Zara: Future Ready?

Case Code: OPER122
Case Length: 10 Pages
Period: 2011 - 2016
Pub Date: 2017
Teaching Note: Available

Price: Rs.400
Organization : Inditex
Industry : Apparel Manufacturing and Retail
Countries : Spain
Themes: -

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case discusses Zara, a clothing brand and the pioneer of fast fashion. Zara was owned by Inditex, a public listed company which also owned other popular clothing brands. Zara had a cult following of customers who flocked to its stores expecting something new each time and Zara lived up to their expectations every time. It brought the in-trend catwalk designs to its stores across the globe at affordable prices and replenished its stores twice a week – a feat no rival in the Industry was able to replicate. Zara provided such a customer proposition by being extremely agile in its manufacturing and sourcing practices. Inditex, Zara’s parent, also kept excess capacity in its factories (to be more responsive) and was heavily vertically integrated to maintain absolute control over its supply chain.

In the 21st century, Zara witnessed more growth outside its home country (Spain) and Europe which had historically contributed to the major part of its top-line. The Far East, which was viewed as a low-cost manufacturing source for Zara, also became a consumer of its Fast-Fashion so much so that China had the largest number of Zara stores in the world by 2016. But though Zara was a truly global brand, it didn’t act locally. In some markets like India where there weren’t as many fashion seasons as in the Western countries, there was little customization to appeal to local customers.

Zara’s operations were heavily centralized, which was seen as a competitive advantage for all the years of its growth. Analysts were of the view that Zara’s bottom line could be under pressure owing to its burgeoning global presence, especially when Zara used air-freight for its global deliveries. Moreover, every store across the world was served through its head office in Arteixo, Galicia (irrespective of the location of manufacturing), Inditex’s Spanish base. Such centralization for a global company was considered by many as counterintuitive. But for Zara, to act locally meant giving up its competitive advantage.

Issues

The case is structured to achieve the following teaching objectives:

Understanding the key drivers of a supply chain.
Different trade-offs to align organizational strategy to the supply chain strategy.
Efficient Supply Chain and Responsive Supply Chain.

Challenges with sub-contracting

Is the supply chain future ready?

Exhibits