Question

1. 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?

Answer 1

Inditex chose to have both in-house manufacturing and outsourced manufacturing because In-house manufacturing allows Zara to be able to respond quickly to the changing trend. Zara will be flexible in producing products with uncertain demand especially the fast move of new product design. Outsourced manufacturing is for the general, common and out season products. This outsource manufacturing also benefits the company as low cost of production, supplier knowledge bases and development and the available of new technologies and innovations. Zara maintain manufacturing in Europe rather than move everything to Asia because the company and management believe that having a factory in its own country, the company can manage and response to unpredictable quick change of demands. Although the cost of production in Spain is consider to be high comparing to Asia countries but the Zara factories is located in the areas where is known to be a cheap labor in Spain. The factories are also located near to the distribution center so the cost of delivers finished good to the DC is low.