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Zara: Fast Fashion

Group No. 1 - International Supply Chain
by

carlos perez

on 19 September 2014

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Transcript of Zara: Fast Fashion

What is ??
Why is
different ??
"Fashion Gurus"
Introduction to Collection
Decide the designs for the next season
Takes one year preparation
Winter/Summer
Manufacturing
Send the designs to the manufacturers
Seeking low costs
Massive production
Used to take up to 6 months for manufacturing and distribution
2-4 seasons
Traditional Industry
Distribution
Sales
Designs
Introduction to Collection
Lot of designs.
What customer really want.
Global fashion trends.
30,000 designs a year
internal and external
Send the designs to the manufacturers
Seeking low costs
Controlled production
In-house: Fast, better quality control
External: European or developing countries.
3-6 weeks to the entire process
104 seasons
Arrivals twice a weeks "Z days"
Distribution
Retail
Manufacturing
Arteixo, Spain
sales
trends
It was revolutionary
Traditional Industry
ZARA
Few designs
Advertising
Low cost labour -external
Massive production
Failure rate 10%
40% discounted
Visits store 3 timer per year
No flexibility
Designs from magazines, media,sales info, stores, local trends, designers team.
Lots of designs.
Limited advertising (0.3%)
External and internal production - faster
Low production (controlled)
Failure rate 1%
10% discounted
17 times per year
Flexible - changes in 3 weeks
Competitors
Market Perception map
S
W
O
T
Strength
Weakness
Opportunities
Threats
Affordable price
Low inventories
Strong IT system
Vast product segmentation
Short cycle time
Rapid product turnover
strong distribution network
Quality
Limited in-store inventory
Centralized
Global Expansion
Fashion trends
Online sales
Fierce competition
Diseconomies of scale
Supply Chain Analysis
Central Distribution
Zara uses a central distribution system to control goods manufactured from around the world
Vertical Integration
Zara controls retailers (Forward Vertical Integration) but places a greater focus on suppliers (Back Vertical integration)
Strategic Fit
Depending on uncertainty and responsiveness
Agile Strategy
Zara focuses on flexibility by adapting quickly and efficiently to fast changing customer requirements (Sufian & Monideepa,2013)
Quick Response (QR)
In Design and Retail sections, QR system is exploited by ZARA.
3Cs: Control, communication & Collaboration
Key formula: (1) short Lead time, (2) Low quantities & (3) More clothing.
Zara's supply chain efficiency is directly related to its demand chain effectiveness. It reflects how ZARA pays attention to customer value drivers as its key success (Walters, 2006)
ZARA Demand Chain
Pull-Demand Strategy
Pull-driven approach is a customer demand driven method to pull materials through the multiple stages of production (Ng, Zheng & Xie 2013)
Fisher (1997)'s Framework
With a concentrate on consumers' taste and modern trend, ZARA is seen to produce "innovative products" that contribute to a "Responsive Supply Chain"".
Just-in-Time Management
The main benefit of JIT is reduced inventories, in supply chains that use made-to-order or pull-based schemes (Kros, Falasca & Nadler 2006).

ZARA incorporated Toyota JIT technology to help it run more efficiently and continue to coordinate with Toyota .
IT System
Zara's supply chain system only works efficiently due to an outstanding IT system, that helps to strengthen the QR system with better control, communication, collaboration, and distribution.
International Expansion
Sales by Region
2001
2012
2013
Stores by Region
2001
Present
Store Growth by Market
2008-2013
2001-2013
Global Retail Space
2001
2014
Mexico launches today!
Online Sales
Entering a New Market
Traditionally looked for markets similar to Spain.

Macro analysis of the country focusing on legal aspects, taxes, property and salaries.

Micro analysis in then performed on-site, focusing on local competition, location, demand and pricing.
Zara's "Oil Stain" expansion approach (create a flagship store, local experience, expand).
Benefits: increase market visibility and reduce cost.

Market prices are a primary concern and if they decide to enter a market they expect profitability to be quick usually within a year or two.
This happens in 3 different ways
Company - Owned
High profile countries
High growth prospects
Low business risks
Franchise Stores
Smaller riskier countries
Significant cultural difference
Administrative barriers
Restrictions on foreign ownership
Joint Venture
More important markets
Difficulties in direct entry such as prime retail space.
AZADEA : A franchisee with 29 stores in 8 markets
Relative price Level
Radio Frequency Identification (RFID)
Provides real-time data on the physical whereabouts of a garment through the desire distribution-to-sales process.
Delivers, precision, speed and enhanced in-store customer service.

International Expansion
Future Challenges
Move to a De-centralized supply chain?
Centralization VS Decentralization
Tax avoidance & Exchange Rate Fluctuations
How ZARA could be in trouble?
Multinational tax avoidance a top agenda with the G20 and European Commission.
Significant loss in profits if they have to stop this practice.
Affected by currencies flutuations (Yen, Russian rouble etc)
Labor problems
From China to India, from England to Mexico, the slogan popularised by La Alameda, "EsclaviZara", linking ZARA with slave labor, is travelling the world.
References
Thank you!
Group No. 1

Production
Advertising
Production Lead Times
90% outsourced
Outsourced
Outsources
40% in-house
60% outsourced
High
High
Low
High
Long
Long
Long
Short
Move 2.5 million items per week
Nothing remains more than 72 hours.
Amancio Ortega
Large batches + minimum designs + heavy outsourcing
Small batches + Lots of designs + Close manufacturing = FAST FASHION
Warehouse
Case: 72 Current: 42
Transportation
Truck

75%
24-36 hours
Europe
Air
25%
24-48 hours
Outside Europe
Design by gurus
ZARA's founder, Amancio Ortega's early adoption of IT technologies in the 80's is fundamental in Zara's global success.
Answers
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