Case discussion

ZARA: Apparel Manufacturing and

Retail
Design to sale -4
Responsive
to 6 weeks
Owned by Inditex Instable demand strategy and
(compared >
affordable prices
6months)

Source: flexible
Fast
Low cost sources and quick
Less markdowns replenishment of
–Asia (Portugal and
designs
Spain)

Postponement strategy
Manufacturing : Predictable
Uncertain and responsiveness-
40% Inditex, 60% demand: Asian
demand –Europe reduce and forecast
outsourced locations
error

Order to delivery
-24-36 hrs
European stores
& 48 hrs America
and Asia
 Q&A
1. What advantages does Zara gain against competition by having a
very responsive supply chain?

2. What are the various strategic and operational decisions Zara has
taken?

3. Why has Inditex chosen to have both in-house manufacturing and

outsourced manufacturing?
 Q&A
4. Why has Inditex maintained manufacturing capacity in
Europe even though manufacturing in Asia is much cheaper?

5. Why does Zara source products with uncertain demand from

local manufacturers and products with predictable demand
from Asian manufacturers?

6. What advantage does Zara gain from replenishing its stores

multiple times a week compared to a less frequent schedule?
 Q&A
7. How does the frequency of replenishment affect the design of its
distribution system? What are its implications to push pull view of
supply chain?
8. Do you think Zara’s responsive replenishment infrastructure is better
suited for online sales or retail sales?
9. Conduct a SWOT analysis for Zara.
 Strengths

 Cost leadership strategy

 Efficient distribution
 IT
 High replenishment rate
 Unique designs
 Strong presence
 Brand value
 Superb supply chain
 Design advantage
 Store design
 Weaknesses

 Not much money spent on advertisement

 Generalised collection
 Low safety stock
 Opportunities
 Online e-commerce

 Backing some flagship design

 Growing market potential- needs to capitalize on the growing

market potential of existing markets.

 Market expansion
 Threats

 Low advertising
 Competition
 Reach – new small stores
 ZARA Business Model : Key take
away
 Selling “state-of-the-art” fashion though being a fashion follower
 Integration upstream to create competitive advantages downstream
 Relation between distribution and product development
 Evolutionary product development and sourcing
 Product development and distribution instead of promotion underlies brand
development

 Rethink the entire supply chain

 Reduction in mark-down can more than make up for increase in labor cost
 Planned shortages can induce more future demand
 Good store location, layout and product display can substitute advertising
 Faster response eliminates inventory risks
 Gateway
Late 1990s- selling
1985- direct sales through retail stores-
manufacturers of 1996-Selling online no inventory-
PCs customer service
focus

Value of share
Reduced number of Closure of retail
dropped- $80 to $4
configuration outlets (2004)
(1999-2002)

Acer purchased Gateway computers

Gateway for $710 sold thru 20 retail
million outlets
 Gateway vs. Apple

Gateway Apple
 No finished inventory in stores  finished inventory in stores
 Reduced configuration offered  Less varieties in stores
 Q&A

 Why does Gateway not carry any finished goods inventory at

its retail stores? Why did Apple choose to carry inventory at its
stores?
 Should a firm with an investment in retail stores carry any
finished goods inventory? What are the characteristics of
products that are most suitable to be carried in finished –goods
inventory?
 What characterises products that are best manufactured to
order?
 How does product variety affect the level of inventory a retail
store must carry?

1-14
 Q&A

 Is the direct selling supply chain without any retail stores always
less expensive than a supply chain with retail stores?
 What are the supply chain implications of Gateway’s decision to
offer fewer configurations?
 Define push pull boundary for Gateway.
 What factors explain the success of Apple retail and the failure of
Gateway country stores?