ZARA supply chain (3)

SUPPLY CHAIN
ANALYSIS
LECTURER: HO THI HONG XUYEN
GROUP: TOKTOK


2

Member
Phạm Thúy Hiền

Nguyễn Thị Ánh Tuyết
19124041

19124046

Nguyễn Thế Trung

Nguyễn Hoàng Nhật Quyên

Hà Thị Thu Huyền

19124063

19124073

201204185


3

CONTENTS
1. ABOUT ZARA
2. SUPPLY CHAIN MODEL
3. SUPPLY CHAIN COMPONENTS
4. STRENGTHS AND WEAKNESSES
5. CONCLUSION
REFERENCES


4

I. ABOUT ZARA
Zara is a Spanish fashion clothing manufacturer
and retailer, formed in the 1970s
Zara mainly targets young and urban female
customers and acceptable prices are offered
Zara is not a world leader in cloth designs, but it
is a highly sensitive and flexible fashion trend
follower.



6

I I . SUPPLY CHAI N MODEL


7

Zara’s Fashion Retail Supply Chain Strategies

8
ZARA global distribution center "the cube"


9

III. SUPPLY CHAIN
COMPONENTS


10

CLOSED CYCLE OF THE
ZARA SUPPLY CHAIN

1

Product design

3

Sourcing and production

2

Raw material

4

Product distribution

procurement cycle

5

Sales

cycle


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1. PRODUCT DESIGN
In

terms

of

fashionable
inspired
famous

by

design,
clothes
the

Zara

with

work

designers,

but

sells

designs

of

some

they

are

not affiliated with these designers
to design their products.


12

2. RAW MATERIAL PROCUREMENT CYCLE

Buy cheap raw materials from many
kingdoms in Spain, India, Middle East
region, ...

Zara has its main design
headquarters in Spain and has
strict links with its
offices/purchasing networks in
many places such as: Hong
Kong, Beijing, Barcelona, ...


13

3 Sourcing and production cycle
Zara produces 60% of their default
garments in servers around Arteixo
40% in Africa and Asia, where semifashion and design basics are
produced.
Zara only works with 20 main
suppliers for 75% of finished products,


14

All Zara products, no matter where they are made,
are sent back to DCs in Spain, which are then sent
to Zara stores worldwide.
Products will be shipped from DC to warehouses in
select

local

schools,

then

sent

to

Zara

stores

by

third-party logistics companies.

4.
The market does not have domestic goods,
products

will

be

sent

directly

to

Zara

stores
75% of Zara products are shipped by truck
and 25% are shipped by air


5. SALE

In terms of format retail, Zara stores have premium
products that move in and out of the store quickly. Special,
Zara keeps less inventory

15


1

ZARA’S
SUPPLY CHAIN
APPROACH

16
Procurement Methodology

2

Deep Collaboration

3

Production Feedback

4

Local Manufacturing

5

Spare Capacity

6

Demand Forecasting


1. Procurement
Methodologies
Zara’s
work

Procurement
on

clothes

the

but

materials

on

team

number
the

needed

doesn’t

of

finished

number
to

16

of

raw

manufacture

the clothes. This helps reduce waste,
as

you

can

re-use

fabric

but

not

resell a piece of clothing that didn’t
meet

the

expectations.

A

great

example of how sustainability can be
improved
reduction.

in

parallel

to

cost


2. Deep Collaboration

Supplier relationships
are key and suppliers
are all close to Zara
factories and
collaborate tightly, so
Zara can order on an
everyday-need basis.

17


19
3. Production Feedback

Every day, store managers give
customer feedback to the
market specialists, who then
pass the information along to

the production & design teams.
This rapid feedback loop
enables a quick and agile
response to the market.


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4. Local Manufacturing
Zara presents a drastically different approach than its competitors. Instead of
outsourcing

all

of

its

production

to

Asia

or

Eastern

Europe,

it

decided

to

manufacture its products in Galicia for items with a more unstable demand.
While lower-cost production could be achieved in other regions, the faster time
to market, reduced transportation costs and low exposure to changing tariffs
and politics outweigh that one factor. This reduces overall supply risk, with a
more narrow set of risks than posed by more extended, global supply chains.
This

also

helps

reduce

the

reduction in transportation.

overall

carbon

footprint

through

a

significant


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5. Spare Capacity
Zara voluntarily keeps up to 85% of its
plants idle, in order to optimize the
response to demand changes all around
the world. Another interesting approach,
quite different to competitors that try to
maximize utilization.


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6. Demand Forecasting
Zara reaps the benefits of very efficient inventory management models
that help them determine the exact quantity of items needed for every
store. They ship very small batches twice a week. As a result, it creates a
sense of scarcity, very few items are unsold, and if the experiment fails
there is much time (thanks to their very responsive Supply Chain) to try
other

different

styles.

almost every time.

This

eventually

helps

Zara

find

the

right

product


23

7 rules of
fashion
supply chain
management


24

IV

50%

STRENGTHS
AND
WEAKNESSES


25
First,

being

able

to

react

quickly to all fashion trends
Zara owns all the channels

and supply fashion outfits as

of the supply chain, it

soon as in a few weeks’ time.

becomes difficult to expand

to far locations as it is very

Secondly, Zara never makes
its products in big quantities

expensive to distribute such
products

Thirdly, though Zara’s supply
chain has a higher cost it
allows the advantage of low
inventory and hight