Supply Chain Management : Zara Apparel Manufacturing and Retail

Group Members:
Muhammad Nazir Ansari
Salman Khan
Muhammad Ahmad Temuri
Sadia Rafique
Azhar Ali
Presented To: Sir Irfan Ali
Qudsia Saleem

Class: BBA-6B
Question No. 2

• Why has Inditex chosen to have both in-house manufacturing and

outsourced manufacturing? Why has Inditex maintained
manufacturing capacity in Europe even though manufacturing in Asia
is much cheaper?
• Outsourced manufacturing is for the production of products with
predictable demand
• In-house manufacturing is for the production of products with highly
uncertain demand.
• 40% in-house production allows added responsiveness to trends and
postponement of decision until after trends.
• A strong IT department helps them make quick product decisions and
drive replenishment.
• Maintained large fraction of manufacturing capacity in Portugal and
Spain (Europe), despite the higher cost there, it allows Zara to
respond quickly to changing fashion trends in Europe.
• For ZARA, speed and responsiveness are more important than cost.
Manufacturing Capacity in Europe helps manufacturers offer fast and
flexible sourcing and such products are to be delivered quick instead
of at Asia
• The above helps Zara reduce inventories and forecast error.