2 AGENDA Industry Overview Zara Overview Zara Supply Chain Zara ChallengesRecommendations
3 INDUSTRY OVERVIEW High Demand Uncertainty Push vs. Pull Method 30% of world production exported from developing countriesGeographic DifferencesPer capita spending and preferences different in any given market
4 INDUSTRY OVERVIEW: COMPETITION Gap, Inc.H&MBenettonZaraProductionOutsourcedIn-House40% In-House60% OutsourcedLead TimesHighLowNet Margins-.06%9.6%7.05%10.47%
5 INDUSTRY OVERVIEW: POSITIONING Price +BenettonGapFashion -Fashion +ZARAH&MPrice -
6 ZARA OVERVIEW Owned by Inditex (Industria de Diseno Textil) Largest of 6 Inditex Chains500 stores in 30 countriesFor women, men, and youthFrom infants to age 45Zara starts with “Z”
7 The “yoo-goo-goo-lizer” – you know, the guy that speaks at funerals!
8 ZARA OVERVIEW: ADVANTAGES Vertical IntegrationQuick Response to Demand (Pull System)Small Batch ProductionHigh Product TurnoverCentral Distribution Center / Strong IT System
10 ZARA OVERVIEW: SUPPLY CHAIN System is designed for short productioncycles, quick response (QR) to demand,and reduced number of markdownsManufacturingASIA (20%)Low QR Low CostDesignDistributionSaleDISTRIBUTION CENTER Increased shipment frequency increases QRSmall batch production lowers cost of demand uncertaintySTORES Decentralized store management supplements QRManagers determine products to sell and returnINDITEX MANAGEMENT / DESIGNERS Determine apparel designs and manufacturing locationsIN-HOUSE (40%)High QR High CostEUROPE / N. AFRICA (40%)High QR High costReturns from stores either rerouted or disposed of in local stores near dist. centerIT SYSTEMS Provides accurate demand information to determine manufacturing locations and production levels
11 ZARA CHALLENGES Aggressive growth strategy needed 76% of equity value based on future growth expectationsNeed to maintain competitive advantages in new geographic marketsData collection, Quick response, High product turnover, Strong IT System
12 RECOMMENDATIONS Short-Term Solution: Expand in Europe Focus on Italy (63 Billion Euro Market)Implement “Oil Stain” expansion methodLong-Term Solution: Expand Outside of EuropeEstablish operations in North AmericaNorth American Distribution Center (Mexico)Initially focus on coastal citiesCulturally Diverse Management Team
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