The Sourcing Strategy Of Zara

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Introduction Zara was created by Amancio Ortega Gaona in 1975 in Spain. From there, he kept expanding, and by 1989 he had opened up 82 stores in Spain. Zara eventually began expanding globally, and by the year 2000 over half of Zara’s sales were from outside of Spain. If you look at Table 9-1 below, it shows that Zara’s net sales gradually increased by millions from 1998 to 2000, and that they are Inditex’s bestselling brand. By 2001, Zara allowed the public to invest in their stocks and became the world’s third largest clothing retailer. They also had over 1200 stores located in 35 countries. Zara offers moderately priced, fashion forward clothing for men, women, and children.
Analysis/Recommendations One
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This allows them to outsource basic items and knits, and insource fabric procurement, garment assembly, and finishing. By doing this, they are able to only commit 15-25% of its season inventory six months in advance, as compared to the 40-60% most retailers require. Keeping production split allows them to go from start to finish on a style within as little as 10 days. They also compare their house manufacturers against 3rd party suppliers to keep them competitive and keep their cost low. Along with doing this, they also subcontract sewing to Galicia and Northern Portugal because wages are low, and unemployment is high. Currently, they depend largely on local sourcing in Spain, which helps support their vertically integrated model. Zara also has deliveries between their factories and suppliers many times a week. This keeps the turnaround time between a week or two. The fast turn around gives them a competitive advantage by allowing them to produce quickly and adjust to …show more content…
If you look at table 9-3 in the book, Spain has the 3rd largest hourly labor wages. If they want to expand their production and keep costs low, they might have to outsource to India and China, which have the lowest hourly wages. This could be a problem because it might affect the quality of the product, which will affect their competitive advantage. They also pride themselves on being local, and outsourcing to cheaper locations will distort that image. The increase in outsourcing may also lead to slower turnover rates, so they may lose their ability to adjust inventory to market demand as quickly as they are able to now. To see how this may impact the company, they could start by outsourcing just a segment of the clothing and see what impact it has on the company’s costs and sales. Depending on how this initial segment does, the company could slowly outsource more and more of their production. Along with step by step implementation, they could also look at their online sales to determine where the company should expand next, whether that is the U.S. or another European

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