1. Baki USLU Barış BOZOĞLU
ZARA
Baki USLU
Barış BOZOĞLU

2. Outline History of Zara The Textile and Apparel Industry
The Zara Model
The Problem (outsourcing benefits and risks)
Questions

3. History of ZARA 1963 The founder of Zara, Amancio Ortega Ganoa
Started his career as a clerk
1975
First Zara store opened in La Coruna, Spain
1989
There were 82 Zara stores in Spain
Ortega began international expansion in
Portugal, Paris, New York

5. In 2001 Zara was a world brand with 1200 stores in all around the world
Most of the products were produced in Spain

6. The Textile and Apparel Industry
Global textile and apparel industry was 5.7% of the whole manufacturing output of the world.(1999)
The clothing market in the major countries $580 bilion
40% labor cost in textile
60% labor cost in apparel
Apparel production is related to the fabric

7. .

8. The Textile and Apparel Industry in the E.U and Spain
Textile and apparel workers consist of 7.6% percent of total E.U manufacturing workers
Italy 31%
U.K 15%
Germany 14%
France 13%
Spain 9%
Portugal 6%

9. Spain E.U is the second textile exporter in the world
Spanish textile and apparel industry was comprimised mostly of many very small firms and had not been strong in R&D.
Wages increase

10. THE ZARA MODEL Zara’s Planning and Design Cycle
Designers start to work on designing collection a year ago for initial collection
There are 200 designers
They made designs every year

11. Patterns and Samples
In some cases designs made by 3rd party suppliers

12. Production Sourcing and Scheduling
50% of the garments are outsourced
Garments with fashion styling manufactured in Spain basics and knits are outsourced
Zara’s season inventory
In the beginning of the season 60% of the collection is ready while others are 80%
25% of the season’s collection is stored in stores in the beginning of the season
85% of the inhouse production is that season’s production

13. In-house Manufacture

14. In-house Manufacture
40% of fabric produced in-house
Cutting
Sewing

15. In Season Production Modified in response to market demand
If an item was not selling
If an item sells
If a product sell very well
If a product’s sale is not satisfactory

16. Distribution Zara’s distribution center in Arteixo
New distribution center in Zaragoza
Shipment

17. Retailing
Store managers decide for the items from the distribution center
Stores receive new inventory several times a week
Sale

18. Pricing Strategy Pricing strategy= cost + target margin
Single Tag to Bar Code

19. Growth Strategy Stores operated by Zara, franchise, alliances
USA market

20. Sourcing Dilemma?
Increase outsourcing vs. keeping current model

21. Benefits and Risks of Outsourcing
Economies of Scale;
Manufacturing costs is reduced with outsourcing by aggregating orders from different buyers
Focus on Core Competency;
A careful decide on what to outsource helps the buyer to focus on its core competency
Zara has the ability to give a quick response

22. Increased Flexibility;
Ability to better react to changes in customer demand
Ability to use the supplier’s technical knowledge to accelerate product development cycle time
Conflicting Objectives;
Flexibility vs. cost reduction

23. Questions?

24. Thank You