ZARA SUPPLY CHAIN FINAL ASSIGNMENT

HO CHI MINH CITY UNIVERSITY OF
TECHNOLOGY AND EDUCATION
🕯✡🕮🕮✡🕯
COURSE: Supply Chain Management

FINAL REPORT – GROUP TOKTOK

Supply Chain Management
Supply chain situation at Zara
INSTRUCTOR: Ph.D Ho Thi Hong Xuyen

AUTHORS:

Student ID

Pham Thuy Hien

19124046

Nguyen The Trung

19124073

Ha Thi Thu Huyen

20124185

Nguyen Thi Anh Tuyet

19124041

Nguyen Hoang Nhat Quyen

19124063

Ho Chi Minh City, May 27th, 2022


HCMC UNIVERSITY OF TECHNOLOGY & EDUCATION
FACULTY OF ECONOMICS
MAJOR: Industrial Management - YEAR OF ADMISSION: 2022
Group Toktok - Class: SCMA430706E_21_2_01CLC
Topic: Supply Chain Management - Supply chain situation at Zara
MEMBER

ID

DEGREE FINISHING

1

Pham Thuy Hien

19124046

100%

2

Nguyen The Trung

19124073

100%

3

Ha Thi Thu Huyen

20124185

100%

4

Nguyen Thi Anh Tuyet

19124041

100%

5

Nguyen Hoang Nhat Quyen

19124063

100%

LECTURER COMMENTS
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HCMC, May 27th, 2022
Lecturer's signature

Ho Thi Hong Xuyen


TABLE OF CONTENTS
CHAPTER 1: OVERVIEW OF THE STUDY ............................................................... 1
1.1 Reasons for choosing the topic ............................................................................ 1
1.2 Research objectives .............................................................................................. 1
1.3 Research methods ................................................................................................ 1
1.4 Significance of the study ...................................................................................... 2
1.5 Structure of the report ......................................................................................... 2
CHAPTER 2: LITERATURE REVIEW ........................................................................ 3
2.1 Define key concepts.............................................................................................. 3
2.1.1 The concept of supply chain .......................................................................... 3
2.1.2 The concept of Fast Fashion.......................................................................... 3
2.2 Introduction about Zara ...................................................................................... 3
2.3 Factors that create success for the Zara brand .................................................. 3
2.3.1 Create new ones based on existing ones........................................................ 3
2.3.2 Update "speedy" new trends .......................................................................... 4
2.3.3 Success of Zara: variety of designs, but small quantity ................................ 4
2.3.4 Cheap price but good quality ........................................................................ 4
2.3.5 Don't spend money on advertising, but spend money on standing next to big
brands .............................................................................................................................. 5

2.4 Success of Zara and the Supply Chain ............................................................... 5
CHAPTER 3: THE REALITY OF ZARA’S SUPPLY CHAIN ................................... 7
3.1 Zara’s Supply chain model ................................................................................. 7
3.1.1 Design and Order Administration ................................................................. 7
3.1.2 Sourcing and Manufacturing ......................................................................... 8


3.1.3 Supplier .......................................................................................................... 9
3.1.4 Distribution center ....................................................................................... 10
3.1.5 Retailing ...................................................................................................... 11
3.1.6 Merchandising. ............................................................................................ 12
3.1.7 Store Operations. ......................................................................................... 12
3.2. Zara’s supply chain strengths and weakness................................................... 13
3.3. Solution for a fast fashion model - How can Zara forecast and respond well to
customer needs? ................................................................................................................ 16
3.4. Compare the supply chain model between ZARA and other traditional retailers
in the industry. .................................................................................................................. 17
3.4.1. Activity ........................................................................................................ 17
3.4.2. Ways to reduce costs ................................................................................... 18
3.4.3. Strategy ....................................................................................................... 19
3.5. ZARA supply chain before, during, and after COVID - 19 and solutions given
to deal with covid-19 ......................................................................................................... 19
CHAPTER 4: SOLUTION AND RECOMMEND SUPPLY CHAIN FOR ZARA .. 21
4.1. Solution ............................................................................................................. 21
4.2. Recomment New Supply chain ......................................................................... 21
4.3 Conclusion : ....................................................................................................... 22
APPENDIX – TEAM OF TASK IN THE US GROUP ............................................... 24
REFERENCE................................................................................................................... 25

TABLE OF CONTENTS IMAGES
Figure 1: Zara's main product line ................................................................................... 7
Figure 2: Zara's supply chain ............................................................................................ 7
Figure 3: Zara Supply Process in full ............................................................................... 8
Figure 4: Zara's Supplier ................................................................................................. 10
Figure 5: Zara's Distribution System .............................................................................. 10
Figure 6: Basic logistic flow of Zara ............................................................................... 11
Figure 7: Zara’s new supply chain model ....................................................................... 22


CHAPTER 1: OVERVIEW OF THE STUDY
1.1 Reasons for choosing the topic
The phrase "supply chain" is related with the import and export sector, and it is also
known as "logistics" globally. For commercial businesses, particularly industrial
enterprises, the supply chain is crucial. Furthermore, units in the forwarding, freight
forwarding, and supply chain activities assist in the timely delivery of goods to target
customers and consumers.
The success of supply chain management operations has a significant impact on the
prompt, accurate, and timely supply and distribution of items.
It can be observed that the supply chain is essential and necessary for any
organization, particularly manufacturing businesses, such as Zara, a globally recognized
apparel brand.
Therefore, this topic aims to analyze, evaluate and make comments on "The current
situation of Zara's supply chain".
1.2 Research objectives
Objective overview: Analyze, evaluate and make comments on "The current state of
Zara's supply chain"
Specific goals: Understanding Zara's supply chain model, seeing strengths and
weaknesses; comparing the difference between Zara and its competitors in the supply chain
model. Specifically, it belongs to the fashion segment; How does Zara's supply chain model

for the periods before, during, and after the pandemic.
1.3 Research methods
With this topic, the essay is used to collect data to come up with the most optimal
solution. By using available information from different sources, thereby analyzing,
evaluating, building solutions and commenting on problems related to the topic's
objectives.

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1.4 Significance of the study
See the importance of the supply chain in the business model of a business.
Impact of the Covid 19 pandemic on business activities in general and the Zara
supply chain model in particular.
Methods to improve the existing weaknesses in the operation of the Zara supply
chain, helping to have better innovations and improvements with the supply chain.
1.5 Structure of the report
Chapter 1: Overview of the study
Chapter 2: Literature review
Chapter 3: The reality of Zara's supply chain
Chapter 4: Solutions and Recommendations For New supply chain

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CHAPTER 2: LITERATURE REVIEW
2.1 Define key concepts
2.1.1 The concept of supply chain
A supply chain is a system of organizations, people, activities, information, and
resources involved in moving a product or service from a supplier or producer to a

consumer. Supply chain management is an integrated function responsible for connecting
key business functions and business processes within an organization into a cohesive and
robust business model. Supply chains span a wide range of different industries and sectors;
there are also many differences in the definition of supply chains due to the specifics of
each industry and sector.
2.1.2 The concept of Fast Fashion
Fast fashion is a term used to describe a business model in the apparel industry that
replicates current runway trends and high-quality, mass-produced designs at a fraction of
the cost. Low cost and get them to retail stores quickly when demand is greatest.
2.2 Introduction about Zara
Zara is a Spanish clothing and accessories brand. Headquartered in Arteixo, Galicia.
Founded in 1975 by Amancio Ortega and Rosalia Mera.
Zara is the main brand of the Inditex Group - the world's largest fashion retailer. The
fashion group also includes brands such as Massimo Dutti, Pull and Bear, Bershka,
Stradivarius, Oysho, Zara Home, and Uterqüe.
2.3 Factors that create success for the Zara brand
2.3.1 Create new ones based on existing ones
Many people will say that Zara's products are "fake goods" because Zara's designs
always have the appearance of a famous brand. But then Zara was still popular and still
sold out. Because Zara has the ability to absorb, listen to customers, and always create very
quickly based on what other brands have done.

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Zara doesn't spend money to hire famous designers, but spends its time collecting
feedback from buyers around the world from other brands, then refining and combining
them with Zara's own designs. . Therefore, in Zara's designs, one can see a delicate blend
of many fashion brands in the world: there is the dusty look of Gap, the luxury of Prada, or
a bit of sophistication with a royal sound. Gucci's house…

2.3.2 Update "speedy" new trends
Of course, in fashion, trends are the most important thing. The team of 300 designers
at Zara is always busy, and they create "quickly fast" to come up with new designs in
lightning time that makes competitors bow their heads in awe.
If other brands take months or even years to launch new products, Zara only takes
about 1 to 2 weeks to do so.
2.3.3 Success of Zara: variety of designs, but small quantity
Zara never massively produces a design in large quantities, but always knows how
to create scarcity with its products. Zara only provides a certain amount to the market that
buyers "do not buy quickly will run out". This hits the customer's psyche, making the
customer's buying decision process faster. That's why Zara's stores are always out of stock,
and no stock is left in the warehouse for more than 4 weeks.
In order to compensate for the fact that only a certain number of products with the
same design are released to the market, Zara always tries to create a variety of different and
novel designs that are suitable for many audiences and for customers to have more choices.
choose more.
2.3.4 Cheap price but good quality
The pricing strategy that Zara offers has brought great success to this brand. Many
customers love Zara because the reputation of the Zara brand is on par with Gucci, Prada,
etc., but its price is 2 to 3 times cheaper. Good quality, trendy design but the cheaper price,
there's no reason why consumers don't choose.
For Vietnamese people, with just 500,000, it is possible to own an outfit and
accessories of the world-famous Zara fashion brand.

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2.3.5 Don't spend money on advertising, but spend money on standing next to
big brands
It may be hard to believe, but the truth is that Zara has no advertising budget and

doesn't spend a dime on advertising its products. Instead, Zara invests in standing next to
popular brands - a very smart "brand upgrade".
It will be difficult for you to see Zara in magazines or in the media, but it is easy to
recognize that Zara's store is located next to stores of famous brands such as Gucci, Prada,
etc. And by customers, Customers are often price-sensitive, so instead of spending money
to own a luxury item from Gucci or Prada, many people will prefer Zara because "the price
is cheaper but the quality is good".
2.4 Success of Zara and the Supply Chain
Is the philosophy of "fast fashion" the guideline for the supply chain operation that
determines the incredible success of this "fast fashion king" from Spain?
Zara's supply chain vertically integrated, highly responsive, enabling garment
exports 24 hours, 365 days a year, making it possible to ship new products to stores twice
a week. Once products are designed, they take about 10-15 days to arrive in the store.
All garments are processed through the main distribution center in Spain, where new
products are inspected, sorted, labeled, and distributed. In most cases, garments are
delivered to stores within 48 hours. Zara produces more than 450 million items and releases
about 12,000 new designs annually, supply chain efficiency is therefore important to ensure
smooth and efficient in-store collections renewal.
● How often customer insights are collected: Daily trending information is fed into a

database at headquarters, then used by designers to create new lines and modify
designs now available.
● Standardize product information: Zara warehouses have standardized product

information with consistent definitions, allowing for speedy and precise design
preparation with clear production instructions.

5

● Product information and inventory management: By effectively managing its

thousands of fabrics, cuts, design specifications, and actual inventory status, Zara
has the ability to design a new suit with raw materials. raw material, needed,
available.
● Procurement strategy management: To save money through demand aggregation,

around two-thirds of undyed textiles are acquired before the design is finished.
● Manufacturing method: Zara encompasses a "make and buy" strategy, during

which it makes more trendy and risky things (which require testing) in Spain while
exporting typical designs to other countries. Morocco, Turkey, and Asia have more
stable demand, lowering manufacturing costs. Zara's more trendy and riskier goods
are created in many company-owned factories in Spain (Galicia), northern Portugal,
and Turkey (which account for nearly 1/2 of the company's inventory). Low-cost
suppliers, primarily in Asia, manufacture clothes for an extended period of time (i.e.,
those with more predictable demand), like basic t-shirts.
● Distribution Management: People run the operations in ZARA's state-of-the-art

distribution facility. And every hour more than 60,000 items of clothing are sorted
and distributed by optical readers.

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CHAPTER 3: THE REALITY OF ZARA’S SUPPLY CHAIN

Figure 1: Zara's main product line
3.1 Zara’s Supply chain model
As shown below, The supply chain management of ZARA is divided into 4

categories:

Figure 2: Zara's supply chain
3.1.1 Design and Order Administration
Zara designs all of its products. it's a “commercial team” including designers, market
experts and buyers. they're all involved within the detailed design of the products, the
designers are the key players. Nearly 40,000 products are designed annually out of 10,000
selected for production.

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Teams performing on both next season's design and concurrently updating the
season's design to remain competitive
Design inspiration comes from global sources, including catwalks, magazines, trade
shows, discos, and more. Zara creates two basic collections every year - one in fall/winter,
and one in spring/summer. The designers took about nine months before the beginning of
the season to figure on the initial sketches. Once the sketches are made, the sketches are
redrawn using software (CAD) and other adjustments are made to search out a more robust
mixture of the weave, texture, and color. the material and other components are then
finished by the designers. Also, the value of the merchandise determined there'll be sold
within the future. Samples are presented ahead of the sourcing and development unit
product for the choice process. The sourcing unit determines the desired production and
decides whether the item are going to be outsourced or outsourced. supported this, the
sourcing unit allocates a timeline to make sure that the gathering Initial episode arrives
before the beginning of the sales season

Figure 3: Zara Supply Process in full
3.1.2 Sourcing and Manufacturing
Zara designs all of its products. it's a “commercial team” including designers, market

experts, and buyers. they're all involved within the detailed design of the products, the
8


designers are the key players. Nearly 40,000 products are designed every year out of 10,000
selected for production.
Teams acting on both next season's design and concurrently updating the season's
design to remain competitive
Design inspiration comes from global sources, including catwalks, magazines, trade
shows, discos, and more. Zara creates two basic collections every year - one in fall/winter,
and one in spring/summer. The designers took about nine months before the beginning of
the season to figure on the initial sketches. Once the sketches are made, the sketches are
redrawn using software system (CAD) and other adjustments are made to seek out a more
robust mixture of the weave, texture, and color. the material and other components are then
finished by the designers. Also, the value of the merchandise determined there'll be sold
within the future. Samples are presented ahead of the sourcing and development unit
product for the choice process. The sourcing unit determines the desired production and
decides whether the item are outsourced or outsourced. supported this, the sourcing unit
allocates a timeline to make sure that the gathering Initial episode arrives before the
beginning of the sales season
3.1.3 Supplier
Because Zara has such a large global network, raw material distribution becomes
critical within the given time frame. Transport logistics must be robust and dependable in
order to deliver raw materials on time. To minimize a last-minute rush, Zara orders
materials far ahead of the start of a seasonal collection. Zara also has a robust and adaptable
shipping infrastructure that enables timely delivery of raw materials and finished goods.
Furthermore, because the bulk of fabric suppliers are headquartered in Europe and Spain,
supplies are shipped rapidly. Raw materials, both cost-constrained and unrestricted, are
often supplied from all over the world, mostly from Hong Kong and the rest of Asia.

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Figure 4: Zara's Supplier
3.1.4 Distribution center
Zara's centralized distribution system gives it a coping advantage by reducing the
lead time of goods. Zara consolidates all shipments from Spain through a network of
600,000 square meters in Spain and smaller hubs in Argentina, Brazil, and Mexico.

Figure 5: Zara's Distribution System
Zara has four main warehouses in Spain that receive finished clothing shipments
from internal and external suppliers throughout Europe and different regions of the world.
The finished products are then shipped to Zara stores around the world twice a week during
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regular periods and twice during off-seasons. New item samples are incorporated with each
delivery for ongoing maintenance of refreshing stock in stores. Products that are inspected
for any defects in stock will not be delivered, after proper inspection, in stock will be
shipped immediately. Zara has a rule that goods will not be kept in stock for a longer time.
As a result, items are shipped immediately upon arrival from various suppliers after
inspection. To speed up delivery, shipments are scheduled according to time zones, and
items are shipped by land or air. Stores located near Spain will receive goods via road
transport. The rest is done via worldwide airmail for fast delivery

Figure 6: Basic logistic flow of Zara
3.1.5 Retailing
Zara has almost 2,200 locations in 96 countries. In the US currently open 99
locations, and the majority of its locations totaling 464 are in Spain (including ZARA
Home)

Zara's approach is to have a greater number of items available than its competitors.
While most clothing companies develop and sell 2,000 to 4,000 distinct items each year,
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Zara's output has been far greater, with around 10,000 pieces manufactured every year. Zara
has been able to appeal to a wider range of clients with diverse tastes because to this
distinctive characteristic of the company's approach.
3.1.6 Merchandising.
Their stores serve as a gathering place for their consumers as well as the most
effective promotional campaign for the company. They've opened in key cities throughout
the world, bringing their fashion offering to the high street and representing the brand's
authentic signature, always with an original and distinctive touch.
The characteristics of Zara's corporate philosophy are applied to the store
architecture: design, continuous innovation, rapid response, and local adaptation to the
needs of consumers and the surroundings. Store development is viewed as a continuous and
open process that is critical to their business and is the product of professional collaboration
across several departments. Each store is unique and adapts to diverse cultures and
circumstances, but sharing the same set of ideas. Their architectural projects occasionally
include historic heritage renovations, as well as thorough rehabilitation projects in
individual areas.
3.1.7 Store Operations.
The primary purpose of Zara was to connect client demand to manufacturing and
manufacturing to distribution. Short manufacturing periods, lower inventory risk, and a
wide range of clothing have all helped Zara create a distinct value and develop its present
business strategy.
Zara's core principle is to maintain design, production, and distribution systems that
allow the company to adapt swiftly to variations in consumer demand, even when
forecasting such demand is challenging. They have a quick manufacturing and distribution
approach that allows them to deliver the most up-to-date styles in under three weeks. This

improves the frequency of client visits, which boosts revenue and adds value to their
offering. Zara's one-of-a-kind approach to advertising and marketing is another aspect of
their business plan that contributes to their success. Zara invests 0.3 percent of their overall
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revenue on marketing and advertising. As a result, Zara retains a marketing cost edge over
their competition. Zara employs shop style, location, and short product lifespans as
marketing tools to attract customers in order to compete effectively with their counterparts.
Instead of depending on a small number of people, Zara's senior executives intended to tap
into the expertise and decision-making abilities of all of the company's employees. This
trust provided them a better grasp of the general public's sense of fashion, giving them an
advantage in designing the proper clothing.
The fashion industry is tumultuous, with fluctuating demand and customer
tastes. Zara created three methods to meet client requests. The first step is to place an order.
Ordering encompasses both the renewal of current products and the fulfillment of requests
for new ones, and it is the pinnacle of speed and decision-making. Stores are given "tough"
deadlines to restock current products in order to meet customer requests, failing which La
Coruna calculates a "replenishment-only" order.
3.2. Zara’s supply chain strengths and weakness
What are Zara’s major strengths?
● Pioneer Advantage: Fast-fashion focuses on creating, manufacturing, and
marketing clothing as soon as a trend is identified. The procedure takes months in
traditional fashion; Zara completes it in three weeks. Zara has the most advanced
supply chain strategy and management methods as a pioneer.

● Stores: Zara has outlets in 96 of the 202 markets where it sells. ZARA has the top
fashion boutiques in the world, double Nike's is 2249 locations, followed by Nike,
which has the second highest number of retail locations.

● Supply Chain: Twice a week, ZARA will update the collections online in stores.
ZARA has up to 10 logistics centers, delivering goods in 48 hours to any region in
the world. Inditex also has an in-house software development team that's working to
extend the company's order fulfillment speed.

● Design Team: Inditex employs 700 educated designers who turn customers'
aspirations into designs. The product design team creates 50,000 works per year.
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And it only takes them 3 weeks to bring from the design at the drawing board to the
sales shelf.

● Switch to Online: Inditex plans to spend $3 billion to spice up its online sales. the
cash will come in creating a fun online shopping experience and integrating the
present physical infrastructure. By 2022, the corporation wants to earn 1 / 4 of its
income from online sales.
Mastering the fast fashion industry is the reason why Zara is so successful today.
But "fast fashion" is also considered a knife because the environment and plagiarism are
the deep concerns of today's society. Our team will continue to cover this issue in the next
section - "ZARA's weaknesses"
The next strength that Zara can establish a versatile Supply Chain lies within the
following unique approaches to provide chain success:

● Procurement method: Zara's Purchasing team is based on the number of raw
materials needed to form the garment, but they don't work on the amount of finished
clothing. A good example of how sustainability is improved while reducing costs
because this avoids waste because they will be able to reuse the material but also
should not resell it if a part of the garment is not of the expected quality.

● Extensive collaboration: Supplier ties are crucial, as suppliers are adjacent to Zara's
factories and collaborate closely, allowing Zara to place orders on a daily basis.

● Production Feedback: The shop manager provides consumer input to market
specialists on a daily basis, who subsequently pass the information on to the design
and manufacturing teams. This rapid feedback loop enables a quick and flexible
market reaction.

● Local production: Zara has a unique strategy in comparison to its competitors. They
opted to produce their products in Galicia for things with more unstable designs
rather of outsourcing the full manufacturing to Asia or Eastern Europe. While lowercost production may be found in other locations, the benefits of a faster time to
market, cheaper transportation costs, and less susceptibility to shifting tariffs and
politics outweigh the disadvantages. one of the variables When compared to more
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wide, global supply networks, this minimizes total supply risk by focusing on a
smaller pool of hazards. This also contributes to a reduction in overall carbon
footprint by reducing transportation.

● Backup capacity: Zara intentionally idles up to 85% of its manufacturing in order
to respond more quickly to fluctuations in global demand. Another intriguing
technique differs significantly from rivals' attempts to maximize utilization.

● Demand forecasting: Zara has very effective inventory management algorithms in
place that allow them to determine exactly how many things are required for each
shop. Twice a week, they send out extremely little portions. As a consequence,
there's a sense of scarcity, and very few goods go unsold. If the test fails, there's
plenty of time (due to their extremely responsive Supply Chain) to try out new
models. Zara is able to discover the proper goods practically every time as a result

of this.
What are some of Zara’s weaknesses?
What sets Zara apart from other fashion houses is Zara's commitment to revising its
collection every two weeks. It is because of that dedication that has helped Zara get to the
top of the business. However, the advantage goes hand in hand with the cost. And here is
the additional information:
● Fast-Fashion: Surprisingly, the movement to push ZARA to the top is also the
source of its most serious flaw. What is becoming more and more popular these days
is the juxtaposition of sustainability with fast fashion and that's ZARA's problem as
well.
● Physical Store Dependence: The epidemic has hastened Zara's ambitions to cut back
the amount of physical stores. Zara was ready to get over an outsized reduction in
sales thanks to COVID-19-related issues due to online sales. Even with the rise in
online sales, sales are still only 89 percent of what they were in 2019.
Zara has 99 locations in the United States and Asia-Pacific. Zara's 2249 outlets
account for only 4.4 percent of the total. However, the United States is the world's largest

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clothing market. In addition, Asia-Pacific accounts for 38% of the global clothing market.
Zara has a little presence in both regions.
Inditex works with 1520 suppliers in 7108 factories, all of which follow ethical labor
practices. Although Inditex deserves respect for developing a strict code of conduct, there
is a significant gap in its enforcement. This gap is highlighted by a story in Buzzfeed about
the abuse of employees in Myanmar.
● AI-Enabled Prediction: And now, Inditex is collaborating with AI and Big Data
companies to develop an AI-powered system that predicts customer behavior. The
present system, on the other hand, is still being tested. Zara will have unequaled
power in forecasting and meeting client wants once such a system goes live.

3.3. Solution for a fast fashion model - How can Zara forecast and respond well
to customer needs?
There are no product discounts that combine to maintain product production in small
quantities as Zara's inherent plan, promoting customer psychology that even if buying
slowly, the price is still not cheap, then if you are late, you will not be able to buy that
favorite product.
In the case of inventory, if there are lockdown issues similar to the Covid pandemic,
instead of destroying goods without reducing prices and being criticized for luxury,
affecting the brand's name, they will proceed to cut the Zara label and donate money. All
charitable donations.
So far, Zara has always listened and put customers first, absorbing customer fashion
trends thoroughly and quickly in order to more accurately forecast customer needs, but still
through sales staff. customers, store managers, ... then senior experts. So why don't we
shorten this distance through some method? Feedback link, Zara app,... will directly send
customer requests to the head office database.
At the same time, to encourage customers to download the Zara app or give
feedback, there will be a gifting program of accessories according to the rules of lucky
customers with Zara's own limited edition gifts.
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3.4. Compare the supply chain model between ZARA and other traditional
retailers in the industry.
3.4.1. Activity
-

Global business model, vertically integrated.

-

Use a group of factories in Spain to do the initial cost-intensive tasks such as dyeing,
cutting fabrics
=> Take advantage of scale (making a larger quantity will cost less than making a
small quantity at each stage) to minimize costs.

-

Use different factories to perform machining operations
=> Increase economies of scale => Reduce costs

-

Use a vertical supply chain:
+ The process from production to product arrival in retail stores in just 3 weeks, quick
response to the needs of customer tastes and new fashions, creates a competitive
advantage in the short term.
+ Introducing new products continuously, in addition to the two main seasons of
winter and summer, Zara can also introduce new products continuously throughout
the year, each Zara male has up to 26 seasons. It does this because its production
process is short, specifically, Zara introduces 11,000 new items a year => which
increases the level of customer demand.
=> Differentiate yourself from the competition:
+ Zara can track its inventory at retail stores quickly through its staff, and it can
accurately determine how many of its products are on store shelves without
prediction. in advance, as it uses vertical supply chain, and the order quantity only
needs to be contacted at the beginning of the month to the factories without the need
to check monthly.

-

Internal organization:
+ Retail stores will place orders twice a week, managers will manage stock at the store
using a handheld device, it will notify exactly what items are available and how

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much, when which managers will place orders at factories. This makes Zara no
inventory => Reduce inventory costs => Reduce costs.
+ The marketing team introduces new products to retail stores, in order to survey
customers' tastes for new products => This helps Zara accurately predict customer
demand for new products.
+ Using a conveyor system to supply retail stores, orders will be delivered from 1 day
to 2 days => New goods are always on the shelves without delay => Quick response
to the demand of consumers.
-

Do not sell on the Internet in order to reduce the cost of revenue management because
the management of revenue on the Internet is very complicated, and the order of
customers on the Internet is small, so it will not be possible to take advantage of the rule
of law. tissue at processing factories.
3.4.2. Ways to reduce costs
Zara has clearly understood the needs of customers as well as found out that the law
of the garment industry is the constant change of customer needs. Therefore, Zara has
implemented a strategy to highly respond to customer changes, which is also the
difference, a competitive advantage of Zara compared to other brands that use it.
On average, in the apparel industry, it takes more than 6 months from design to sale.
Zara did this in about 5 to 6 weeks.

 This speed allows Zara to introduce new products weekly and change about

75% of its products between 3 and 4 weeks => So Zara products are preferred
by customers over competitors. As a result, Zara sells most of its products at
regular prices, compared to about 50% of the competition's regular sales (the
rest is on sale).
Until 2002, Zara focused on all point operations in Europe and a few global
distribution points in a distribution center in Spain. It also has several satellite
distribution centers in Latin America. Deliveries from good distribution centers to stores

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are made twice a week. This allows stores to better respond to customer needs. After
growing, Zara built an additional distribution center in Spain.
While other unusual competitors often take advantage of cheap labor in Asian
countries to reduce costs, Zara mainly focuses on production in Spain and Northern
Portugal. The goal is to quickly bring the product to the customer (because in the fashion
industry, the focus time factor is very important).
During the off-season, Zara produces more products for sale than its competitors.
Products manufactured for sale are discounted more than competitors. But products
produced for sale at a discount are often not of the same quality as those produced to
sell at the right price. This makes the profits for Zara will be greater than that of
competitors.
3.4.3. Strategy
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Minimize costs through economies of scale

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Specialization of outsourcing activities

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Create differentiation by regularly launching new products and responding quickly to
the needs of new tastes and fashions, through short shipping times to retailers.
3.5. ZARA supply chain before, during, and after COVID - 19 and solutions

given to deal with covid-19
Zara is a media company in the "fast fashion" strategy. The collections of this brand
catch the trend, the quality is not inferior to the branded items but the price is cheaper than
the competitors. In the Vietnamese market, Zara has made steady steps since its first
presence in 2016. According to market survey companies, this affordable foreign brand has
quickly proven itself. proving its attractiveness to Vietnamese consumers when sales far
outstrip fashion chains such as Blue Exchange, Ivy Moda, or Kowal... However, during the
COVID-19 pandemic, Zara's sales in Vietnam were also affected. seriously affected.
However, the Covid-19 pandemic that began in early 2020 has dealt a heavy blow
to many economic sectors, including the fashion retail industry. To prevent the pandemic,

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many countries have imposed a prolonged blockade that forced all shops to close. Without
exception, 88% of Zara's stores around the world had to temporarily close.
As a result, in the first quarter of the company's financial year, from February 1,
2020, to April 30, 2020, the group's revenue fell by 44% to 3.3 billion euros. The group
recorded a net loss of 410 million euros compared with a profit of 734 million euros in the
same period of 2019. By June 2020, before the complicated development of the pandemic,
Zara had to announce the closure of 1,200 of the total. 7,412 stores worldwide, or about
20%. The stores that were forced to close were mainly located in Europe and Asia.
The solution, during the blockade, Zara's online sales service worked quite well,

helping the brand to reduce revenue loss somewhat. The implementation of digital
technology, as well as the online sales service, enhances the most important selling points
of the Zara brand. Larger stores will act as distribution centers for online sales. The brand
has ambitions to add to its revenue through online sales by 2022. In its bidding, the owner
of fashion brand Zara - Inditex (ITX.MC) beat Swedish rival H&M (HMB.ST). Its efforts
to recover from the coronavirus crisis, with sales in the second quarter rising above prepandemic levels "Zara's most important goal between now and 2022 is to accelerate the
rollout of its 'integrated store' ", helping to meet the needs of all customers wherever they
are, using any device and at any time?". Zara's transformation is also justified according to
a recent report. announced by Forrester and BloomReach, never before has the e-commerce
platform played such an important and influential role as it does now. COVID-19 has
pushed digital from a supporting function to a major role for many as social distancing
regulations entail a drastic change in consumer behavior. Although fashion retailers have
recovered from the pandemic, the spread of the new variant - Delta, this means that some
restrictions have been applied again, while many industries, including the fashion industry
faces supply problems due to lack of shipping containers and other bottlenecks.

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