ZARA: FAST FASHION

AGENDA Industry Overview Zara Overview Zara Supply Chain Zara Challenges Recommendations

INDUSTRY OVERVIEW High Demand Uncertainty Push vs. Pull Method 30% of world production exported from developing countries Geographic Differences Per capita spending and preferences different in any given market

INDUSTRY OVERVIEW: COMPETITION Gap, Inc. H&M Benetton Zara Production Outsourced In-House 40% In-House 60% Outsourced Lead Times High Low Net Margins -.06% 9.6% 7.05% 10.47%

INDUSTRY OVERVIEW: POSITIONING Price + Benetton Gap Fashion - Fashion + ZARA H&M Price -

ZARA OVERVIEW Owned by Inditex (Industria de Diseno Textil) Largest of 6 Inditex Chains 500 stores in 30 countries For women, men, and youth From infants to age 45 Zara starts with “Z”

The “yoo-goo-goo-lizer” – you know, the guy that speaks at funerals!

ZARA OVERVIEW: ADVANTAGES Vertical Integration Quick Response to Demand (Pull System) Small Batch Production High Product Turnover Central Distribution Center / Strong IT System

ZARA OVERVIEW: SUPPLY CHAIN System is designed for short production cycles, quick response (QR) to demand, and reduced number of markdowns Manufacturing ASIA (20%) Low QR Low Cost Design Distribution Sale DISTRIBUTION CENTER Increased shipment frequency increases QR Small batch production lowers cost of demand uncertainty STORES Decentralized store management supplements QR Managers determine products to sell and return INDITEX MANAGEMENT / DESIGNERS Determine apparel designs and manufacturing locations IN-HOUSE (40%) High QR High Cost EUROPE / N. AFRICA (40%) High QR High cost Returns from stores either rerouted or disposed of in local stores near dist. center IT SYSTEMS Provides accurate demand information to determine manufacturing locations and production levels

ZARA CHALLENGES Aggressive growth strategy needed 76% of equity value based on future growth expectations Need to maintain competitive advantages in new geographic markets Data collection, Quick response, High product turnover, Strong IT System

RECOMMENDATIONS Short-Term Solution: Expand in Europe Focus on Italy (63 Billion Euro Market) Implement “Oil Stain” expansion method Long-Term Solution: Expand Outside of Europe Establish operations in North America North American Distribution Center (Mexico) Initially focus on coastal cities Culturally Diverse Management Team

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