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Zara Case Study

Zara store keeps much of its floor space empty in order to provide a
pleasant, spacious and uncluttered shopping experience for their customers.
Zaras management instructs its store managers to focus on providing good
customer service, thereby increasing sales. Additionally, Zara pays special
attention to the location, traffic, and layout as it does not focus much on
advertising. Furthermore, Zara has a low inventory policy, which means that
the stores are reliant on the replenishment of clothes almost every day.

Much of Zara success can be attributed to their pull strategy, supply chain
network efficiency, and understanding of the customers requirement.

Reason for success:

The average age of the designers in Zara is 26, which means that they
are aware of the latest fashion and the management gets firsthand
information regarding customer demands from these designers.

Zara has an open and an informal culture where the designers after
drawing the design sketches with hand discuss them with not only the
other designers but also the market specialist and planning and
procurement team. This gives them a broad variety of inputs.

Zara produces about 50% of its products and the rest from 400 outside
suppliers. This is a clever way of working as it is based on speed and
expertise, cost effectiveness, delivery terms, etc.

Zara also outsources labor-intensive operations such as sewing. This


allows its own factories to focus on other important tasks.

The speed of delivery is one of the most important criteria for the Zara.
The management measures distance in time and not in kilometers.

Retailers must place orders on time. The delivery to the retailers is


made twice in a month ensuring that the retailer has a minimum
amount of inventory.
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Retailers do not keep items in the store for more than two weeks. This
means that the inventory carrying cost is reduced. Additionally, this
creates floor space for new items as well.

Collaborative working among various departments of Inditex like


designers, market specialist and procurement and production planners
and among managers at various locations.

For in-house production, the suppliers are located in Portugal and Spain
and their close proximity ensure quick response to Zaras orders.

Multiple suppliers and sub-contractors in the supply chain network


ensuring less dependency on a single source.

High-efficiency rate in shipment (98.9%) with less than 0.5% shrinkage.

Production based mostly on pull strategy: Low production volumes in


the beginning of the season and then respond according to the market
season demand.

Centralized distribution from a major distribution center at La Courna.


The distribution center has highly automated systems that contribute
towards their distribution success.

Shipments are delivered to retailers at fixed time: twice a week. For


stores in Spain and southern Europe, shipments are being delivered
before 3 pm Wednesday and 6 pm Saturday and for rest of the world
on Tuesday 3 pm and Friday 6 pm.

Items on stores kept for more than 2 or weeks are kept out of stores or
sent back to Spain.