Logistics And Supply Chain Management Of Zara – A Case Study

Introduction to Zara and its success in the global fashion industry

Question:

Discuss About The Logistics And Supply Management Case Study?

One of the major factors of success by Zara in global fashion industry is its operation management, out of which Logistics and Supply Chain management plays the most vital role. The company was launched in 2012 by Ortega as the unique retail concept. Out of the total turnover of US $ 20.7 billion, Zara has represented through their major share contribution of 66 percent amounting to US $ 13.6 billion.

The normal production trend of Zara is 450 million annually it is amazing to note the efficiency level of the company to manage such big and enormous volume produced every year through supply chain with the logistics management efficiently controlled to meet the requirements of the stores in time globally. (Anon., 2015)

The coordination between operations and business strategy of Zara is found unique by prioritizing the need of the business with proper emphasis on the need of the customers. The company is accomplishing its growth objective by diversification of operation empowered with vertically integrated system. The company is engaged in specialized mode of design through couture with the operation process of manufacturing, distribution and retailing of clothes within the period of two weeks of the original design as displayed in catwalks. Thus the concept of Rapid Fire Fast Fashion Strategy is applied to Zara.

Main feature of fashion industry is to deliver the fashionable and trendy outfits for different class of target audience in such integrated and controlled system so that the customers can feel it Just in Time. It is the normal operation practice of Zara to keep significant inventories for its in-house production to assure that the factory reserves of Zara should be maintained in the level of 85% of total capacity to meet the timely requirement. This feature can provide the flexibility for Zara to fix its priority regarding the amount, variety of new products and frequency of products for launching. The company mainly depends upon headquarters in Spain for the production process including its sophisticated raw materials. The statistics shows that Zara runs its production process with the commitment of six months advance of 15 to 25% of benchmark line of season with the locking of 50 to 60 percent of its production process during the tart of the season. This effort results to conformation of 50 percent of its new products are designed and produced during the middle of the season. This practice ensures the company to sale 85% of its product with full price where as the industry trend is 60 to 70 percent. The percentage of unsold materials is only 10% of finished goods inventory which is phenomenal comparing to the industry average of 17 to 20 percent. As a result of this manufacturing strategy, Zara can sell most of its items in full price and the total overhead costs is mitigated through reduced merchandising cost as compared to that of competitors. For this factor the company can afford extra overhead costs in labor and shipping to match customers’ demands.

The unique business strategy and operational efficiency of Zara

It is rarely found in the inventory system of Zara that there is stacking of inventory of obsolete products in the warehouse as the company is more concentrating on the concept of lean for the rolling process of raw materials to finished goods in the stores.

 The model of optimizing inventory is practiced by Zara so that the company can determine to be delivered to the respective stores through arranged shipment of twice of each week. The quantity of delivered stock is limited to ensure that each store should have the product as per their requirement. This practice enhances brand image to exclusiveness by avoiding pile up of unwanted inventories. The company has the capacity for quick turnaround within the season in their manufacturing facilities in Spain which allows the company to make frequent shipment of smaller size of batches.  These small batches mitigate the harm of getting unpopular products stacked in the stores with the lesser loss for the company related to unsold inventory.

Zara has the integrated practice of placing two orders from stores weekly with specified days and time which are being catered in time with specific items properly labeled and priced as per the practice of Zara. This process can ensure involvement of human resource in all levels of operation management right from procurement to retail with the defined timeline with coordination between departments.

The strong practice of distribution network of Zara ensures deliverance of finished goods to the European outlet by 24 hours while for overseas stores of US or Asia the cut-out time form delivery is specified as maximum 40 hours. As per by the case study wrote Nelson Fraiman in 2010 , a professor of Columbia Business School, the lean time for getting shape of the product from design to stores is 15 days for Zara while the other takes 6 months as industry standard.

This success story is not any magic, but is the result of well organized and strategic application of the operation management of Zara. The entire process consisting of design, procurement, manufacturing, distribution and placing in the shelves are working in such way that the success of the system is only announcing its successful implementation. (Lu, 2014)

Conclusion

Zara is a big name in global fashion industry and with its unique operation management; it proves its worth to be on top of the industry globally. Different steps of operation management are working in well coordinated manner and this proves the worth of the brand.

• Think of low cost trendy garments to match pocket of low ability customers
• Make exclusive brands restricted to the premium stores
• Open regular stores for pocket friendly budget products
• Expansion process to be continued in countries of lower GDP

References:

Adam, P., 2013. The Strategic Management Analysis of ZARA (Relative to the Case in Developing Countries). [Online] Available at: https://www.academia.edu/5492552/The_Strategic_Management_Analysis_of_ZARA_Relative_to_the_Case_in_Developing_Countries_ [Accessed 13 September 2017].

Anon., 2015. LOGISTICS MANAGEMENT OF ZARA – A CASE STUDY. [Online] Available at: https://progressivewritingskills.wordpress.com/2015/04/28/logistics-management-of-zara-a-case-study/ [Accessed 13 September 2017].

Anon., 2016. Strategy-The Secret of Zara’s Success: A Culture of Customer Co-creation. [Online] Available at: https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-culture-of-customer-co-creation/ [Accessed 13 September 2017].

Chettupalli, S., 2016. Supply Chain Managment of Zara. [Online] Available at: https://blog.scmglobe.com/?page_id=1513 [Accessed 13 September 2017].

Lu, C., 2014. Zara supply chain analysis – the secret behind Zara’s retail success. [Online] Available at: https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success [Accessed 13 september 2017].

Sowray, b., 2015. The 5 ingredients of Zara’s success. [Online] Available at: https://www.telegraph.co.uk/fashion/brands/the-5-ingredients-of-zaras-success/ [Accessed 13 September 2017].

Textiles, Z., 2011. Zara Textilesd Pvt. Ltd. [Online] Available at: https://www.zaratextiles.com/vision.php [Accessed 13 September 2017].

Zhelyazkov, G., n.d. Agile Supply Chain: Zara’s case study. [Online] Available at: https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=6&cad=rja&uact=8&ved=0ahUKEwiIo7PQ6qHWAhUBu48KHZ6UBKsQFghLMAU&url=https%3A%2F%2Fwww.researchgate.net%2Ffile.PostFileLoader.html%3FassetKey%3DAS%253A273761356451852%25401442281201894%26id%3D55 [Accessed 13 September 2017