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Inventory
Thanu Khan
Navneet Kaur
Neha Prasad
About Zara
countries around the world, 12000 designs per
year and more than 30000 SKUs per year.
2
OPTIMIZATION INVENTORY
MODEL
9
Push Or Pull System
https://unsplash.com/photos/mcLpPD36-2k
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Short Lead
Time(as little as 2 Ownership and
weeks from Reducing Leadership
Control of
concept to store) Risks in Numbers
Production
INVENTORY MANAGEMENT
STRATEGIES
Supercharged React Information Keeping Costs
Product rather than Technology Down
Development Predict
5
HOW ZARA USES
LEAN
MANUFACTURING
MODEL?
Zara is vertically integrated. It produces nearly 60%
of its merchandise in-house. This vertical integration
approach gives Zara a lot of control over how it
operates.
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Just In
Time Zara uses vertical integrations in their supply
01.
Production
chain, and implement strict lean inventory
.
practices that ensure each store receives only
the stock that they need.
02.
Twice a week, at precise times, all the 650
store managers order clothes, and twice a
week, on schedule, new garments arrive.
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Holding inventory is hazardous for fast fashion because products that are in demand
one day can be out of favour the next day. So holding large amounts of inventory can
lead to heavy discounting or outright waste. Zara holds approximately 6 days worth
inventory.
LOW INVENTORY
Zara’s agile manufacturing and supply chain capabilities allow it to maintain low levels of
inventory across the supply chain and replenish as often as two times a week.
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KANBAN SYSTEM
9
ONE
PIECE 01.
It is the movement of a product ,one
piece at a time through the production
FLOW
.
process
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Zara’s vs.
Competitors
“With Zara, you know that if you don’t buy it, right then and there, within 11
days the entire stock will change. You buy it now or never.”
Zara which contributes 80% of group sales
concentrates on 3 winning formulae:
✓ Shorter Lead Time= More Fashionable
Clothes
✓ Lower Quantities= Scarce Supply
✓ More Styles= More Choice
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❖ Zara sells over 11,000 distinct items per year versus its competitors that carry 2,000
to 4,000.
❖ However Zara also boasts the lowest year-end inventory levels in the fashion industry.
This lean working capital management offsets their higher production costs and enables
them to boast rapid sales turnover rates.
❖ At Zara, only 15% to 25% of a line is designed ahead of the season, and over 50% of
items are designed and manufactured in the middle of a season based on what
becomes popular. This is in direct contrast to a close competitor like H&M where 80%
of designs are made ahead of the season, and 20% is done in real-time during the
season.
❖ Most other retailers commit 100% of their designs ahead of a season, and are often left
with excess inventory that they then have to discount heavily at season-end.
❖ Instead, Zara’s quick replenishment cycles create a sense of scarcity which might
actually generate more demand.
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