ZARA
Baki USLU
Barış BOZOĞLU
Outline
History of Zara The Textile and Apparel Industry The Zara Model The Problem (outsourcing benefits and risks) Questions
History of ZARA
1963The founder of Zara, Amancio Ortega Ganoa Started his career as a clerk 1975First Zara store opened in La Coruna, Spain 1989There were 82 Zara stores in Spain Ortega began international expansion in Portugal, Paris, New York
Inditex
Zara Pull&BearMassimo
DuttiBerska
Oysho(2001)
In 2001 Zara was a world brand with 1200 stores in all around the world
Most of the products were produced in Spain
The Textile and Apparel Industry
Global textile and apparel industry was 5.7% of the whole manufacturing output of the world.(1999)
The clothing market in the major countries $580 bilion
40% labor cost in textile 60% labor cost in apparel Apparel production is related to the fabric
.
Apparelindustry
High qualitysegment
Medium qualitysegment
Low quality segment
The Textile and Apparel Industry in the E.U and Spain
Textile and apparel workers consist of 7.6% percent of total E.U manufacturing workers
Italy 31% U.K 15% Germany 14% France 13% Spain 9% Portugal 6%
E.U is the second textile exporter in the world
Spain Spanish textile and apparel industry was
comprimised mostly of many very small firms and had not been strong in R&D.
Wages increase
THE ZARA MODEL
Zara’s Planning and Design Cycle Designers start to work on designing
collection a year ago for initial collection There are 200 designers They made 11.000 designs every year
Patterns and Samples
In some cases designs made by 3rd party suppliers
Production Sourcing and Scheduling
50% of the garments are outsourced Garments with fashion styling manufactured
in Spain basics and knits are outsourced Zara’s season inventory In the beginning of the season 60% of the
collection is ready while others are 80% 25% of the season’s collection is stored in
stores in the beginning of the season 85% of the inhouse production is that
season’s production
In-house Manufacture
İn-house manufacture
Fabric procurementGarment assembly
And finishing
In-house Manufacture
40% of fabric produced in-house
Cutting
Sewing
In Season Production
Modified in response to market demand
If an item was not selling
If an item sells
If a product sell very well
If a product’s sale is not satisfactory
Distribution
Zara’s distribution center in Arteixo
New distribution center in Zaragoza
Shipment
Retailing
Store managers decide for the items from the distribution center
Stores receive new inventory several times a week
Sale
Pricing Strategy
Pricing strategy= cost + target margin
Single Tag to Bar Code
Growth Strategy
Stores operated by Zara, franchise, alliances
USA market
Sourcing Dilemma?
Increase outsourcing vs. keeping current model
Benefits and Risks of Outsourcing
Economies of Scale; Manufacturing costs is reduced with
outsourcing by aggregating orders from different buyers
Focus on Core Competency; A careful decide on what to outsource helps
the buyer to focus on its core competency Zara has the ability to give a quick response
Increased Flexibility; Ability to better react to changes in customer
demand Ability to use the supplier’s technical
knowledge to accelerate product development cycle time
Ability to use the supplier’s technical knowledge to accelerate product development cycle time
Conflicting Objectives; Flexibility vs. cost reduction
Questions?
Thank You