ZARA

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ZARA

• Baki USLU
• Baris BOZOGLU

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Outline

• History of Zara
• The Textile and Apparel Industry
• The Zara Model
• The Problem (outsourcing benefits and risks)
• Questions

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History of ZARA

• 1963
• The founder of Zara, Amancio Ortega Ganoa
• Started his career as a clerk
• 1975
• First Zara store opened in La Coruna, Spain
• 1989
• There were 82 Zara stores in Spain
• Ortega began international expansion in
• Portugal, Paris, New York

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• In 2001 Zara was a world brand with 1200 stores
  in all around the world
• Most of the products were produced in Spain

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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

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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

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• 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 RD.
• Wages increase

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THE ZARA MODEL

• Zaras 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

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Patterns and Samples

• In some cases designs made by 3rd party suppliers
  

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Production Sourcing and Scheduling

• 50 of the garments are outsourced
• Garments with fashion styling manufactured in
  Spain basics and knits are outsourced
• Zaras season inventory
• In the beginning of the season 60 of the
  collection is ready while others are 80
• 25 of the seasons collection is stored in
  stores in the beginning of the season
• 85 of the inhouse production is that seasons
  production

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In-house Manufacture
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In-house Manufacture

• 40 of fabric produced in-house
• Cutting
• Sewing

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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 products sale is not satisfactory

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Distribution

• Zaras distribution center in Arteixo
• New distribution center in Zaragoza
• Shipment

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Retailing

• Store managers decide for the items from the
  distribution center
• Stores receive new inventory several times a week
  
• Sale

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Pricing Strategy

• Pricing strategy cost target margin
• Single Tag to Bar Code

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Growth Strategy

• Stores operated by Zara, franchise, alliances
• USA market

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Sourcing Dilemma?

• Increase outsourcing vs. keeping current model

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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

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• Increased Flexibility
• Ability to better react to changes in customer
  demand
• Ability to use the suppliers technical knowledge
  to accelerate product development cycle time
• Ability to use the suppliers technical knowledge
  to accelerate product development cycle time
• Conflicting Objectives
• Flexibility vs. cost reduction

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• Questions?

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• Thank You