For ZARA stores to be able to offer cutting edge fashion at affordable prices requires the firm to exert a strong influence over almost the entire garment supply chain.

1. 1 COMPANY PROFILE
1.1 COMPANY BACKGROUND
Zara is a Spanish brand of clothing founded by the visionary Amancio Gaona and Rosalina
Mera at 1975. It is one of the major selling brands of one of the biggest fashion retailer
‘INDITEX’. Zara is now available in 86 countries with total of 1,763 stores worldwide. In
1975 INDITEX established Zara’s 1st
store in downtown A Coruna, Spain. Zara offers
fashionable designs for men, women, and kids.
1.2 VISION AND MISSION
1.2.1 Vision
Zara is committed to satisfying the desires of our customers. As a result we pledge to
continuously innovations our business to improve your experience. We promise to provide
new designs made from quality materials that are affordable
1.2.2 Mission
Through Zara’s business model, we aim to contribute to the sustainable development of
society and that of the environment with which we interacts
1.3 VALUE
Fashionable, affordable clothes
Large choice of styles
Scarcity
Prime locations
Attractive prices
Up to date design
Creating sense of exclusivity
Fast delivery of new products and trends

2. 1.4 BUSINESS STRATEGY
Core competencies are resources and capabilities that create the firms competitive advantage
Core competencies of Zara
Fast and powerful design team, fashion brand image, quick production process,
frequent new products, and low cost
Production and Distribution
Maintain quality
Cost leadership
Can offer more product than other
Fast distribution system
Design
Ability to produce new products
Coordinate with R&D stores to get new trends
Feedbacks
Customers Response
MIS
Product distribution system
Improving inventory system
Stores ordering system
Marketing
R&D
Market and location of stores
Market penetration
Consumer behavior analysis

3. 2 ZARA’S SUPPLY CHAIN
The foregoing exploration of ZARA’s strategic position reveals something of its relationship to customers.
Before considering the companies logistics operations more depth, it is useful to examine its relationship with
suppliers,alongwithotherdefinefeaturesofitssupplychain.
Zara’ssupplychainmanagement
The most important thing in ZARA’s supply chain is its vertical integration where design,
product, distribution and retailing were integrated. The following chat shows its vertically
integrated process.
I. 200 fashion designers are in charge for the clothing line and among those they
select the most cost effective fabrics for designs.
II. Designs will be made into models when sent into factories. The computer then
design how to shear fabrics in order waste as little as possible
III. Fabrics will be sent to the factories
IV. After sewing products will sent back to the factory for button nailing, ironing
and inspection
V. Underground transmission channels connects all processes
VI. Label trademarks for different countries

4. 3.SupplychaindriversofZARA
Zara concentrates on three winning formulae
• Short Lead Time = More fashionable clothes
• Lower quantities = Scarce supply
• More styles = More choice, and more chances of hitting it
Right
They have structured their suppy chain drivers in order to release more styles in short lead
time
Logistical drivers
Facilities
Zara set up its own factory in La Coruña (a city known for its textile industry) in 1980. 50%
of the products Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in
Asian and African countries and the rest of the world. So while some competitors outsource
all production to Asia, Zara makes its most fashionable items—half of all its merchandise—at
a dozen company-owned factories in Spain and Portugal, particularly in Galicia and
northern Portugalwhere labor is somewhat cheaper than in most of Western Europe.
Zara is the flagship chain store of Inditex Group and they have 4.607 stores in 74 countries.
There are over 2000 their own stores located across 88 countries.Zara tends to use franchisee
and joint ventures in countries that were small, risky, or subject to significant cultural
differences or administrative barriers that encouraged this mode of market participation.
Examples included Andorra, Iceland, and Poland in Europe and the Middle Eastern countries
that the chain has entered (where restrictions on foreign ownership ruled out direct entry).
Inventory
Zara’s parent company, Inditex, had the lowest inventory, as a percentage of annual sales,
compared with its nearest global competitors, such as Gap, Benetton, and H&M. Zara seems
fully aware of the adage:
“inventory = death.”

5. The firm therefore avoids building inventories in any part of its supply chain from raw
materials to end user. Inventory optimization models are in place to help the firm determine
how many of which items in which sizes should be delivered to stores during the twice a
week shipment ensuring sores stock just what they want. Zara designs around 10,000 new
models every year and replenishes ranges within every one of its 650 retail stores twice per
week, but in strictly limited quantities of stock. This ensures Zara’s brand promise to
customers of exclusivity, and also of design freshness. But it also avoids build-up of large
quantities of unpopular stock.
Transportation
The transportation system is based on software designed by the company’s own teams.The
time between receiving an order at the distribution center to the delivery of the goods in the
store is on average 24 hours for European stores and a maximum of 48 hours for American or
Asian stores. With this system its possible ship 45.000 folded garments per hour. The
facilities move about 2.5 million items a week. Trucks serve destinations that can be reached
overnight, to be more precise in Europe, while chartered cargo flights serve farther
destinations. The firm recently tweaked its shipping models through Air France-KLM Cargo
and Emirates Air, so flights can coordinate outbound shipment of all Inditex brands with
return legs loaded with raw materials and half-finished clothes items from locations outside
of Spain. Zara is also a pioneer in going green. In Fall 2007, the firm’s CEO unveiled an
environmental strategy that includes the use of renewable energy systems at logistics centers
including the introduction of biodiesel for the firm’s trucking fleet.
Cross functional Drivers
Information
Information is the key drier which cordinates all other drivers.Zara have come out of box
and practising more advance and reliable inforamation sources.Zara is in tune with its
customers. Trend information is entered into database in regular basis and designers check
the database to identify the latest fashions among the customers. Shop managers use PDAs to
check on the latest clothes designs and place their orders in accordance with the demand they
observe in their stores. Constantly updated information reduces the damage done by bullwhip
effect.

6. Sourcing
Zara sources fabric, other inputs, and finished products from external suppliers with the
help of purchasing offices in Barcelona and Hong Kong, as well as the sourcing personnel at
headquarters.
Comditel, a 100%-owned subsidiary of Inditex,that dealt with more 200 external
suppliers of fabric and other raw materials. Combitel manages (45%) the dyeing, patterning
and finishing of undyed fabric for all of Inditex’s chains.
Fabric is cut and dyed by robots in 23 highly automated factories, outside the
distribution center in La Coruña.50% of the items that Zara sells are manufactured in Spain,
28% in the rest of Europe, and 24% in Asia and the rest of the world. Zara experience
flexibility and more control by giving priority to in-house production.
Pricing
Zara offers unique, high quality, latest fashionable clothing to its customers at affordable
price.
Zara’s pricing method can be identified as,
𝑃𝑟𝑖𝑐𝑒 = 𝐶𝑜𝑠𝑡 + 𝑇𝑎𝑟𝑔𝑒𝑡 𝑀𝑎𝑟𝑔𝑖𝑛
Most of the Zara’s production is carried out inside of Spain where average labor cost is
higher than Asian countries. Therefore Zara has to charge premium price comparing with
other competitor who outsourced all of their production to Asian countries.
Zara’s change prices of the same product according to the region. As example, a coat
in Spain could be priced at 90 Euros, and the same coat in France could be priced at 118
Euros. Therefore, they use a demand oriented method for setting prices based on region,
taking advantage of what customers are willing to pay.

7. 4. Performance measurement of ZARA’s supply chain partners.
supply chain partner How to measure.
Supplier  Lead time taken to supply materials
 Average process overdue time
 Average time to complete task
 Availability
Factory  Line yield and Die yield
 Equipment utilization
 Number of employees
 Number of complains
Inventory  Avg. annual inventory turnover
 Number of employees
 Equipment utilization
 Avg. annual defect items
Transport  Availability
 Average time to complete task
 Sum of deviation of time (e.g. in days)
against planned schedule of all active
projects
 Number of vehicles
 Avg. annual expense
Distributor  Inventory value and carrying cost
 Sales order fill rates
 Vendor performance
 Lost Sales
 Returns due to improper shipments
and defective items
Customer  Avg. return rate
 Avg. revenue
 Avg. sales
 Customer satisfaction
 Customer loyalty and retention
Shopper  Avg. return rate
 Avg. sales
 Shopper satisfaction

8. 5. SWOT analysis of ZARA supply chain
Strengths
1. Zara has a well-established brand name worldwide. - Clothes are produced at a low
cost with the most innovative and fashionable designs
2. Low cost supply chain – they achieve it by better managing of the following criteria.
Product design, inventory management, logistic management, material management.
3. Just in time production – they copied designs from different sources and produce it
faster than the peers. Zara can get the product idea into market within 15 days.
4. Information system – use technology to identify the demand and get products quickly
to the market. Send online information to headquarters like selling trends customer
comments etc. input designs for CAD system it automatically feed up into cutting
machines.
5. Keeping low inventory – zara designed 10,000 new models every year and
replenishes every one of its 650 retail stores twice per week.
6. Centralized logistics and distribution – out sourcing from Spanish countries
7. Human resource management – hires young people and give fair incentives. Dressed
in fashionable way
Weaknesses
1. Over depends on European market – there market is heavily dependent on spain.
2. Only have one manufacturing and distribution center
3. Vertical integration – this leads to inability to acquire economies of sale
4. Lack of marketing communication – they do not spend much money on marketing
and advertising. They use only simple marketing strategies such as weekly change the
shop layout. But it not contributed to attract new customers. It only increase the
buying of existing customers.
Opportunities
1. Expansion beyond the Spain.
2. Establish a Asia logistics center
3. Online marketing
4. They can also enter into segments and expand those areas where they haven’t

9. Threats
1. Local and global competitors – competitors are reducing their lead time. Eg: H@M
has increased the frequency of ne items in stores.
2. Rising labor cost – as they highly depends on European labor market the price of
labor become increasing.
3. Currency value in Euro hurts global competitiveness.
4. There is a large amount of consumer switching taking place
6. Areas for improvement of Zara
In order to identify the areas that can be improved in Zara we can directly apply the SWOT analysis.
1. Use strengths to maximize opportunities
Here we can achieve the opportunities through our strengths
 Expansion beyond the Spain through our strong brand name
Here Zara can use their strong brand name to reach new markets. Strong brand name
will attract new customers and Zara can compete with the local products with their
exclusive designs and premium products. Currently they are lack in presence in Asia.
 Establishing Asia logistic center with linked to internal information systems.
Zara can establish a logistics center to serve Asian customers. Here management of this
center can be done effectively with their strong information systems.
 Online marketing with effective information systems.
Zara can use marketing in the social media like Facebook , Twitter or Google plus.
They can evenly push themselves to have a website enabling online purchases.
Information systems will enable them to show available designs and the upcoming
designs.
 More segmentation
Zara can go in to more segments of the clothing market. Specially kids clothing. With
their superior brand name it will be successful. Mars did the same by entering in to ice-
cream market from the chocolate market.
2. Use strengths to minimize threats

10.  Competitors
Zara can use it’s strong brand name to compete with their competitors. By providing
exceptional customer service with unique designs , Zara can make loyal customers
while grabbing the market shares of competitors.
 Rising labor cost
With the help of their Enterprise resource planning system and Electronic data
interchange systems
They can plan their labor resources effectively. Automation some of the material
preparation can negate the rising labor costs.
 Currency value of Euro
With the number of stores in USA and Europe the currency fluctuations is a major
concern. By manufacturing in the respective countries can overcome this issue.
 Customer switching
To avoid customers from switching Zara can use it’s brand name followed by
advertising. With their low cost inventory they can pass the benefit to the customers
thus increasing the switching cost of customers.
3. Use opportunities to minimize weaknesses
 Reduce over dependence on European market by expanding to Asia
Currently 71% of the business is based on European countries. With the emerging
economies like China and India it would be advisable to expand to Asia. This will
decrease the centralization on European market and bring new revenue to Zara.
 Have a logistic and manufacturing center in Asia
By having a second manufacturing center Zara can reduce dependence on the main
manufacturing center in Spain. This will reduce logistics and manufacturing cost while
increasing the flexibility of production.
 Vertical integration minimize through Asian logistics center.
Vertical integration is a barrier to focus on core business. By having Asian logistics
center, Zara will not have to focus more on logistics
 Increase marketing communication by online marketing.
Online marketing can be used to increase marketing communication. Zara can market in
the social media sites and putting advertisements on fashion sites. Having interactive
website tracking customer information can be a big leap in this process. Online
marketing will provide more customization to marketing and will be more effective.