Zara uses a mixture of strategies when sourcing their production. It uses most of outsourcing to produce basic items and initial fashion collection. It outsources about half of its production to third party (of the outsourced 60% from Europe, 30% from Asia, 10% rest of world). The sourcing strategy with external suppliers is based on expertise, relative cost, transportation cost and most importantly time sensitivity. At the beginning of each season Zara commits 50-60 % of its inventory, while quarter of the season collection is made available at start of season.
Competitive advantage for Zara by using the sourcing strategy: 1. Being able to produce at lower costs 2. Flexibility to use in-house production following fashion trends 3. Better meet consumer demand (able to produce more of the popular products) 4. No need to discount a large amount of product at the end of the season (ultimately leaving few unsold products at the end of the year)

Zara maintains extremely low inventory of finished products to increase the regulatory visits of customers in one season. No inventory is held in the central warehouses and there was almost no inventory at the stores that was not on the selling floor. Zara relies immensely on direct communication between retail stores to give direct feed back to the designers. Second distribution centre is built for more distribution capacity of inventories.

Zara is now implementing a radio frequency identification (RFID) system that allows it to track products from the factory to the point of sale. The goal is to improve inventory management by instantly indicating items that need to be reordered. The platform can record and reorder apparel for stores that sell out of particular sizes more quickly than others, or track high-performance items. This new tagging system will speed up the process of getting apparel into stores