Question:
Discuss about the Significance of the Supply Chain and Logistics Management of Zara.
Zara is a clothing manufacturing and distribution brand across the globe and they have developed their image as an effective fast-fashion retail chain organization. It was founded in 1975 by Amancio Ortega and Rosalía Mera and its headquarters is situated in Arteixo, Galicia. It is the most crucial brand for Inditex Group and it is world’s largest retailer of apparels. Inditex is fashion group and it also owns various big brands such as Massimo Dutti, Pull&Bear, Bershka, etc. Unique feature of Zara’s logistics management is that they change their collection once in a week in order to fulfil the consumer’s requirements. With relation to this, Zara has launched more than 20 collections in 2017 only.
Under this report, comparison between the logistics management of Zara and logistics management of Dell and Myers will be executed. Along with this, competitive analysis will also be conducted for evaluating the customer base, market share, growth rate and effectiveness of the strategies implemented by the Zara in their workplace.
Comparison between these two companies is next to impossible because both the companies are linked with different industries. Zara is engaged in manufacturing of clothing materials while; Dell is engaged in the IT sector and known for manufacturing computers, laptops and other electronic gadgets (Charles & Gareth, 2012).
Supply chain management of Zara is quite unique from other companies and major components of its supply chain management are designing, manufacturing, sourcing and distribution outlets. Its vertically integrated supply chain is considered as its biggest competitive advantage as it allows mass production under effective control thereby leading to well- managed inventories, lower price cutting, improved cost-effectiveness and value creation for the shareholders both in the short and long term.
Supply chain management of Dell consists three major players i.e. suppliers, consumers, and company. The process of supply chain management of Dell is quite simple, as they take orders from customers and company arranges parts from the suppliers and assembles them into a finished good to deliver it to the customers (Christopher & Towill, 2000). Innovative personnel and suppliers are engaged by Dell for the purpose of supplying and delivering the product with greatest value such that it creates a positive impact in the minds of the customers. The effective supply chain activities and techniques adopted by Dell has enabled it to acquire the position of one of the most successful PC companies around the globe.
Supply chain management of both companies differs from each other, as they both are linked with different sectors. Dell uses horizontal integrated supply chain system while; Zara has vertically integrated supply chain system. Apart from the supply chain and logistics management, there are various factors through which difference could be evaluated (Kiessling, 2015). Zara is engaged in the manufacturing and distribution of fast fashion clothes and accessories while; primary activities of Dell are to manufacture computers, and other electronic devices (Cowe, 2011).
Key elements through which Zara’s success could be analysed are their product’s quality, effective customer relationship management, and their apparels manufactured on the basis of latest trends and customer’s demands. Zara has adopted advanced techniques and strategies through which they had imposed control over all functionalities of the organization in order to attain the desired goals and the objectives. Apart from this, organization has identified its customer’s needs and fulfilled them in effective and efficient manner with the help of advanced controlling systems over the activities of the organization. In relation to effective controlling measures, it has been observed that the productivity and the efficiency of the organization have been raised within the certain period of time. On the other hand, Dell’s supply chain management involves the managing the activities, controlling measures and the performance appraisal measures through which organization has attained effective image in the IT sector. Following are certain points through which further understanding could be developed in relation to the difference between the procedures of Zara and Dell:
Suppliers: In terms of suppliers, Zara has adopted the vertically integrated supply chain management and under this system, organization controls its suppliers. The main advantage of this type of supply chain system is that company could easily identify and fulfil its consumer’s demand. On the other hand, Dell uses horizontal supply chain management system under which various suppliers are available for the organization and they need to identify an adequate supplier in relevance with the accuracy and speed of the services for producing the effective gadgets. Selection of inappropriate supplier in case of Dell may lead to various issues such as insecurity of data, uncertainty, slow supply services, shortage of materials, etc. This is the reason; Dell has managed its suppliers close to their manufacturing unit (Dalton, 2010).
Production Philosophy: Dell follows on make-to-order strategy and as per this strategy; organization manufactures products on the basis of consumer’s demand within the specific period of time. Apart from this, organization has adopted pricing strategy under which they provide electronic gadgets at reasonable rates. Dell also uses digital media platforms in which information regarding their products is available on their website. This helps the consumers to get relevant information regarding the company’s gadgets through which demand could easily be enhanced (Deogratias & Harorimana, 2009).
While Zara has adopted the strategy under which new and innovative designs are produced in order to satisfy its consumer’s demands within the certain period of time. Company also uses various promotional strategies so as to spread the awareness in the consumers regarding their new range of products. Thus, the production philosophy of Zara is based on the tastes and preferences of consumers and latest trends of fashion. Dell uses make-in-products for meeting its desired goals and the objectives.
Storage: Dell does not have huge storage facilities and this leads to reduction in their costs while Zara incurs huge costs in terms of storing their apparels. This is the reasons Zara’s cost of production is quite high in comparison with Dell (Donald & Stephen, 2014).
Distribution: Suppliers, retailers, distributors, customers, and assimilators are certain crucial elements of the distribution channels for Dell (Kampstra & Ashayeri, 2013). Dell is engaged in the B2B type of business model under which most of their products are ordered on internet platforms. Dell sells its laptops and PCs through internet mediums which enhance the demand for the product as well mediator cost reduces as products could easily be attained directly from company. This develops customer relationship and the trust over the company also builds up (Estampe, Lamouri, Paris & Brahim-Djelloul, 2013). Whereas Zara’s distribution techniques are totally different from the Dell, they distribute their products through their stores under which collection of apparels changes from time to time. The company also uses grade system to analyse the rate of demand over the products and less demanded products are removed from the stores so as to maintain the unique and innovative reputation of the organization (Ferdows, 2003).
Communication: In terms of communication, Zara uses various digital and print medium platforms for spreading awareness amongst their target audience in relevance with the arrival of new range of products. Company has also adopted the most trending strategy of taking feedbacks and suggestions from its customers for improving the performance of the organization. Whereas, Dell does not use these platforms for communicating with its clients which results in the huge weakness for the organization (Gallaughar, 2008).
Myer does not have special efforts for segregating their target market. While Zara uses segmentation variables to segregate their target market on the basis of demographic, geographic and on other segmentation variables while Myer does not use these techniques for targeting their audience. Zara is known as the leader of fast fashion industry as they have options for all age group audience irrelevance to their sex. Along with this, organization has developed its effective image in the global fashion industry through delivering best quality products at affordable process. Thus, Zara uses demographic and lifestyle type of segmentation technique to enhance their product’s demand as well as their market share (Gorrepati, 2016).
Myer uses “My Store” concept under which their target audience is general while Zara targets mostly young generation people. Myer has developed its effective position in the general retail industry through diversifying its ranges of products. Myer uses discount and offers’ strategy for attracting its tartest audience while Zara introduces its new designs on the basis of weather conditions in order to attract their target audience.
Logistics management of Zara is quite effective and efficient with the help of strong financial position in the target market. While Myer has also built its logistics management quite strong, this is capable enough in terms of attaining the desired goals and the objectives for the organization. Zara’s logistic management is capable enough to enhance the productivity of the organization through which goals and the objectives could easily be attained in fair manner (Hill, 2009).
Supply chain management plays crucial role in order to increase the efficiency of the organization; thus, most of the companies have adopted this strategy to gain adequate place in the business environment. With addition to this, effective supply chain management is helpful in attaining organizational goals and the objectives. It is also helpful in enhancing the customer satisfaction which leads to enhancement in the market share of the organization in the dynamic business environment. With the effective supply chain management, organization could develop adequate relationships with the customers through which customer services could be rendered at very low costs. This will develop the positive image of the organization in the customer’s mind-sets (LU, 2014).
Inditex Group has various brands engaged in the production and distribution of apparels across the globe. They have varieties of designs and materials for all age group audience. With its great steps and functionalities, Inditex group has been rewarded as the ‘International retailer of the Year’ by World retail Congress. This shows the capability of the group as well as it also helps the group to analyse its demand for the consumers across the globe. Inditex group has attained competitive advantage in the global market through its innovative strategies. The major brand of this group is Zara and this brand is majorly known for its attractive and innovative designs. With the help of this, organization has developed and maintained its position in the target market (Romano, 2009). Along with this, organization has attained adequate competitive advantage from its primary competitors such as H&M. The major reason behind adequate competitive advantage is adaptation of their unique and effective strategies and they have concentrated on fulfilment of their customer’s demand. Fulfilling consumer’s demand is really important for Zara as they are engaged in production and distribution of consumer-based products (Mihm, 2010).
From the above analysis, it could be observed that supply chain management and other basic activities of Zara are quite unique and different. Zara has attained adequate success and the major objective behind their success factor is adaptation of strategies which are customised, their economies of scale, and its logistics management plays crucial role in terms of attaining the goals and the objectives of the organization (Waller & Fawcett, 2013). While comparing the functionalities of the Dell, Myer, and Zara, it was observed that Dell satisfy its clients’ needs in an adequate manner through providing them adequate and appropriate qualitative gadgets while services rendered by Myer are not satisfactory as compared to other two companies (O’Marah, 2016).
Every organization is required to adopt and practice the innovative and advanced technologies and the strategies for attaining its desired goals and the objectives. Zara has performed in the same and they have adopted this methodology for enhancing their efficiency in the target market (Golicic & Smith, 2013). They have adopted the technology under which Zara has created their brand value through providing qualitative and innovative products to its consumers. Zara’s brand value is the most important factor through which organization could attain its desired goals and the objectives (Ray, 2010).
From the aforesaid information, it can be concluded that Zara’s supply chain and logistics management is quite effective and efficient through which they have attained their desired goals and the objectives in the global market. Apart from this, organization is also engaged in delivering unique and attractive designs twice a week in order to serve the consumers in an appropriate manner. They have also adopted certain strategies which have played crucial role in developing and maintaining the relationships with the suppliers and the consumers (Ellram & Cooper, 2014).. Under this report, supply chain management and the logistics management of the Zara was compared with the Dell and Myer in order to evaluate the effectiveness of the organizational performances. Apart from this, Zara should adopt certain set of strategies through which their policies could be molded on the basis of market trends, consumer’s demand, etc.
References
Charles, & Gareth, J., (2012), Strategic Management: An Integrated Approach, Cengage Learning, Pg 94- 109
Christopher and Towill, (2000), Supply Chain Migration from Lean and Functional to Agile and Customized, Supply Chain Management: An International Journal, Vol 5(4), pp206-213
Cowe, (2011) Sources of Competitive Advantage, (3rd), Essex, Pearson Education Ltd
Dalton, (2010), Leadership and Management Development, UK: Pearson Education Ltd
Deogratias, & Harorimana, (2009), Cultural Implications of Knowledge Sharing, Management and Transfer: Identifying Competitive Advantage: Identifying Competitive Advantage, IGI Global, Pg 144
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Golicic, S. L., & Smith, C. D. (2013). A meta?analysis of environmentally sustainable supply chain management practices and firm performance. Journal of supply chain management, 49(2), 78-95.
Gorrepati, K., (2016), Zara’s Agile Supply Chain Is The Source Of Its Competitive Advantage, accessed on 30th November 2017 from https://www.digitalistmag.com/digital-supply-networks/2016/03/30/zaras-agile-supply-chain-is-source-of-competitive-advantage-04083335
Hill, (2009), Global Business Today. New York: McGraw Hill Irwin
Kampstra, R. P. & Ashayeri, J. (2013). Realities of supply chain collaboration. The International Journal of Logistics Management.
Kiessling, M. G. L. M. D. T. (2015), Supply chain management as the key to a firm’s strategy in the global marketplace, International Journal of Physical Distribution & Logistics Management, Vol. 45 pp. 159 – 181
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