PRESENTED BY:

HITESH NANDAANANYA PANDEY

RICHA RISHI PRASHANT

CHAUDHARYPRATEEK BANSALI MANISH DARUKA

ROHIT SHARMA ROHAN MOHANTY VIVEK GUJRAL

SUPPLY CHAIN MANAGEMENTSupply Chain Management (SCM) is

concerned with the management and control of the flows of material, information, and finances in supply chains.

The task of SCM is to design, plan, and execute the activities at the different stages so as to provide the desired levels of service to supply chain customers profitably

Key to Zara’s success is its vertically integrated structure

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ZARA’S SUPPLY CHAIN(Vertical Integration)

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A picture is better than 1000 words!How many words would be better than 3 pictures?

- A supply chain consists of

- aims to Match Supply and Demand, profitably for products and services

SUPPLY SIDE DEMAND SIDE

The rightProduct

HigherProfits

The rightTime

The rightCustomer

The rightQuantity

The rightStore

The rightPrice =++ ++ +

- achieves

SupplierSupplier ManufacturerManufacturer DistributorDistributor RetailerRetailer CustomerCustomer

UpstreamDownstream

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Cycle View of Supply Chains

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

Any cycle0. Customer arrival1. Customer triggers an order2. Supplier fulfils the order3. Customer receives the order

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INTRODUCTIONZara was founded by Amancio Ortega

Gaona in the year 1975Zara’s presence was extended to major

spanish cities between 1976 and 1984 & first store was opened in 1988 in portugal.

The next international ventures were New York in 1989 and Paris in 1990.

In the late 1990s & early 2000s, Zara continued its global expansion and opened stores in several countries i.e. UK, Japan, UAE, Chile, Germany etc.

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Contd….In 2004 Zara procured 40% of the

fabric from Comditel,which finish the processes of dying and printing in about 4-5 days.

By 2005, Zara had become the third largest clothing retailer in the world in terms of revenues.

About 65.8 % of Zara’s revenues came .from international markets

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Contd….Zara stores offer a compelling blend of

fashion quality and price offered in attractive stores in prime locations on premier commercial streets.

Zara also scored high on offering garments similar to those created by famous fashion houses at a fraction of a price.

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SPOTTING TRENDSOne of the secrets behind Zara’s success was

its ability to spot emerging trends and react quickly.

Zara had a dedicated design team in Arteixo, A Courna, in northern Spain.

The store managers and sales staff updated the head office every day about the moving stock and about customer’s demands.

Sales staff was equipped with wireless handsets which provided data to store manager about the pieces sold.

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Contd….The staff also provided inputs

regarding the new lines, colors, styles and fabrics that customers were demanding.

The store managers were selected carefully as an important role to be played by them in providing crucial information which formed the base new designs.

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Contd….Another source for designs was team of

designers who traveled across the world looking our for designs and emerging trends.

Zara kept exploring around at fashion shows, universities, movies and music videos to spot new trends.

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Designing Zara has a team of 200 designers, with each

designer churning out about 60 styles a year on an average.

Within Zara’s defined parameters, designers are encouraged to experiment.

They are expected to adapt the haute couture styles.(haute means ‘high’ or ‘elegant’ and couture means ‘sewing’)

Zara has 3 design centers - for men’s, women’s and children apparel.

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Design process of Zara Store managers – place order twice a

week

At headquarters- store specialists collect information

Obtain informal feedback from store managers

Based on feedback-store specialists provide designers with an outline of the new styles, designs and fabric as

per the demand

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Contd….Each line has separate procurement, design

and production planning staff.Designers use CAD(computer-aided design).Zara brings out its own collection

periodically- one during spring/summer and another during fall/winter.

Only after the design is decided upon, the fabric procurement and production planning begins.

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PRODUCTIONUsing of high tech cutting facilitiesComputer layout is prepared in order to

avoid wastage.Outsourcing of sewing to small firm for faster

result.Flexibility in production process.

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Contd….• Twice checked for quality.• Capital intensive things were done

indigenously.• Labour intensive steps were outsourced.• Ready with the product within 10 days

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Data obtained used to decide on price ,fabric etc.

Store specialists, designers, procurement and production managers work in tandem to arrive at new designs

Sampling and approval

Fabric is dyed, cut, and sent to workshops for stitching

Stitched garments are checked for quality and sent for distribution

Garments are sorted out and sent to zara stores across the world

Sales personnel & store managers obtain customer feedback, monitor local trends and update the headquarters daily

Designers travel across the world scouting for trends, ideas and designs

Undyed fabric supplied from far east

Manufacturing process of zara 17

DISTRIBUTIONCenter location for distribution was in

Arteixo.Merchandise moved through optical reading

devices that sorted more than 60,000 items every hour.

The were two belt system – one for folded and one hung garments.

Consignments were received within 24-36 hours if within Europe, otherwise 48 hours.

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Contd….Distribution center was also use to select ,

sort, reroute, and resort merchandise.Accuracy level of 98.9% in its shipment.Arriving of new stock twice a week with new

offers for the customer.On a average ,customer visited Zara’s stores

17 times a year , compared to its competitors'.

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DISTRIBUTION CHANNEL

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Store OutlayStore Location :The stores were mostly located in prime

location across the world.All of Zara’s store were located at places

where there was constant pedestrian flow.Zara believed that the prime locations

themselves provided the required advertising.

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Contd….Store Interiors:• Zara’s stores were uniform in outlay

including lighting, fixtures, window display and arrangement of garments.

• Typical store had a floor space of 1200 square meters.

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Contd….Lighting: • The stores were brightly lit with a mix of

halogen and fluorescent lighting.• Color was not used much in the interiors, which

were mostly in white, natural pine, mill work and brushed stainless steel hues.

• The windows had a display platforms and variable light which helped Zara in determining how the display unit would look on bright day, on cloudy days and during the nights.

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Reaping BenifitsZara concentrates on 3 winning formulae:•Short Lead time = More fashionable clothes•Lower quantities = Scarce supply•More styles = More choice and more chances of hitting it

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Contd….Zara used the pull process instead of

forecasting to gauge marketing trends.Zara adopted supply practices which resulted

in higher costs.Zara kept its manufacturing units in Europe

when all its competitors were moving to India or China.

Zara’s use of IT was minimum.

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ConclusionAnalysts said that Zara could not continue

with its supply chain model for too long as other competitors are moving their manufacturing processes to Asia.

However, if Zara moved its operations from Spain, it would lead to higher costs from its centralized distribution system.

Also, Zara’s strength of vertical integration could turn out to be its weakness.

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Contd....Therefore, Zara should complete its

expansion in European market before entering into the Asian market by decentralising its production processes and have production center for a cluster of countries along with distribution centers.

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