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Name of the company: ZARA

Type of company: Private(Clothing)

Company turnover: 7.071bn

Is the P&L statement published for 2009-10:

Our Group
Inditex is one of the world's largest fashion retailers, welcoming shoppers at its eight store formats
-Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe -
boasting 5.044 stores in 77 countries.
The Inditex Group is made up of more than 100 companies operating in textile design,
manufacturing and distribution.
The group's success and its unique business model, based on innovation and flexibility, have made
Inditex one of the biggest fashion retailers in the world.
Our approach to fashion – creativity, quality design and rapid turnaround to adjust to changing
market demands -- has allowed us to expand internationally at a fast pace and has generated an
excellent public response to our retailers' collections.
The first Zara shop opened in 1975 in A Coruña, Spain, a city in which the Group first began doing
business and which is still home to its headquarters. Its stores can now be found in prime locations
in more than 400 cities in Europe, the Americas, Asia and Africa.
Fiscal Year2010200910/09Net sales(1)12,52711,08413%Net profit(1)1,7321,31432%Nº of
stores5,0444,607437Nº of countries77743Employees100,13892,3017,837The Inditex financial year
is from 1st February to 31st January of the following year

Expense in SCM/logistics/transportation cost:

Structure of supply chain in the company:

It is claimed that Zara needs just two weeks to develop a new product and get it to stores,
compared with a six-month industry average, and launches around 10,000 new designs each
year. Zara has resisted the industry-wide trend towards transferring fast fashion production to
low-cost countries. While it spent little on ads, it spent heavily on stores.

channels of distribution in the company:

Suppliers to the factory in the company:They have their own manufacturing unit
it is estimated that 80 percent of Zara's production is carried
out in Europe which is within the small radius of its headquarters in Spain. In fact, almost
half of its production is in owned or closely-controlled facilities.

Zara's initial forecast was limited to the kind of fabric and the amount of fabric it would buy. The
fabric thus procured was unprocessed and undyed and Zara colored the product only before selling
it, based on the need and demand by consumers. Zara sourced undyed fabric from the Far East,
Morocco, and India...
Zara’s centralised design and production centre is attached to Inditex headquarters and consists of
three spacious halls – one each for women’s, men’s and children’s clothing.

External fabrics sourcing

Lead time,safety stock,reorder level,inventory turnover for the supplier

reaching the factory

Lead time,safety stock,reorder level,inventory turnover for the stock reaching

the branches from the factory

Low level of inventory due to Fast supply chain - 1 week final production cycle, two
day outbound logistics, fast adaptation of leading trends

Lead time,safety stock,reorder level,inventory turnover for the stock reaching the
wholesellers/retailers from the branch

Zara keeps almost half of its production in-house without pushing its factories to maximise output.
Rather than chase economies of scale, it manufactures and distributes products in small batches.
Bullwhip effect:

The constant flow of updated data mitigates the so-called bullwhip effect – the tendency of supply
chains and open-loop information systems to amplify small disturbances. In an industry that
traditionally allows retailers to change a maximum of 20% of their orders at season start, Zara lets
them adjust 40-50%. In this way, it avoids costly overproduction and the subsequent prevalent

Warehouse design criterion:

They don’t have any warehouses,rather they move their products directly from the
factories to the retail outlets.
In each hall, floor to ceiling windows overlooking the Spanish countryside reinforce a
sense of cheery informality and openness. Unlike companies that sequester their
design staffs, Zara's cadre of 200 designers sits right in the midst of the production
process. Split among the three lines, these mostly twentysomething designers—hired
because of their enthusiasm and talent, no prima donnas allowed—work next to the
market specialists and procurement and production planners. Large circular tables
play host to impromptu meetings. Racks of the latest fashion magazines and catalogs
fill the walls. A small prototype shop has been set up in the corner of each hall, which
encourages everyone to comment on new garments as they evolve.

Forecasting tools/IT system used by the branch the order the stock from the
Customized handheld computers support the connection between the retail stores and La Coruña.
These PDAs augment regular (often weekly) phone conversations between the store managers and
the market specialists assigned to them. Through the PDAs and telephone conversations, stores
transmit all kinds of information to La Coruña—such hard data as orders and sales trends and
such soft data as customer reactions and the "buzz" around a new style. While any company can use
PDAs to communicate, Zara's flat organization ensures that important conversations don't fall
through the bureaucratic cracks.Once the team selects a prototype for production, the
designers refine colors and textures on a computer-aided design system. If the
item is to be made in one of Zara's factories, they transmit the specs directly to
the relevant cutting machines and other systems in that factory. Bar codes
track the cut pieces as they are converted into garments through the various
steps involved in production (including sewing operations usually done by
subcontractors), distribution, and delivery to the stores, where the
communication cycle began.

SCM performance measure:

a)Total SCM cost,SCM as % of total cost

b)% of orders refilled by the requested delivery data

c)% of orders that arrive on time,complete and damage free

d)Average number of orders received electronically

Safety stock,reorder level,average inventory

Zara's system has to deal with something in the realm of 300,000 new stock-keeping
units (SKUs), on average, every year.
Zara has an informal policy of moving unsold items after two or three weeks. This
can be an expensive practice for a typical store, but since Zara stores receive small
shipments and carry little inventory, the risks are small; unsold items account for less
than 10 percent of stock, compared with the industry average of 17 percent to 20
percent. Furthermore, new merchandise displayed in limited quantities and the short
window of opportunity for purchasing items motivate people to visit Zara's shops
more frequently than they might other stores. Consumers in central London, for
example, visit the average store four times annually, but Zara's customers visit its
shops an average of 17 times a year

Current SCM network

Zara's supply chain—from customers to store managers, from store managers to

market specialists and designers, from designers to production staff, from buyers to
subcontractors, from warehouse managers to distributors, and so on.


Compare the above points with the best class in company

Benetton ……..
•Benetton Group S.p.A. is a global clothing brand based in Treviso, Italy.
•The name comes from the Benetton family who founded the company in 1965.
•The company's core business remains their clothing lines.
•Casual clothing is marketed as the "United Colors of Benetton";there are also a fashion-oriented
"Sisley" division, "Playlife" and "Killer Loop" streetwear brands

To protect franchisees, the company does not sell online, using its websites solely for marketing
purposes without listing prices.

•By the year 2000, the group was selling 160 million garments

The Operations :The Three tier model

tier 1:Supplier of raw materials and unfinished products and production plants.
Tier 2:Contractors and sub contractors
tier 3:retail outlets spread over several countries.
Designing responsibility were with Benetton headquarter
Designers worked in three groups
First group takes care of commercial aspects
Second group carry’s out research
Third group responsible for graphics

Purchasing function Largest buyer of wool in world 180 suppliers of raw material Over years it had
gone vertical Dec 2006 Benetton Operated through 18 factories 12 in Italy and remaining in Europe

ts in other countries
–Smaller in scale
–Subsidiaries fully partially
lants in other countries
aller in scale
–Subsidiaries fully partially

Suggest optimal Sc network