RMT Assignment: N I F T, H - K

NATIONAL INSTITUTE OF FASHION TECHNOLOGY, HAUZ-KHAS
RMT ASSIGNMENT
SUBMITTED BY-
SALONI MISHRA ARUNAV SUMIT KUMAR M.FTECH SEM-2
ABOUT ZARA Zara is part of the Inditex Group of Spanish fashion retailers. Inditex, one of the worlds largest fashion distributors, it has more than 4,780 stores in 77 countries in Europe, the Americas, Asia and Africa. ZARA is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega. Head Quarters in Coruna, Spain, where the first ZARA store opened in 1975.In the 1980s Zara pioneered the concept of what is now considered "fast fashion. Their product portfolio is comprises with men, women and kids(ZARA KIDS)clothes, shoes, cosmetics and accessories.
CASE STUDY RELATED TO ITS SUPPLY CHAIN

STATISTICS
15 days from designs to products VS. industry average of 6-9 months 12 inventory turnovers/year VS. industry average 3-4 times 12,000 designs/year 30,000 Stock-Keeping Units (SKUs)/year Unsold items account for 10% of stock VS. industry average 17%~20% Commits 50%~60% of production in advance of the season VS. 80%~90% for other. Supply Chain Suppliers are all close to their factories so ZARA can order on a need basis. ZARA buys fabric in only 4 different colors; designs and cuts its fabric in-house Clothes are ironed in advance and packed on hangers, with security and price tags affixed Overnight trucks are used to deliver to European stores and airfreight is used to ship to other countries. ZARA changes their designs 2 weeks per time. Products of ZARA is very popular with young females (age of 24 -25)
Vertically integrated supply chain where design, production, distribution, and retailing were integrated. The vertical integration of ZARAs production system allows them to place a garment in any store around the world in a period between two to three weeks. Vertically Integrated Supply Chain
FACTOR IN THE PROFITABILITY FORMULABuy low, sell high; Buy on credit, sell on cash. Zara, which contributes around 65 per cent of group sales , concentrates on three winning formulae to bake its fresh fashion:
Short Lead Time = More fashionable Lower quantities = Scarce supply More styles = More choice, and more chances of hitting.
In Spain, 200 fashion designers are in charge of new designs for the clothing line. They select the most cost effective fabric for the new designs. Designs will be made into models when sent to the factory. The computer then decide how to shear fabrics in order to waste as little as possible. Fabric will be sent to the factories.
After the sewing process, products will be sent back to the factory for button nailing, ironing and inspection. Up to tens of kilometers of underground
transmission channel connects all the processors. Label trademarks for different countries.
Why using Vertical integration?

Local sourcing of raw material Cutting cost because they do not outsource any channel Fast time-to-customer Cutting time, faster, effective, and efficient Mass customization Low process costs
INVENTORYStores place orders twice per week and the supply of finished goods is matched to store demand.

Production is then increased or decreased in the flexible production facilities. Demand based production means there is very little inventory in Zaras supply chain, which results in much lower working capital requirements.
PROCUREMENT /INBOUND LOGISTICS
ZARA buys its raw materials from Italy, Spain, and Greece. Reason is final product can be push to the final selling point quickly. suppliers have agreed to supply material within 5 days to ZARAs facility in spain. due to this most of the inbound logistics are road haulage.(mainly trucks).
PRICING
As production is carried out in Spain where average wages are higher than low cost Asian countries so factory wage costs will be higher than competitors, which will affect margins.
DELIVERY
Deliveries typically arrive one to two days after ordering with most deliveries arriving by truck from the Spanish factories. Clothes are then put straight onto the sales floor and are available to purchase.
STRENGTHS
It produces about 11,000 distinct items annually compared with 2,000 to 4,000 items for its key competitors. The company can design a new product and have finished goods in its stores in four to five weeks; it can modify existing items in as little as two weeks. Shortening the product life cycle means greater success in meeting consumer preferences.
An average high-street store in Spain expects customers to visit three times a year. That goes up to 17times for Zara. 50% of the products Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in Asian and African countries and the rest of the world.
INFORMATION TECHNOLOGY (IT)

A. Approaches and Organization Zara's approach to the organizations utilization of IT was aligned with its preferences for speed and decentralized decision making. There is no chief information officer appointed and no formal processes for setting an IT budget on specific technology investments and projects. Essential applications were developed in-house as most commercial packages were not suitable for Zaras unique operations. B. La Coruna In La Coruna, applications developed internally were used to prepare and distribute the offer globally via the internet, receive orders from all of its stores and aggregate them. When the supply and demand were imbalanced, it will be highlighted and Commercials decisions on product allocation when demand exceeded supply will be executed. Theoretical inventory of each SKU at each store were managed with a separate application. Though it was not entirely accurate, it was not a great concern since it was only used to facilitate stock allocation decisions.
CONCLUSION
Zaras updates after the case study and identify several important updates to its SC which includes a more accurate way of managing its inventories, an addition to its sales channel and improvements to retailers work process. However, it is noted that Zara still experiences several SC challenges. These include key issues such as the limitation of its companywide interconnectivity, obsolescence and restriction of the technologies currently used and lastly, the need to maintain its leadership in the industry with online expansion.
Based on the challenges discussed above, we have came up with three different recommendations to tackle the issues at hand. They are establishing mobile enterprise applications, upgrading of POS terminals and further improvements on its e-commerce. However, each of these recommendations has its benefits, disadvantages and associated risks. Zara will need to carefully evaluate these recommendations and mitigate possible risks before implementing them. All in all, we believe that through the implementation of more advanced technologies, whilst having proper management of possible risks, Zara will be able to further enhance their operations and remain as a dominant player in the fast fashion industry.

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NATIONAL INSTITUTE OF FASHION TECHNOLOGY, HAUZ-KHAS

SALONI MISHRA ARUNAV SUMIT KUMAR M.FTECH SEM-2

CASE STUDY RELATED TO ITS SUPPLY CHAIN

Why using Vertical integration?

PROCUREMENT /INBOUND LOGISTICS

INFORMATION TECHNOLOGY (IT)

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