ABHISHEK RANJAN

2020065
SECTION – A
PGP 2
ZARA: RESPONSIVE SUPPLY CHAIN
ZARA & INDITEX
• A Spain based fashion tycoon
• Started by Amancio Ortega in 1975
• 650 stores across 50 countries
• Inditex - The parent company of ZARA
• 70% sales from ZARA
• €367 Million (1991) vs €34.6 Billion (2003)
• 20 % sales & net income growth (Last 3 yrs)
OPERATIONAL REWARDS
• 15 days to design, produce, and deliver a new garment
and put it on display in its stores globally
• Quickly offers a large variety of latest designs in limited
quantities
• Collects 85% of the full ticket price on its retail clothing
whereas the industry avg is 60% to 70%
• In 2001, Inditex’s net margin was 10.5% vs that of
Benetton’s 7% vs H&M's 9.5% vs Gap’s ~0%
SUCCESS PRINCIPLE
• Close the communication loop
• Stick to a rhythm across the supply chain
• Leverage your capital assets to increase supply
chain flexibility
• Control what happens to your product until the
customer buys it
OPERATIONAL STRATEGY
• Almost half of ZARA's production is in-house
• Leaves an extra capacity in the factories,
manufacturing & distributing in small batches
• Manages all design, warehousing, distribution, &
logistics functions on its own
• Holds and controls retail stores to a rigid timetable
for placing orders & receiving stock
• Puts price tags before shipping & leaves large areas
empty in its expensive retail shops
 • 3 parallel channels – Men, Women, and Children
• Sales trends and customer reactions are transmitted from stores to center
• Quick information transfer from shoppers to designers and production staff
• Bar code is used to track during production, distribution, and delivery to the
stores
• Customers – Store managers – Market Specialists and Designers –
Production staff – Buyers – Subcontractors

SUCCESS
• Latest information technology tools (PDA) for information exchange
between stores and production center
• Dedicated staffing of designers, sales, production, and buyers for each
channel. This helps in fast information flow in each channel
PRINCIPLE •
•
Centralized design and production center
Prototype - CAD (colors and textures) - cutting machines
• Prototype shop for quick feedback on the new designs and resource

S •
•
planning
Real-time inventory tracking
Impromptu meetings on a circular table
• Minimized bullwhip effect, thus eliminates overproduction
• Designers sit right in the midst of the production process and work closely
with market specialists, procurement, and production planners
 LEVERAGING CAPITAL
• Using postponement to gain higherASSETS
• Vertical integration
flexibility and speed
• Using sophisticated just-in-time systems – highly automated factories
• Owning production assets provides a level of control over schedules and
capacities
• Using local subcontractors for simple and labor-intensive steps of the
production process
• Adding temporary staff during peak times to maintain lead times
• Major capital investments in production and distribution facilities for
increasing the supply chain’s
• Proper Allocation of resources as floor space – leaving out empty spaces
– extra warehouse space – elaborate material handling technique
• Following a fundamental rule of queuing models, which holds that
waiting time shoots up exponentially when capacity is tight, and
demand is variable
• Ramp up or down production of specific garments quickly and
conveniently by operating in a single shift
• Reserving the manufacture of the more complicated products, for its
own factories
• Investment in capital assets can increase the organization's overall
flexibility
 • The investment made in transportation
• Price tagging articles before shipping
• Manages all the design, warehousing, distribution, and
logistics functions itself

STICK TO THE • Scheduling of shifts on 3 days and round the clock

functioning on the other days
• Strict Order Placing and Stock Receiving Timings -
RHYTHM Adherence to deadline
• Outsourcing a smaller portion of its manufacturing than its
peers
• Production of garments in small batches, though larger
batches would reduce costs
• Customers are aware of delivery time as they own nearly
all its retail shops(Transparency)
• All trucks and connecting airfreights run on established
schedules-like a bus service-to match the retailers' twice-
weekly orders