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Case Zara

BMI 601 2014 Winter
by

Stillen Chen

on 13 March 2014

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Transcript of Case Zara

A SOURCING
Sourcing Strategy for Component
Fisher’s framework focuses on finished goods and the demand side.
Kraljic ‘s framework foces on supply side.
Combine Fisher’s and Kraljic’s framework to derive sourcing strategy.

Case Zara
Procurement and Outsourcing Strategies
BMI 601
Andrea, Malcolm, Salpi, Steven
Prof. Peter Jackson
March 13, 2014

Introduction of Zara
Zara-Flagship store of Inditex group

Company Overview: Inditex- Parent Company

Overview of Industry






Analysis Zara’s Current Supply Chain concepts & Strategies

Main Focus: Impact of new strategies for Zara

Recommendations and Conclusion

Company Background
Inditex: Founded by Amancio Ortega Gaona in 1963
First created housecoats/ First Zara store in 1975
14 years-82 stores in Spain alone
Global Expansion- Europe, Portugal, Paris & New York

Brands created under Inditex Umbrella
Zara
Pull & Bear
Massimo Dutti
Bershka
Stradivarius and Oysho

Zara Model
1. Production Sourcing and Scheduling
2. In season production
3. Distribution
4. Retailing
What does it means?
6 months in advanced:
15-25 %
committed
Beginning of the season:
50-60%
committed
In season response:
40-50%
End of the season sale:
15-20%
40-60%
committed
80%
committed
0-20%
30-40%
Zara
Most of
the retailers
This slide is like a comparative chart
0.3%
3-4%
Expenditure for retail advertising:
The Zara Challenge
Zara is the most innovative and creative retailer in the world.
It has a unique agile supply chain (ASC).

Outsourcing
Outsourcing have increase progressively over recent years.
Fashion Industry – design and Marketing in particular.
There are Questions and issues regarding Outsourcing.
What are the risk involved?Viasv Zara.
What kind of innovations is available to you? Visav Zara.
9.1 Outsourcing an Option


Economics of Scale
Aggregating of demand.
Risk Pooling
Demand uncertain transfer to supplier.
Supplier reduce uncertainty through the risk pooling effect.
9.2 Outsourcing Benefits and Risks


Reducing Capital Investing
If you transfer some of your responsibilities to your suppliers.
Supplier higher investment shared between customers
Outsourcing Benefit and Risks


Focus on core competence and capabilities.
Buyer can focus on its strengths
Allow buyer to differentiate from its competitors.

Outsourcing Benefits and Risks


Increase Flexibility
The ability to read changes in customer demand
The ability to use the supplier’s technial knowledge to accelerate product development cycle time.
The ability to gain access to knew technologies and innovation.

Outsourcing – Benefits and Risks

How can the firm decide on which component to manufacture and which to outsource.
Focus on the core competences.
How can a firm identify what is core and what is outside the core?

9.3 Framework for Make/Buy Decision


Capacity And Knowledge
Dependency on capacity
Dependency on knowledge

Two main reason for outsourcing

Modular Product
This dealing with products off the shelves. E.g. Computer configurable product.
Integral Product
Component are tightly related
Designed as top down approach


Product Architecture

A framework for Make/Buy Decisions
Factors to consider
Customer importance.
If the product(has competitive value) is extremely important to the customer it does not make sénse to outsource.
Component Clockspeed.
If it changes very quickly – No.
Competitive Advantage.
If it has a competitive- No you have to guard it
Capable Suppliers.
If you have lots of suppliers take advantage of competition for business
Architecture.
How Modular or Integral dictate your judgment.

A good procurement System –Kraljic Matrix
Firm’s supply strategy should depend on two dimensions
Profit impact.
Volume purchased-percentage of total purchases cost impact on product quality or business growth.
Supply risk.
Availability-number of suppliers.-competitive demand-make-or- buy opportunities –storage risk-substitution opportunities.

Fisher’s functional vs Innovative Products
Integrated Framework
Component forecast accuracy
Component supply risk
Component financial impact
Component clockspeed

Thanks for Watching
Introduction to E-Procurement
E-procurement is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the Internet as well as other information and networking systems, such as electronic data interchange and enterprise resource planning.
Relationships with Long-Term Suppliers
Well known suppliers may resist to sell their product and services to e-markets, because they may not feel comfortable competing on price alone.
Pros & Cons
Value proposition
offered to buyers
Serving as an intermediary between buyers and suppliers
Identifying saving opportunities
Increasing the number of suppliers involved in the bidding event
Identifying, qualifying, and supporting suppliers.
Conducting the bidding event.

Value proposition
offered to Sellers
Fragmented markets
Reducing marketing and sales costs
Increasing ability to compete on price
Allows suppliers to better utilize their available capacities and inventories

E-Market
Licensing fee
software vendor licenses its software so that the company can automate the access to the marketplace
Subscription fee
marketplace charges a membership fee
Fee depends on the size of the company, the number of employees who use the system, and the number of purchase orders
Profitability
Four Types of E-Markets
1. Value-Added Independent Public e-Markets
2. Private e-markets
3. Consortia-Based e-markets
4. Content-Based e-markets
Full transcript