Discuss about the Logistics Case Study for Demands of Customers and Markets.
Although most companies might claim to respond to the changing demands of customers and markets, very few of them have requisite agility within their supply chains to make deliveries in such claims. Zara is one firm that stands out. The firm rapidly designs, produces and ships the latest fashion to its stores in far off locations. Zara logistics case study provides a description of how the firm, operating in Galician La Coruna in North-west Spain, has been able to maintain its flexibility and speed in its industry of garments (Tiplady, 2006). The case illustrates a fast-response global producer, supplier and retail network. The success of the company is as a result of logistic management strategies derived from the seven supply chain management principles listed in the case.
Zara’s case study raises a number of issues. It also points out where the company is based, and states that it is one of the fastest growing companies. Unlike any other companies, the case makes it clear that the success of its growth is because of a clearly defined supply chain. Unlike its competitors, Zara’s supply chain is fast and its inventory levels are low (Sheffi , 2012). Consumers love it when they order products and get them within a short time of waiting. The case indicates that most apparel companies like Zara end up failing because they face difficulties in this area (Malviya, 2015; Mangan, Lalwani and Lalwani, 2016). According to the author, the manufacturers are hindered by obsolesce of their products, and are later stuck with those products because the market does not want them. The problem with this is that they do not have ways to get rid of the products. This is a form of wastage that lean systems work hard to eliminate.
The other issue that the case raises is the distance between sections of the same organization. Some organizations fail because a product has to be moved distances before it is completed and taken to the customer. This leads to wastage of time and delays for the customers. Zara eliminates this problem by ensuring that all the processes take place under one roof, from design to packaging of the product (Mangan, Lalwani and Lalwani, 2016). When everything is done in one facility, colleagues easily consult each other in case problems with the product arise.
In addition, the case study raises the issue of distribution of the complete product. Zara ships the finished products to its stores worldwide according to the schedule that it has created. If customers are asked to wait for their products after two weeks, they are guaranteed and are sure they would get the product at that short period. Most companies fail in this section. Customers lose faith because by the time they come back to collect their products from the stores, they are disappointed by the news that the product is not yet available. The case points out that store managers at Zara use handheld devices so that they can maintain the schedule. With the devices, they are able to post real-time orders.
Another issue raised is the visibility of the supply chain. All the individuals along the supply chain are able to tell where a particular product is, that is, from the store managers to designers and manufacturers on site. Most companies that fail here because they cannot track the exact position of the ordered product. This leads to wrong information being delivered to the customers.
In addition, the case study points at the adequacy within the company. Unlike in other companies, Zara has spare capacity ready. If trucks, warehouses or certain products are required urgently, the firm is able to provide them immediately. This ensures that there are no delays within the supply chain. Companies that do not have ready supply capacity waste a lot of time as they wait for the one that has failed to be repaired (Mangan, Lalwani and Lalwani, 2016). This trend makes the customers uneasy and they end up finding for alternative firms that they can trust. Zara’s case study is closely examined by other companies because the firm has managed to eliminate most problems along the supply chain for fast and unique retailing.
The first strategy that makes Zara so successful is its ability to maintain the lessons learned and make them the foundations of the business. Since its establishment, the firm has always been aware of what is happening in the market, and it does everything possible to adapt to those changes. The story of Zara dates back in 1963. In that year, Amancio Ortega Gaona began manufacturing women lingerie and pajamas for wholesalers (Walt, 2013). However, in 1975, a German customer cancelled a large order and Ortega was prompted to open the first Zara retail shop. The initial intention was to have an outlet where cancelled orders can be retailed (Ehrmann, 2016). The experience taught the company the importance liking manufacturing and retailing. The company is always guided by this lesson. Its job is to maintain the connection between the factory and the customers.
Another strategy is the synergy between operations and business. The company’s overarching strategy is to ensure that it grows with vertical integrations through diversification. Zara acclimatizes couture designs, manufactures them, distribute them and retails the garments within a fortnight of the original design’s first appearance on catwalks. The firm owns the supply chain and ensures that it competes on its own speed to market. It is their brand to value responsiveness and speed to latest fashion trends. The company was once labeled by New York Times, “mind-spinningly supersonic” because of its high speed (Jacob, 2012).
The firm’s other strategy is the just-in-time production strategy. Zara delivers trendy and fashionable numbers for different tastes via an integrated and controlled process – just-in-time (Folpe, 2010). In order to succeed in this, the company keeps a good amount of what it produces in-house and ensures that its factories reserve about eighty five percent of that capacity for adjustments within seasons. In-house manufacturing enables the company to maintain its flexibility in frequency, amounts and variety of new products to be launched. The firm is able to maintain this trend because of its heavy reliance on sophisticated textile sourcing and sewing amenities located near design factories in Spain.
The other strategy that Zara uses is for its success is creation of shortage and demands. The firm has more capacity that responds to demand as it occurs and changes. For instance, Zara operates four days weekly on full time and around the clock, leaving time for more shifts as well as temporary labor that can be added when required. This high capacity results to frequent shipping of the products created. As more new garments are supplied, more customers visit the stores, creating a shortage and opportunity environment. This strategy enables the company to provide customers with more fashion at full price because they are able to experience exclusiveness and scarcity. The total price is reduced as a result of the marked down merchandize in comparison to that of competitors.
The company should do more to maintain its success in future. In its logistics and throughout the supply chain, the firm should employ the lean system (The Ends Report, 2012). All the way from raw materials to finished products on shelves, the company should ensure that there is no wastage. Currently, the company commits 6 months in advance to approximately twenty percent of the season’s line. By the beginning of the season, Zara locks in sixty percent of its line at the beginning of the season. This means that 40 to 50 percent of its garments are designed and produced within the middle of the season. The firm gets to work when a certain design is a must-have and new in the street. Zara has maintained the trend of churning out new styles and fast-tracking them to their stores around the globe. While this is good, the firm should always control the amount produced to ensure that wastage is eliminated according to lean system.
It is important for the company to invest in Information technology systems that would be used in collection of data, data processing and analysis. Through such systems, trends of what and how customers make their purchases will be visible and enable the company make appropriate plans and strategies (Sanders, 2016). Currently, the managers for the respective stores communicate to the designers and manufacturers on the feedback they get from customers, that is, what they like, dislike and the type of clothes they are looking for. Integration of IT systems in future would enable customers provide their views without necessarily stepping to Zara’s stores. In addition, the company should ensure that the wages of the European workers is more than those of the counterparts in the developing countries (Pendleton and Finkel, 2016). This will help the firm to keep its best talents.
Myer is the largest chain group in the retail industry within Australia. It consists of more 67 stores strategically located in different locations. The stores have particular brands and have embraced mobile, digital and online platforms. The company has created a socially dependable enterprise and keeps manageability as the foundation of the business. Manageability considers social effects, finance and ecology of the business systems. Pillars created by the business include: more than 50 million Myer reward cards have been distributed to customers; Individual rewards are used by “My Myer team” to improve development; community contribution and support helps create relationship with society through “my community”; and finally, use of “My environment” reduces the firm’s energy use (Westcott and Pendleton, 2013).
Dell pays attention to clients and pay attention to what their PCs require. The firm’s motto is “Learn, Listen and Convey”. Direct model enabled the company to be proficient on supply chain. According to their model, they do not make to stock, they make to arrange. This reduces the duration of process. The company empowered its full production through the following four stages: keeping track of what was taking place in the business, designing a supply chain that meets the requirements of its customers, ensuring that capacity is enabled, and stabilizing the situation to make sure it works (Grinnell, J. and Muise, 2011).
There is a rivalry between Myer, Dell and Zara in terms of design and retail business. Although Myer is costly, it is effective. Both Myer and Zara puts much focus on the customers. However, Zara takes its time to listen to the customer and do what they want. In contrast to Myer, the strategy that makes Zara a favorite is the supply chain technique (Bonnin, 2012). The firm is very fast –new garments are conveyed as expected. Items that are not sold are taken back to the headquarters and shipped to places where demand is high.
Dell is a successful acclaimed company with PCs. Like Zara, Dell listens to customers and delivers what they require. Dell uses a basic supply chain, that is, customer, to Dell, to suppliers. Zara’s supply chain is a bit complex because the firm includes planners, producers, circulations and sources to all stores. Supply chain at Dell is Horizontal whereas that at Zara is vertical. Dell manufactures PCs after customers request for them in order to eliminate stock expense. Zara, on the other hand, has more distribution centers where they supply the complete products.
Toyota is a fortune 500 company currently ranked at position 8. The firm is a pioneer in the car industry even though it has been facing challenges. The challenges made the company lose a market to Volkswagen and General Motors. Lean manufacturing is ascribed to Toyota firm. One of the foundations that made the company successful is the creation of global destinations such as Malaysia, Pakistan, Argentina, Brazil, France and US (Dutta, 2011). Also, Toyota succeeded because it created an administration that incorporated the firm’s supply chain. The assembling frameworks at Zara are displayed according to thoughts that were created from Toyota. For instance, operations with high economy of scale are directed to Zara’s in-house cost reduction.
Conclusions
In conclusion, Zara has succeeded because of the logistic management strategies that it has put in place. The firm has thousands of stores all over the world. However, garments to all those stores are designed and manufactured in a facility in Spain. This represents a very wide market served by a single base. The firm therefore strives to meet needs of all its customers by ensuring that all its activities are well coordinated. For this purpose, store managers use handheld devices to provide real-time information of customer’s orders, both to the designers and to the customer. The firm has adequate resources to ensure that the supply process goes on even after breakdowns occur. In addition, the supply chain has been made visible. In order to succeed, the company recognizes the importance of customer feedback. Feedback creates an inextricable link between customers and designers. Special teams act on the feedback received from the stores in order to maintain the company’s brand. All these strategies are derived from the seven supply chain planning principles.
Globalization has been the way to go for most companies. Zara is not an exception. According to Forbes.com (2016), the company is ranked position 53 in the world’s most valuable brands. The clothing retailer is currently in 88 countries with more than 2,100 stores globally. Even after such expansion, Berfield and Baigorri (2014) argue that the firm is not ready to put its ecosystem to a test. Zara is a global company that does not act locally. Researchers argue that the secret of the company’s success is its centralization. Having its major operations in Spain alone makes the company to make decisions in a very controlled and coordinated manner. This trend poses the risk of the firm losing a share of its market as competitors increase. This risk can be eliminated by opening a second factory elsewhere.
In this case, the best recommendation is for the company to create another base from which it will be designing and manufacturing its garments, just like it is done in the Spain headquarters. With 142 stores, China has the largest number of stores after Spain. This would be probably the second best place to create a factory. In the past, other retailers have tried to expand their base and they faced complete closure. A good example is the Borders Group Inc. book retailers. However, strategy missteps and mistakes can be avoided by closely monitoring market trends and customer feedbacks. Once the company opens a second factory elsewhere, it should maintain the same culture as it has always done. For instance, the new factory should maintain the schedule of taking orders twice per week and making the deliveries. With proper coordination, monitoring and evaluation, the firm will continue to do better in future.
References
Bonnin, AR 2012, ‘The Fashion Industry in Galicia: Understanding the ‘Zara’ Phenomenon’, European Planning Studies, 10, 4, pp. 519-527
Dutta, P. (2011). Corporate Sustainability: A Case Study on Toyota Motor Corporation. Indian Journal of Applied Research, 4(8), pp.105-108.
Ehrmann, C 2016, ‘Zara’s first Michigan store to be at Somerset’, Crain’s Detroit Business, 32, 48, p. 0005,
Folpe, J. M. (2010). Zara Has a Made-to-Order Plan for Success. Fortune, 142(5), 80.
Grinnell, J. and Muise, C. (2011). Dell Computers: Competing Toward Decline?. Journal of Business Case Studies (JBCS), 6(3).
Jacobs, A. (2012). At Zara, in Midtown, It’s All a Tribute. [online] Nytimes.com. Available at: https://www.nytimes.com/2012/03/29/fashion/at-zara-in-midtown-its-all-a-tribute.html?_r=0 [Accessed 5 Dec. 2016].
Berfield, M. and Baigorri, M. (2014). Zara’s Fast-Fashion Edge. [online] Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2013-11-14/2014-outlook-zaras-fashion-supply-chain-edge [Accessed 5 Dec. 2016].
Malviya, S. (2015). Zara becomes the first apparel brand in India to cross $100-million sales mark. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/zara-becomes-the-first-apparel-brand-in-india-to-cross-100-million-sales-mark/articleshow/48011626.cms [Accessed 6 Dec. 2016].
Mangan, J., Lalwani, C. and Lalwani, C. (2016). Global logistics and supply chain management. 1st ed. New York: John Wiley & Sons.
Pendleton, D, & Finkel, I 2016, ‘A Zara of Modesty Rises in Turkey’, Bloomberg Businessweek, 4467, pp. 28-29,
Sanders, NR 2016, ‘How to Use Big Data to Drive Your Supply Chain’, California Management Review, 58, 3, pp. 26-48,
Sheffi, Y 2012, Logistics Clusters : Delivering Value And Driving Growth, Cambridge, Mass: The MIT Press, eBook Collection (EBSCOhost), EBSCOhost, viewed 6 December 2016.
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Walt, V 2013, ‘Meet the Third-Richest Man in the World’, Fortune, 167, 1, p. 74
Westcott, M. and Pendleton, A. (2013). Private equity and labour management in Australia: The case of Myer. Journal of Industrial Relations, 55(5), pp.723-742.
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