Zara Manufacturing Process

The sourcing and manufacturing process are also key to the business model. Zara has purchases offices in the fashionable cities of Barcelona and Hong Kong which allow for the purchases to also serve as trend-spotters. 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 and Mexico. Merchandise in the main facility has a capacity of only 45,000 folded garments per hour. This facility admittedly has its limitations unless more capacity can be created elsewhere. Also, the vertical integration of manufacturing and distribution greatly helped to reduce the Bullwhip effect.

On the retailing end, the business model allows for Zara to have a much more fashion forward line because it can commit to its product line much later in the season. In fact, the design process does not seem to stop and the designers are constantly evaluating consumer preferences. Zara's in-store staff is also young, and very fashion-conscious who serve as key "trend-spotters". In addition, Zara provides very limited volumes of new items in the most fashionable of Zara's stores and then uses the results of those sales to decide whether the items should also be sold in other locations. The limited volume and short available time successfully created a sense of 'scarcity' in consumer's perception.