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GROUP 9Shobhit PathakDhruv BansalShubham SharmaProcurement & Outsourcing Strategies

History of ZaraIn 1963, Amancio Ortega Gaona (founder Zara) started selling the clothes from a small outlet in his factory.

In 1975, under the flagship of Inditex Ortega opened first Zara store in Spain.

Between 1976 and 1984, Zara's presence was extended to major Spanish cities. The first store outside Spain was opened in 1988 in Portugal.

By 1989 Zara began international expansion with store 82 opening in Portugal, Paris, New York, etc.

About the Case ABOUT THE CASEIt also owned 20 other factories for internal manufacturing that apply Just In Time .

ABOUT THE CASECompetitive advantageSWOTStrategiesProduction & distributionMaintain quality

Cost leadership

High bargaining power to suppliers

Fast distribution systemDesignCoordinate with R & D and stores to get the new trends

Ability to produce new trendsMISProduct distribution system

Improving inventory system

Order information flow stores ordering system

MarketingR & D

Market penetration

Market , location of stores , consumer behavior analysisCASE DISCUSSION QUESTIONSVertical integration helped to reduce the bull whip effect.

Buying more from China might reduce the cost of goods sold in future.

Also, Inditex owns Comditel that manages dyeing, patterning and finishing of grey fabric and supply it to external and in-house manufacturers.

1. Current strategyZara does not compete on prices.

They compete only on fashion for which quick response capability is a must.

Zara can originate a new design and have it as finished goods in 4 to 5 weeks and just 2 weeks for restocking or modifying the existing products.

The same takes 6 months for its competitors.Competitive advantegeBuild a decentralized distribution & production in each region to highly penetrate the market and to reduce the complexity of the process.

Value chain should be extended in each region effectively.2). Challenges faced by zaraCurrent supply chain model must be changed, cant be continued for long.

In order to remain competitive and control costs Zara might have to move manufacturing to India, China.

This might prevent Zara from refurbishing its product lines in quick succession.

Zara pioneered the concept of customized retailing and was able to conceptualize the garment, develop, and deliver it to the stores within two to three weeksLooking aheadAs the Euro took hold in Europe there was a possibility of pricing pressure so the current strategy has to changed.

CHANGES:-Increasing the proportion of outsourcing to 60%.Principally increase outsourcing from China to take low cost benefits.Will zaras current outsourcing strategy continue to be useful as it expands? How should this strategy change?Concerning Zaras impressive growth during the past years, it would not make sense to encourage the new strategy.

Moreover, For the moment the profits will go up but Zaras customers set value on premium Quality which will be affected by this new strategy.Negative impact on Zaras image.Risks associated with the new strategy?THANK YOUThis business is all about reducing response time . In fashion, stock is like food. It goes bad quick. Jose Maria Castellano