Case Analysis Zara

Case Analysis ZARA: Fast Fashion

By: Parth Mair (094240)

MBA FB&E II

1.Business Model of Zara

Concept of Zara's business model -

It is often cited as "Dell in the fashion industry" due to its excellent supply chain management.

The core concept of Zara's business model is they sell "medium quality fashion clothing at affordable prices", and vertical integration and quick-response is key to Zara's business model.  The business system of Zara consists of designing, sourcing and manufacturing, distribution and retailing. There are four fundamental success factors: short cycle time, small batches per product, extensive variety of product every season and heavy investment in information and communication technology.  These four elements are involved in every aspect of the business. 

Each year several hundred thousand SKU’s are produced based on 11,000 distinct items varying in color, fabric and size.  Zara accomplishes this huge variance by ordering small batches and internal production of the most stylish, and therefore most time-sensitive items.   The cycle time from beginning of the design phase to the arrival of the finished goods in the stores is 4 to 5 weeks for new items and 2 weeks for modifications to existing items. 

Zara has developed its sourcing and manufacturing very well and now it is its competitive advantage. Zara uses an Inditex subsidiary, Comditel, for its purchasing of fabric.  Approximately half the fabric is purchased in grey to allow for flexibility in manufacturing a variety of colors and patterns.  This is a key component of the business cycle as the fabric is finished in just one week. The particular distinction of Zara's manufacturing is that they manufactured its most fashion-sensitive products internally and produce in small batches for the most time-sensitive ones.

For distribution, all merchandise is shipped through either the central facility in Arteixo, Spain, or through satellite sites located in Argentina, Brazil...