ZARA

1. ZARA Baki USLU Barış BOZOĞLU

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

3. 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

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

6. 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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8. 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%

9. 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 R&D. • Wages increase

10. THE ZARA MODEL Zara’s 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

11. Patterns and Samples • In some cases designs made by 3rd party suppliers

12. Production Sourcing and Scheduling • 50% of the garments are outsourced • Garments with fashion styling manufactured in Spain basics and knits are outsourced • Zara’s season inventory • In the beginning of the season 60% of the collection is ready while others are 80% • 25% of the season’s collection is stored in stores in the beginning of the season • 85% of the inhouse production is that season’s production

13. In-house Manufacture

14. In-house Manufacture • 40% of fabric produced in-house • Cutting • Sewing

15. 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 product’s sale is not satisfactory

16. Distribution • Zara’s distribution center in Arteixo • New distribution center in Zaragoza • Shipment

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

18. Pricing Strategy • Pricing strategy= cost + target margin • Single Tag to Bar Code

19. Growth Strategy • Stores operated by Zara, franchise, alliances • USA market

20. Sourcing Dilemma? • Increase outsourcing vs. keeping current model

21. 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

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

23. Questions?

24. Thank You