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Zara's Supply Chain and Operations Management

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Zara is a clothing and accessories retailer selling stylish apparel at affordable prices, and it is also the most profitable brand of the Spanish clothing retail group Inditex SA. Originally, the first Zara store opened when a German wholesaler suddenly cancelled a big lingerie order in 1975 and owner Amancia Ortega worried it might bankrupt his young clothing company. Ortega planned for this new Zara outlet, located near his factory in La Coruna in northern Spain, to sell this overstock merchandise himself. Since then, Zara has expanded into 500 stores in 68 countries as of January 2007 and has become a leader in customized fashion retailing. Learning from his early bad experience, Ortega developed a highly vertically integrated operation where a majority of the company’s production processes are kept in-house. Zara’s operational brilliance does not rest upon one specific operational component, but rather on a very unique and almost counterintuitive “jigsaw puzzle” of supply chain structure that has allowed it to grow market share and sales, even in times of economic decline. Zara has developed a business model with some basic operational goals: provide consumers with affordable and stylish clothes in very short lead times, supply small quantities of each style to reduce inventory risk and cost and increase the number of available styles and choice. It has created a unique value for its customers – offer very affordable and cutting-edge designer knock-off fashion much faster than its competitors. Its main competitors –H&M, Gap and Benetton – have all developed traditional supply chains that include heavy outsourcing to low-cost labor countries, long product cycles and a focus on a bottom line per-unit cost, rather than focusing on the value of the whole chain. Zara’s success is largely due to the unique combination of operational elements of

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