Zara Case Study

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Introduction: Zara apparel has already established a strong foothold in its native Spanish soil but is looking to expand in various markets worldwide. Zara’s supply chain has been a key factor in facilitating their ability to expand with efficiency, but may also be limiting the pace of their expansion and creating potential diseconomies of scale. Via PICO and financial analysis we can see Zara’s strengths and weaknesses and establish proposed recommendations for improvement and opportunities. Summary of Situation: Zara’s current supply chain has proven effective and the organization has been proactive regarding future expansion. There is strong evidence they recognize the need for continuous change in order to remain competitive with other apparel companies (The Gap, H&M, Benetton). Via PICO analysis we can observe Zara’s DNA and further identify and address their Strengths, Weaknesses, Opportunities and Threats (SWOT). Process DNA- Strategic Sourcing, New Product Design/Introduction, Manufacturing/Supply Chain Planning and Collaboration/Shifting Network Strategies. Exhibit 1 o Strategic Sourcing • One area of strength is that Zara has long-term ties with approximately 20 suppliers for almost 70% of all of their external purchases of finished garments- their utilization of a small number of suppliers allows for better integration and trust. • There may be a potential opportunity to concentrate buying power. Comditel, a subsidiary of Inditex, manages the fabric needed for Zara’s internal and external manufacturing. Currently Zara’s timeframe is one week to finished fabric, but Comditel utilizes more than 200 external suppliers to meet their needs. A reduction in the number of suppliers may create greater buying power and lower costs. • There may be a potential opportunity to concentrate the number of subcontractors used for internal manufacturing. Currently

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