1 Report on Zara supply chain

EXECUTIVE SUMAARY :-
The Zara case study was conducted on 7th and 8th December, 2022. The case is based on the retail chain clothing
brand ‘Zara’ which was founded in the year 1950, in Spain . ideas, business strategy and also due its affordable
prices. Due to the growing of the clothing industry and the enormous unmet need in the clothing market we see
the long-term expansion and potential of Zara throughout the world. We are visionaries who see Zara as an
extreme financial launch. By achieving its sales targets. Zara will position itself for exceptional

profitability and self-funded growth. ZARA’s Plan is to maintain and develop its position in the market by
giving well in time response to changing trends in consumer tastes through creating new designs that are

suitable for all customers at an affordable price.

This case study gives us brief information about the supply chain of the Zara company . The sections in the
report will provide the detailed analysis on the performance of Zara , business models , supply chain .

This case study aims to answer the following questions :

1. Analyze different components of Zara’s supply chain .

2. How well does Zara perform Compared its competitors?
3. SWOT analysis of Zara with respect to supply chain management .
4. Impact of Covid-19 on Zara’s supply chain . What strategies did Zara adopt to recover ?

In addition , the study gives an idea about the significance of supply chain & suppliers in achieving the strategic
alignment of the company’s supply chain & logistics . It also highlights upon the its different production &
planning strategies that they use in their company . Zara uses less inventory than compared to its competitor in
advertising , as its brand is already known all over the globe .

This report entails a deep analysis of Zara’s strategy method , customer value and competitive advantage ,
comprehending the influence of supply chain in this .
INTRODUCTION ABOUT THE ZARA :-
Zara is one of the most popular brands in the world and also one of the largest international fashion company. It
is the 3rd largest brand in the garment industry & they are also unit of INDITEX . Zara opened its first outlet in
Spain in 1975 by Amancio Ortega & his wife Rosalia Mera. The headquarters of the company is located in
Galicia . It is the member of the INDITEX group , a Spanish group . Zara has opened its stores all over the
world. It offers wide range of latest trends. Zara’s clothing has uniquely positioned to serve this segment of
market due its fast paced fashion ideas, business strategy and also due its affordable prices . “Zara constantly
updates its range ”. Zara designs its own clothes , makes most of them in Spain and then distributes all of them
itself. It also offers premium quality products for both the middle-class & the higher-class customers . There are
more than 2600 stores in more 73 countries in the entire world. INDITEX owns all Zara outlets except places
where they are not allowed ownership of stores . It is considered as pioneer in agile supply chain . Zara is
renowned for coming up with the products on a short timescale instead of taking forever .

Fast fashion is popularised by Zara . The production volume is less of a priority for Zara than current fashion
trends . Over 12000 types of products are produced per year . Mostly the customers wants the product whose
availability is limited . It even sets up shops next to high end designer boutique , which draws clients without
requiring significant marketing expenditures . The majority of the customers are women who are 24-35 years of
age . their stores are located in the town centres and also where there is high population of this age group of
women’s . This strategy makes a sense of urgency among customers , encourages them to make a purchase till
supplies last .

HISTORY OF THE ZARA :- The legend began when Ortega established a dress making factory in 1963
under the name of INDITEX. The success of his foundation led him to the path of retail market for which he had
a vision unmatched. Ten years after having set up a factory Ortega with Rosalía Mera started a small store called
Zorba, which he had to rename as ZARA. Marking the year 1975 for a store setup, the investment was merely
nothing and yet another feather was pulled out of Spain’s hat which has made a remarkable name all across the
globe.
After setting up the first store in A Coruña, Galicia, in Spain, ZARA slowly expanded its empire in the rest of the
country and later in Portugal in 1988 and the year after that- 1989 ZARA made it to the United States of
America.

This annual growth has not dropped since day one and every year Zara has been expanding in countries and
places across the globe. France in 1990. During the 1990s, Zara expanded to Mexico (1992),Greece, Belgium and
Sweden (1993). In the early 2000s, Zara opened its first stores in Japan and Singapore (2002), Russia and
Malaysia (2003),China, Morocco, Estonia, Hungary and Romania (2004), the Philippines, Costa Rica and
Indonesia (2005), South Korea (2008), India (2010),and South Africa and Australia (2011).

EXPANSION :- Zara introduced the use of RFID technology in its stores in 2014. The RFID chips are located in the
security tags which are removed from clothing when purchased and can be reused. The chip allows the company to
quickly take inventory by detecting radio signals from the RFID tags. When an item is sold, the stockroom is immediately
notified so that the item can be replaced. An item that is not on the shelf can easily be found with the RFID tag.

 In 2015, Zara was ranked #30 on Inter brand's list of best global brands.
 In 2019, Zara updated their logo. It was designed by the French agency Baron & Baron.
 In 2019, the global fashion business Journal MDS stated that while the textile commerce of the world
had gone down by 2.38%, Zara's had risen 2.17%.
 In 2019, Chief Executive Person said the brand is waiting for more acceptable global rent levels to
continue its expansion. In Europe, the brand planned to cut the number of retail locations beginning in
2020.
LOGO OF ZARA :-
1975 — 1980s :- The very first Zara logo was introduced in 1976 and stayed with the iconic Spanish fashion
brand for quite a long time. It was a diagonally oriented rectangular emblem with the two corners on the right
part cut, decorated by a knot. The label was drawn in black, with two thin white stripes along the top and bottom
sides, and the smooth and heavy uppercase logotype was written in white serif characters and underlined by the
“Tiendas de Moda” tagline, which translates from Spanish as the “Fashion Stores

1980s – 2008 :- The very first logo for Zara was created in 1975 and featured a classy and chic serif lettering,
executed in monochrome. All capital letters of the brand name’s inscription were solid and perfectly balanced,
and its typeface was very similar to such fonts as TT Tsars Bold and Calmius Semi Bold, but with the contour
of the letter “R” modified.

2008 — 2019 :- The redesign of 2008 slightly changes the logotype, keeping its style and mood. The letters
were now placed far from each other, and featured shortened and flattened letter shapes. The new square style
makes the brand look more confident and serious, pointing to expertise, authority, and timelessness.

2019 — Today:- In 2019 Zara logotype was changed again, keeping the monochrome palette and elongated
sheriff of the bold letters. The current wordmark is executed in a custom font with tall narrowed letters
intertwined on their bottom parts, and the bar of the letter “R” curved and elongated.
Zara’s Supply Chain is Lean and Agile :- Stores take deliveries twice per week , and they can get
ordered inventory often within two days after placing their orders. Items are shipped and arrive at stores already
on hangers and with tags and prices on them. So items come off delivery trucks and go directly onto the sales
floor. This makes it possible for store managers to order and receive the products customers want when they
want them, week by week. The store managers may use this approach to order and get the things customers
want , when they want them , week after week . Customer’s preferences change as a result of the real time
responses that zara provides .

It indicates that half amount of the clothes the business sells , including the majority of its high margin and
distinctive fashion products , is produced in accordance with extremely precise , short-term demand projections.

Different components of Zara’s supply chain management :-

1) Product design : Zara changes its clothing designs every two weeks on average compared to
its competitors , who changes their designs every two or three months. It carries about 11,000
distinct items per year in thousands of stores worldwide than its competitors that carries 2,000 -
4,000items per year in their stores . Zara only makes a tiny quantity of each designs , thus clothes
are only kept in stock for about two weeks , before it gets replaced by entirely new stock . Thus ,
the inventory of the Zara company decreases. A large variety of designs results into increased
labour costs and also less room for cost-cutting due to lost of opportunities for mass
manufacturing . With such as large selection of patterns , they can appeal to a wider range of of
audience and keep up with on-going trends . The company catches the massive amount of
attention due its strategy of sending their agents to social gatherings , clubs etc . , where a large
group of people mostly includes youngsters.
As per the study conducted in 2009 , Zara had 3000 in house designers located at its headquarters
in the region called of A Coruna, Spain , which designs over 40,000items per year among which
only 10,000 are selected for production .
2) Suppliers & Procurement :-The company purchases its raw materials mainly from vendors
located in Portugal , Greece , Spain , Italy & Greece . These suppliers delivers the raw materials
within 5 days of orders being placed . These vendors are required to ship the delivered products
to ‘the cube’ , primarily by the truck , plane and train . 60% of the products are made at Zara ,
which means 400 suppliers are responsible for 40% of the production . Zara decided to engage
with a European supplier because of closeness and quality in particular . Suppliers are an
essential component of the supply chain , and having ones who are far away might create
logistical issues.
Zara is a significant and an essential , consistent customer for those suppliers that have provided
a high-classed quality and quantity of command throughout the years , with millions of products
sold each year. Most of the well-known textile industries have been absorbed by IDITEX . The
reason behind this is its procurement strategy that let the company react quickly to the changes
happening in the trends . Zara is able to have a time gap between design to store of about 15 days
while the average of the industry were 6 months . This makes Zara to wait more than the
competitors to make decisions , a crucial point in everyday changing industry like the fashion
one .

3) Manufacturing:- The manufacturing of the Zara is centred in north-western Spain where

company headquarters and the cube are located . It uses just-in time manufacturing
methodology . They buy large quantities of only few types of fabric and does the garment design
& related cutting & dyeing in-house. In this way , fabric manufacturers can make quick
deliveries to Zara DC- the cube . The cube is around 464500 square meter and highly automated
with underground monorail links to 11 Zara owned clothing factories within a 16km radius of the
cube . All the raw materials are then passed through the cube to the clothing factories . After the
manufacturing of the products , the final product is then passed out of the factory directly to the
stores . In order to keep customers coming back for its products that has already been sold out too
quickly or to see new trends in the fashion industry, Zara creates only more of its best-selling
products . The diagram below illustrates the supply chain distribution of Zara.
 Some facts about company's manufacturing operations :
 Zara competes on flexibility & agility instead of low cost & cheap labour . They employ about 3000
workers in manufacturing operations in Spain at an average cost 8.00 Euros per hour compared to
average labours cost in Asia of about 0.40 Euros per hour .
 Zara factories in Spain uses a flexible manufacturing system for quick change in operations if needed .
 50% of all items are manufactured in Spain.
 26% in rest of the Europe .
 24% in Asia and Africa .

 MARKETING STRATEGIES :- In a very short time, Zara has become one of the most successful
fashion retail brands in the world. With the dramatic introduction of “fast fashion” – which are
affordable and stylish clothes, Zara was able to create a passion for fashion amongst a broad spectrum of
customers. Kids, women, men, elders, all age groups, and cultures can try out Zara’s items just to love
them. The result is the brand’s sales keep getting higher, and the market share keeps increasing. To
achieve such spectacular results, Zara doesn’t market itself the way other fashion brands do. It has a
clever marketing strategy that can differentiate itself and find higher visibility as well as loyalty. There
are many factors that contribute to the success of Zara, but one key strength is definitely Zara's
marketing method that focuses on the customers.
Zara 4p’s marketing strategy:-

 PRODUCTS :- Zara is an “instant fashion” brand, which means it identifies the latest fashion trends
and brings the design to its stores quickly at reasonable prices. This is the source of the brand’s quick
growth and reputation. Zara does its research before releasing anything to suit the local culture and
people’s tastes. In short, Zara products have the latest styles, trending designs, affordable prices, and
local-adapted tastes. The brand’s rapid expansion and positive reputation can be attributed to this. The
brand’s products have characteristics that vary depending on the market, but they resemble the trendiest
items on the market in some ways. Before publishing anything, Zara does its due to diligence to
 understand the customs and cultures of the region. In a nutshell, Zara items feature cutting-edge trends,
stylish looks, reasonable costs, and regionally appropriate tastes.
 PLACE:- Zara has nearly 3000 stores worldwide, but the even more incredible fact is that it is a
vertically integrated retailer. This means Zara does all of the designs, manufacturing, and distribution
itself without third-party suppliers. This brings the same environment and experience for customers
everywhere. Its store’s design is modern, luxurious, and predominantly white. Online selling has been
carefully planned and limited to specific countries as well. This creates a throughout strategy for the
company’s growth, and it seems to work because Zara has managed to establish itself as one leading
fashion retailer globally. The fact that Zara is a vertically integrated business makes its roughly 3000
outlets throughout the globe all the more amazing.
 PRICE:- Zara’s pricing strategy focuses on the average shopper that wants the latest fashion items at
affordable prices. So its prices have to be catered to the price-sensitive buyers as well. The pricing
strategy that Zara applied helped its products meet the needs of a very large consumer segment. But Zara
doesn’t compromise the product’s quality, so it will be lower when compared to other brands such as
Hugo Boss or unique . Some , Zara stores have very premium pricing, whereas others have much more
affordable prices, based on the locations and targeted customers. Zara is able to maintain a good pricing
strategy by optimizing development and distribution costs. This creates a unique brand image and grows
the brand's market share faster, especially among millennials.
 PROMOTION :- One thing to note is that Zara spends very little on promotion campaigns compared
to average fashion retailers. It just simply doesn’t market itself as aggressively as other companies. But
this doesn’t mean it has no focus on marketing. Zara mainly focuses on opening new stores and word of
mouth. The key promotion strategy of Zara is based on experience, exclusivity, affordability, and
differentiation. This strategy is visible through the attention to each detail of its showrooms. Everything
is precise, professional, and elegant. Every store manager can talk directly to its counterparts in Spain
regarding the situation. By focusing on the brand’s core qualities towards buyers, Zara can build its
popularity with an effective brand image. When it comes to promotion, Zara has also used the power of
social media channels effectively.
 ZARA’S MARKETING TACTICS :- For Zara, it is not about how much it spends on
advertising, but it is all about the customer. How Zara can provide an experience for the customer in
every place of existence is what the brand has focused on since day one? Here are five marketing tactics
that Zara has implemented to achieve that goal.
 FOCUS ON CUSTOMER’S EXPERIENCE :- Product used to be the focal point of every
business, but not anymore. In the new economy, the customer’s experience matters more than the
product itself in the mind of the shopper. And Zara fully understands this. It tries to capitalize on the
store experience by always offering reasons for the buyers to revisit the stores. A Zara’s loyal customer
can visit the store about six times per year. Zara’s fast-fashion formula provides frictionless shopping
experience in a highly curated environment that offers limited supply and new styles that rotate
continuously. Shoppers feel like if they buy items from Zara, other people won’t have the same outfit.
So not only buyers are trendy, but they are also unique, which sounds pretty cool like being in a cool
kids’ club.
 THE POWER OF BRAND LOYALTY : - Speaking of loyal customers, Zara’s meaningful
experience and values tap the potential of frequent buyers to promote the brand. Rather than spending
more on pushing marketing out (it only spends about 0.3% of sales on advertising), Zara pulls customers
in and turns them into brand evangelists to spread word of mouth about the brand. On social media
channels, Zara has over 28 million Facebook followers, over 39 million on Instagram, and over one
 million on Twitter. These are used to analyse what is on trend or being said on social platforms. This is
used to improve operations, services, and products to keep customers satisfied.
 VALUE FOR PRICE : - Many fashion brands try to be innovators and the leaders of a new
movement, but Zara takes a completely different approach. It doesn’t want to be a trendsetter; it just
wants to be a fashion company that customers need. Buyers now want an item’s value to be beyond
price, with more time-saving and convenience.
Zara has a deep understanding of these values and delivers affordable high fashion items in just two
weeks. That translates into a great brand with high values for customers. Through this approach.
Zara can earn many loyal buyers that are less price-sensitive and return a higher profit margin. Zara is
not the cheapest in the fast-fashion industry, but it delivers trend-right products at appealing prices
consistently, which makes it have the best-branded value.

DISTRIBUTION :- Distribution by an organization can be a huge competitive advantage to the organization.

Most organizations focus on their clients far and wide. As a result of the increasing costs, organizations are
attempting to grow in different markets with the goal that they have a higher turnover and consequently a higher
advantage. ZARA uses two strategies of distribution, Selective distribution in which couple retail outlets cover a
particular land zone . It also uses exclusive distribution is a circumstance where suppliers and merchants go into a
promise that just permits the named wholesaler to offer a particular item.

They mostly concentrate on the mass market imitating the current trends to appeal to consumers with middle-
class incomes who cannot afford the pricey designer goods offered by companies like Gucci , Versace , & Louis
Vuitton . By putting their products on the market as new trends arise , their distribution channel goes on a
effective in order to maximize emerging trends .

The automated distribution centre known as ‘ the cube ‘in zaragoza , spain , where the design , procurement and
production takes place , coordinates the organization’s operations , is essential to its success . In order to attest
that only what is requested is to be delivered ant meet the demand of customers is an essential part of the entrie
process . Zara’s state-of-the-art distribution facility functions with minimal human intervention. Optical reading
devices sort out and distribute more than 60,000 items of clothing an hour.

In addition to these supply chain efficiencies, Zara can also modify existing items in as little as two weeks.
Shortening the product life cycle means greater success in meeting consumer preferences. If a design does not
sell well within a week, it is withdrawn from shops, further orders are canceled and a new design is pursued.
Zara closely monitors changes in customer preferences towards fashion. It has a range of basic designs that are
carried over from year to year, but some in-vogue, high fashion, inspired by latest trends items can stay on the
shelves for less than four weeks, which encourages Zara fans to make repeat visits.

An average high-street store in Spain expects customers to visit thrice a year, but for Zara, the expectation is
that customers should visit around 17 times in a year. This expectation for such a high frequency of repeat visits
is evidence of Zara’s confidence that it is keeping on top of changing consumer needs and preferences and is
helping them shape their ideas, opinions and taste for fashion. In reality, Zara is also helping in giving birth to
new trends through its stores or even helping in extending the longevity of some seasonal styles by offering
affordable lines.

INVENTORY :- Zara is fully aware of the saying, “inventory = death”. It avoids piling up inventory in any
part of its supply chain from raw materials to finished products. Inventory optimization models are put in place
to help the company to determine the quantity that should be delivered to every single one of its retail stores via
shipments that go out twice every week. The stock delivered is strictly limited, ensuring that each store only
receives just want they need. This goes towards the brand image of being exclusive while avoiding the build up
of unpopular stock.

This quick in-season turnaround, from production facilities located close to Zara’s distribution headquarters in
Spain, allows Zara to ship more often and in smaller batches. If the design Zara hastily creates in an attempt to
chase the latest trend does not in fact sell well, little harm is done. The batch is small, so there’s not a ton of
unsold inventory to get rid of. And because the failed experiment is over in a jiffy, there’s still time to try a
different style, and then a different one after that .

ZARA’S SUPPLY CHAIN AND LOGISTICS :- Its supply chain is completely different from other existing
companie or brands . Designing , manufacturing , sourcing ,distribution to outlets , are the main functions of supply chain
. The companies are focused on strategic supply chain management of occupational improvement and achievement .
Strategic logistics managemnet is a major source of customer satisfication and also competitve advantage .
 The secret to their success has been centralization,” says Felipe Caro, an associate professor at the University of
California at Los Angeles’s Anderson School of Management and a business adviser to the company. “They can
make decisions in a very coordinated manner.” Zara sticks to a deep, predictable and fast rhythm, based around
order fulfillment to stores. Each Zara outlet sends in two orders per week on specific days and timing. Trucks
leave at specific times and shipments arrive in stores at specific times. Garments are already labeled and priced
upon destination.

As a result of this , every staff involved (from design to procurement, production, distribution, and retail) knows
the timeline and how their activities pan out with respect to other functions. That certainly also extends to Zara
customers, who know when to visit stores for fresh new garments.

SWOT ANALYSIS OF ZARA :- SWOT of a brand is a study of its strength , weakness , threat ,and
opportunities . Knowing about SWOT analysis of zara will help in upgrading our knowledge about their
business .

Strengths
1.        Attractive design of products

2.       Strong international presence with more than 2,200 stores in 96 countries.

3.       Globally 24th most valuable brand with the brand value of more than 18,5 billion.

4.       Short product development time: from concept to shop shelf in just 2 weeks.

Weaknesses
1.        Ineffective marketing strategy with minimum marketing budget.

2.       Presence of gaps in the product range.

3.       Higher employee attrition rate compared to industry average.

4.       Ineffective cost structure.

Opportunities
1.         Increasing online presence of the brand with the focus on social media.

2.         Strengthening presence in emerging economies.

3.         Establishing collaborations with celebrity designers.

4.         Entering lifestyle products business using current competitive advantages.

Threats
1.       Intensifying competition from high end fashion merchandisers locally and globally.

2.       The loss of appeal within target customer segment.

3.       Failure to meet fashion tastes and preferences of millenials.

4.       Intensifying imitation of counterfeit Zara products.

CONCLUSION :- The Zara brand was born with a keen eye on its customer – its ability to understand,
predict and deliver on its customers’ preferences for trendy fashion at affordable prices. In addition to its
effective supply chain, the brand’s ability to have its customers co-create designs is unique and provides it with
a competitive advantage. Most fashion trends often start unexpectedly, originate from uncommon places and
grow out of nowhere. In a world swamped with Big Data, and yet more collected at an even more rapid pace
than before, brands still need to be careful and observant. Big Data does not provide answers to all business
challenges, and it may be too hyped to be considered as the Holy Grail.

One of the secrets behind Zara’s global success is the culture and the respect for the fact that no one is a better,
authentic trendsetter than the customer himself or herself – and this philosophy needs to be continually reflected
in all its business strategies going forward.
So, why not consult your customers for a start? Zara always does.