Discuss about the Logistic Management for Zara.
This report is based on the case study of Zara, which is Spanish company operates in the apparel industry in the international market. During this report, the logistics management of Zara is analyzed. In the beginning, the fundamental reasons for the success of Zara are identified and that are compared with Dell, Myer and Walmart that tops the list of Forbes op 500cmpanies in the year 2016. After that, the focus is made on the techniques that are applied by Zara to achieve competitive advantage in the industry and market. Lastly, the report identifies the similarities among the success formula that are applied by Zara, Dell and Myers. In the end, the report provides some recommendations that can help Zara developing its business in future.
In the international apparel industry Zara is one of the top performing companies. The product quality of the company is very high. If the success factors of Zara are analyzed in detail, then it can be identified that the main factors behind the success of Zara are its supply chain and the product quality. The supply chain of the company aims to maintain a smooth flow of products and services to the end users. Zara formulates 12,000 designs per year and has 30,000 stock-keeping units per year (Zara.com 2016). Christopher (2016) moreover depicts that ZARA does not have to face any issue regarding the low stock as they commit 50%-60% of production in advance of the season so that they can fulfill their demands.
The materials used by Zara are of top quality. Moreover, the management of the company has focused on the designs of the products. Qrunfleh and Tarafdar (2014) stated that the Zara is the most fashionable brand in the apparel industry in the current scenario. The dresses produced and offered by Zara are of unique and most trendy design, which are not available at other company. Marsh (2015) considered the designs of Zara’s dresses and other products have reached the company to the top level of success.
Apart from the supply chain, product designs and quality, there are many other factors behind the success of Zara. One of those factors is its target market. The company has targeted the higher class people, who can avail its product easily. Due to this, the company can maintain its premium pricing strategy. Crandall et al. (2014) depict that the premium pricing strategy is another factor behind the success of the company. As the prices of the products of Zara is much high, the people or customers believe that the quality of the products will be good and so they prefer to buy the products. This indicates that the pricing strategy of the company also helped it to attract the customers.
Sridharan and Simatupang (2013) states though Zara, Dell and Myer belong from different industries; some common factors have influenced their success. If the success factors of Zara are compared with the success factors of Dell and Myer, then it can be identified that quality is also one of the success factors for Dell. The quality department at Dell is very conscious of maintaining the quality of the products of the company. Like Zara, Dell has also tried by making its product unique in the market. In surveys, it has identified that many people prefer to buy the laptops of Dell especially for the higher quality of the products. Unlike the ZARA, Dell does not have intermediates and all the functionalities are occurred of three major actors- Dell, supplier and customers (Vrat 2014). On the other side, Myer is also trying to maintain the quality of its products; however, the poor service quality of Myer has affected the success of the company. Many customers of the company have complained that they do not get proper service from the company’s end; moreover, the customers of Myer have also complained that the company is not able to meet the specific requirement of them. Therefore, from the point of view of products and service quality, Zara and Dell are better than Myer and it has helped the two companies to become successful in the market. Another organization that is considered as the successful organization according to the Forbes list is Wal-Mart. Latif and Parker (2014) depict that they key success element of their supply chain is that they have 160 distribution centers within 130 miles of their designated stores. The only difference of Wal-Mart with the Zara is that, the former organization have to maintain stock as they are dealing with retail products that are used by people in everyday life every time. Thus, Wal-Mart has giant stocks products and manages an average of $32 billion in inventory. However, there is a chance of wastage of inventory in case the sale does not match with their estimated sales. Thus, maintaining low but real-time inventory is beneficial.
Apart from the product and service quality, selection of specific target market is another success factor for Zara. If the success factors of Zara, Dell and Myer are compared with each other, then it can be identified that the target market of Dell and Myer is much wider than Zara. Due to this, Dell and Myer face problems fulfilling the specific requirements of a particular group of customers or a particular portion of the target market. On the other side, Vijayan et al. (2015) stated that as Zara has a specific target market, which is small, the company has the opportunity to satisfy the specific requirements of the customers. Therefore, it can be said that the strategy of selecting the target market has not contributed much to the success of Dell and Myer, but it has influenced the success of Zara.
The pricing strategy is also a factor behind the success of Zara. However, if the pricing strategies of Dell and Myer are compared with the pricing strategy of Zara, then it can be identified that Myer and Dell have not taken the premium pricing strategy, rather they have concentrated on the economic pricing strategy (Ross 2015). The economical pricing strategy taken by these two companies has also helped the companies attracting the customers because the price level is low, but this particular pricing strategy did not contribute much attracting the loyal customers. As Zara has targeted the customers through premium pricing, most of the customers are loyal to the company.
Therefore, in comparison to the strategies of Dell, Myer and Wal-Mart, It can be said that the strategies taken by Zara are more effective.
Achieving and maintaining the competitive advantage is a very important factor for the sustainability of a company. The term sustainability indicates the situation, in which a company is able to meet the current requirements without hampering or compromising the requirements in the future (Min 2015). In order to maintain the sustainability, Zara has specially focused on the competitive advantage. The management of the company believes that in order to achieve the competitive advantage, it is very important to maintain the quality of the supply chain of the company.
The supply chain management at Zara has very effective. The management of the company has mentioned that Zara maintains a smooth flow of supply chain activities. The designers of the company always keep themselves aware of the latest fashion trend in the market. Seifert and Philipp (2014) portrays that the supply chain of the company always focuses on the proper time management. The management of the company has mentioned that the supply chain of the company is much transparent so that any fault in the supply chain can be identified at the right time. In order to achieve the competitive advantage and sustainability in a better way, the company can follow the principles of supply chain management. The supply chain principles that Zara can follow are stated below:
Principle 1 – The Company must customize the logistics of it according to the products and service requirements of the customers and customer segments’ profitability.
Principle 2 – The Company must segment the market based on the specific products and service needs of the customers and according to that the company must adapt the supply chain.
Principe 3 – Company must be always aware of the market signals like, demand and trend and the supply chain planning must be done based on those signals.
Principle 4 – Organization needs to differentiate its products and services very closely to the customers’ demand and the speed of converting the demand into the final products must be high in the supply chain.
Principle 5 – The Company must reduce the total cost of production and distribution by managing the supply chain activities with the help of proper strategies.
Principle 6 – The supply chain of the company must be based on advanced technology so that the company can take a decision at multiple levels.
Principle 7 – The Company must adopt the channel-spanning measurement method for measuring the performance of the collective success of the supply chain of the company.
The above-stated principles of supply chain management are suggesting an advanced supply chain system that can help a company achieving competitive advantage in the market. In order to follow the supply chain principles, the management of Zara can take the following strategies for its current supply chain management:
Advanced technology – The Company must implement advanced technology in the supply chain of it. The management must implement the data-driven supply chain at Zara. This data-driven supply chain management of the company will be based on real data, which will help the company reducing the waste level to the great extent (Brusset 2016). Use of advanced technology will help the company getting the proper data at the right time. These will only the other side help in taking multi-level decisions for the betterment of the company.
Implementation of JIT system – The management of Zara can implement the JIT or Just-in-Time system at its supply chain. Li et al. (2015) portray some of the benefits of Just-in-Time supply chain in management is that it reduces waste and take less budget to implement in the existing supply chain management and hence it is beneficial for ZARA to provide their fashionable apparel to their customer. ZARA can also reduce the transportation waste, inventory waste by the implementation of JIT (Wisner et al. 2014). The approach of JIT will help ZARA to manufacture the products for fulfilling the customer demands according to season according to their demand and will lead to a situation where no apparel will remain on the shelves. Bookbinder and Locke (2013) furthermore define that with the use of JIT application, products defect will also be reduced.
The procedure of the supply chain is different for both of the companies that are Zara and Dell as their key product is different. MacCarthy et al. (2016) define that Dell implements the made-to-order procedure where they started manufacturing products as they get orders for computer, laptops or accessories. This result in low lead-time and make the suppliers laid close to their manufacturing factories in order to deliver the computer quickly. Zara also applies this strategy and maintain low inventory, and offers a limited stock of its fashion apparels to the consumer. Fantazy et al. (2016) depicts that this allows both of the organization to offer new design every time they launch products as maintaining low inventory allows an organization allows them to focus on the new design of the products rather than the manufacturing same products line.
Yes, this procedure of maintaining low inventory approach is beneficial for other organization especially manufacturing companies. Lu and Swaminathan (2013) explains that suppliers always remain close to the factory and as a result, it will be easier for the organization to communicate with the supplier.
Maintaining low inventory is the key elements or Myer as well and this results in right inventory in the store at the right time. However, they have implement push and pull strategies that are not the approach that ZARA follow. Cordón et al. (2013) depict that Zara maintains limited stock in their store in order to maintain an illusion to the cutesier that they have limited stock and Zara also change their stock after every week so that customer can check for new trends. This strategy is however, not used by Myers for their fashion apparel and their shoes as they follow push and pull strategy. This approach signifies that Myers intends to stock a product and creates a supply chain to facilitate distribution. Gattorna (2015) moreover, explains that both of the organization utilizes the approach for electronic trading as a part of their supply chain. Zara and Myer use the Drop shipping and different contact seller that n behalf of them provide their products across the world. This procedure is beneficial for different organization as they can represent their brand across the borders irrespective of the fact whether they have their outlets in those places. Moreover, application of e-commerce as a part of the supply chain management signifies their competitive advantage.
Conclusion
Thus, it can be concluded that in comparison to the supply chain management strategies of Dell, Myer and Wal-Mart, the strategies are taken by Zara is more effective and attract more customers throughout the year. In addition to that, they manufacture fewer products and rotate their stock in the showroom every after few weeks and this makes the customer to purchase their fashion apparel before clearing the stock. However, Dell initiates manufacturing only after they receive their order from the customers. The suppliers also closely present around the factory so that they can supply the raw materials to Dell. The approach that is similar with Myer’s with Zara is that they implement the e-commerce services and communicate with intermediates to offer their service to people across the world.
Zara do not have fashion outlets in every place rather than they have their e-commerce facility so that every individual can experience their products. However, they can open different outlets of their store so that people can access and evaluate their products closely before buying. Zara can also implement the establishment of supply chain metric like “Enterprise-wide balanced scorecards” that allow the supply chain managers to have timely insights and take effective steps against disruptions and opportunities.
Reference List
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