAIN FRAMEWORK – ZARA

Fashion & Retail industry is extremely volatile in nature, demand for the flagship products changes
with change in trends. To overcome this disadvantage of fashion industry and to capitalise on
uniqueness and trend Zara has pioneered the concept of 20 fashion seasons. Thus, to manage design
development, material procurement, production, logistics & distribution of new stock every 2-3 weeks
Zara has vertical integrated its supply chain.

Vertically integrated retail means taking ownership & control over most of the supply chain function,
right from the design to the making and the distribution of the products. Integration cannot be
achieved without centralised coordination of the activities; thus, Zara’s all retailing activities are
controlled from its centralised head quarter and majority of its production plants are located in the
nearest proximity of its centralised office.

2.1 Following points throw light on the integrated supply chain framework utilised by Zara to
provide unique, trendy and affordable apparels in the span 2 to 3 weeks:

• The process of new product/ design development in Zara starts from the feedback of the
section manager of the retail outlets. The retail manager tries to understand the requirements
of the customers and studies the current fashion trends in the region, this information is
shared to the centralised design team using Zara’s centralised IT software.

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 • On basis of the information Design team along with the procurement & production
representatives design their new seasonal apparels.

• Once the design has been made a prototype is developed and sent to the fashion streets of
Milan or any other high-end fashion hubs for preliminary research and once the design is liked
by the customers there – the design is chosen to be produced

• Zara has standardised material which is procured in advance to reduce lead time. These
materials are then cut and dyed as per the design requirement.

• Semi-finished designs are sent to manufacturing units for assembly/cut/make/trim. Usually

all the outsourcing unit for Zara’s fashion products are in Europe and basic products are in
Asia.

• Once the production is completed the final cloth is sent to the centralised distribution centre
to be picked, sorted, packed and dispatched to the regional retail outlets of Zara.

• This framework is extremely centralised, and each process is closely monitored by the brand’s
headquarter.

In this framework Zara has tried to implement concepts of lean inventory management and just in
time production to avoid wastage of resources and minimise the cost of material handling and
distributing.

3. Zara – Supply Chain flexibility, responsiveness and competitive advantage

Today Zara is the leading fast fashion brand in the world, it has capitalised on the time sensitivity of
the fashion without overlooking the price sensitivity aspect of retail. Integrated Supply Chain
framework of Zara is extremely efficient and has played a major role in making brand flexible,
responsive and thus helping the company achieve a competitive edge over its competitors.

Factors making Zara’s supply chain flexible & responsive:

• Zara factories operates on a single-shift system. Thus, controlling the production in regard to
the demand of the product is extremely feasible for the company.

• Zara most merchandises are produced in-house. It enhances company to be flexible in volume
and products of new varieties to be launched

• Inventory optimization model is applied by Zara. Using this model Zara determines the
quantity to be supplied to its each retail store

• Zara’s retail outlet and headquarter is connected through a software. Section Managers and
Store managers update the demand and change in preference of the customer on regular
basis. This makes the company develop new designs as per market tastes and requirements,
indeed making itself responsive to market demand.

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 • Zara’s layout type is product layout. After goods have been produced, they are immediately
shifted to warehouses and then quickly gets supplied to its retail stores

• Zara does not believe in keeping additional inventory in its distribution centre, thus reducing
cost and achieving a competitive edge over its competitors

• The company has all three fashion segments co located in its production unit and strives
information flow of each channel is swift, direct and accurate. Thus, increasing the
responsiveness to the market information.

• Brand stocks the basic materials to reduce the lead time and then as require it dyes the fabric
and cuts it as per the designs created. This makes Zara responsive to the mid-season colour
change

Considering following points, we strongly believe that Zara’s supply chain is well planned and
sufficient. It does not require changes, but continuous improvements in terms of technology and
production strategy might prove to be profitable.

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