Discuss about the Logistics Management of Zara.
The report is discussing about logistic management strategies using by Zara to become success in the fashion industry. In this report, the strategies of Zara are compared with the Dell and Myer. The Zara was founded in 1975 by the Amancio Ortega Gaona. The company manufactures different fabric products that suit the fashion of customers. The priority of the Zara is its customers a company tries to provide best quality products to them with the proper supply management (Ferdows, 2003). Zara is the subsidiary of Inditex which is the world’s biggest retailer company. The Inditex group has around 100 textile companies and Zara is the flagship brand of Inditex. Zara has strong competition in the market with many competitors i.e. Benetton, Gap and H&M in terms of market share. In 2008, Inditex choose different strategies to grow the business and because of those strategies, it has become the biggest fashion retailer in the world. But in present time, the demands of customers are changed. Customers have unstable demands and it has made the competition tougher in the market (Gallaughar, 2008).
This report is basically analyzing the logistics management of Zara in terms of competitive advantage, supply chain and customer value. The business strategy of Zara will be compared by the Dell and Myers.
Zara and Dell both are the strong and famous companies. Dell manufactures computers and Zara manufactures the clothes. Both have effective strategies and supply chains.
There are three main players in the supply chain of Dell i.e. customers, company and suppliers. In the supply chain of Dell, the consumers place the orders and then company gives the parts to the suppliers. After that suppliers immediately supply the orders to the customers.
The supply chain of Zara is quite different from the other companies. There are different parts in the supply chain of Zara and those are sourcing, designing, manufacturing, and distribution to outlets (Deogratias, & Harorimana, 2009).
The supply chain of Zara and Dell is totally different. The Dell has horizontally integrated supply chain and on the other hand, the Zara has vertically integrated supply chain. Dell is engaged in the production of computers, and it hires suppliers from the third party for supply of products to the customers. On the other hand, Zara does production of clothes and garments in different parts. The key factors of the success of the company are trade, crafting, manufacturing and the ability of delivery on time. Due to control on the all part of business, Zara is able to identify the preferences of the customers in the changing environment of customers. The control on supply chain by Zara allows the company to produce quality products within short duration of time (Christopher & Towill, 2000). The benefit in the supply chain using by Zara is that it can be controlled easily because there are minimum responsibilities to handle. On the other hand, Dell have to deal, control and manage with many procedures in it supply chain. So, the supply chains of both the companies are right and proper according to their business operations. The comparison of supply chains of both the companies in some points are as follows:
Zara uses vertically integrated supply chain in which the company controls over the suppliers. In such kind of supply chain, the company is able to meet with the demand and manufactures the products easily. On the other hand, dell has number of suppliers but there is the concern related to speed and accuracy in the services of Dell. There are certain risks that are involved in the services such as insecurity, uncertainty, delay in delivery of products and shortage of goods and raw materials. But in spite of shortage of goods, Dell is able to give delivery of products on time. This is possible because 95% of suppliers are located near the manufacturing unit (O’Marah, 2016).
In case of Dell, it follows make-to-order strategy. In this type of strategy, company manufactures the products in the short duration of time on the demand of the consumer. Basically the company makes the products as per the requirements of the customers at reasonable prices. Dell has wide range of products for the customers. Along with this, Dell provides all the information related to the products on its website. So, because of internet the company is able to provide the information about the range of products. The company also designs easily customized products.
On the other hand, Zara focus on the new designs and new products every time. Company believes that there should more and more designs in the market for the customers. The company launches its products by the showrooms in which showrooms get few pieces of new products. The company has the strategy to sell out the new products as quickly as possible. It creates curiosity among the customers about upcoming products. Along with this, Zara does not promote its products through advertising because it wants to create big brand image in the unique way. The aim of the company is basically provide the best products in the fashion market and satisfy the customers. Due to limitations of the products, customers visit its stores to check out new products. The clothes of Zara are demanded differently in different regions by the customers. So, the production philosophy of Zara serves the taste and preferences of the customers and Dell focuses on make-in-products in the production philosophy (Gorrepati, 2016).
Dell incurs low inventory cost and has no extra cost in warehouses. The company has 7 hours of inventory. The company cut the cost through other costs such as warehouses, supplier storage, direct delivery and retail storage. Along with this, Dell has no inventory policy. On the other hand, in case of Zara it has number of warehouses that help the company to store the garments and supply them effectively.
There are many distribution channels for distribution in Dell such as suppliers, retailers, assimilators, distributors and the customers. The Dell follows B2B model in its business in which 90% of products are ordered online. Dell sells its products such as laptops and PCs directly through online as per the direct model. By adding more time and cost, Dell is directly connected to its customers and clients. This cuts the transport cost of the Dell. On the other hand, the products of Zara are not stored and they are distributed at the stores twice in a week. For the distribution, inventories are carried out to the Australian border and the logistics carrier takes them in stores. After that stores orders more stocks from the logistics who handles the stocks and inventories. The stores of Zara are graded based on the sales and the orders. If the sale of any product is not good in the market then company stops the production of that product. Because of this system, company is able to remove the unnecessary stock of unsold goods (Ray, 2010).
Zara makes new collections and designs weekly and releases in the store. The shop managers of Zara place via internet and sell out the products. By this, the company is able to keep the information of all the products and new designs that are to be created. The designers design the products based on current sales and feedbacks of the customers. The proper communication of Zara makes the process easy and cost efficient. This is weakness of Dell that there is the lack of proper communication because the customers’ orders are the only feedback for the company (Mihm, 2010).
In case of Myer, it has made no effort in segmenting the market according to the customers. Company did not divide the market in demographic lines and psychographic lines of customers and their needs. On the other hand, Zara has devised the market in demographic segmentation and lifestyle segmentation. Zara has built its brand image as the leader of fashion industry by offering quality products in affordable prices (Lu, 2014). The concept of Myer is “My store” is very unclear. Company has general target market of customers. The target market of Zara is the young generation having the age of 20-35 years. In the case of positioning, Myer has positioned itself as the departmental store having heavy collection of products. But the customer services of the company are unsatisfactory. Myer uses discounting sales strategies to attract the customers for its products. On the other hand, Zara launches seasonal fashion products to attract the customers with proper and effective customer services. Logistics identify the demands of the customers and tries to fulfill them at low cost. The well defined and well organized strategic plan provides strong financial position in the market. The supply chain management is connected to the hierarchy of the organization. Overall the strategy of supply chain management and logistics of Zara are able to achieve the management objectives (Hill, 2009).
Wal-Mart is one of the big brands in the retail industry. There are various strategies adopted by both of the companies. Wal-Mart uses warehouses to store the products and on the other hand, Zara does not store the products. The company directly brings the products in to the stores and sells them. Wal-Mart is both retailers as well distributor also and this is directly connected to the strategy. For getting advantage from the supply chain, company has used ‘hub-and-spoke’ system. Apart from this, Wal-Mart is using inventory management system. It is helpful for the Wal-Mart in delivering the goods in fast way to the customers. On the other hand, Zara is using internal value chain and the services of the company are customer centric services.
In present time, companies are focusing on the supply chain management to improve the efficiency of their business. Strategic management is also helpful to achieve the success in competitive market. Basically, strategic management is the main reason of customer satisfaction and competitive advantage of the companies (Donald & Stephen, 2014). The new model of supply chain management is mainly focused on the handling physical products and information regarding those products to creates value. Along with this, supply chain management strengthens the relationship between suppliers and the customers while delivering the customer services at low cost. Managing the relationship is the main area of supply chain management because the suppliers and the customers are the key points of the success of supply chain management and logistics (Charles & Gareth, 2012).
The company Inditex has gained maximum score in stock market index for social responsible investment. Along with this, Inditex was named as “International Retailer of the Year” by the World Retail Congress for its best practices. These things show that company is getting competitive advantage by continuously expansion of its business. The strategy for innovation and invention is the key factor of the competitive advantage of the company. The new product development and innovation of Zara are popular in the market. Partnership, clarity and alliances the factors in the supply chain which are the strengths of Zara. Zara has customer oriented approach which distinguishes Zara from others in the market (Romano, 2009).
There are many reason because of those the Zara has sustainable competitive advantages in its business. The company is very successful in using customers’ self concept in their benefits. The reasons because of Zara have gained competitive advantage are as follows:
The business strategy of Zara is different from the Dell and Myer. It can be seen that the supply chain analysis of the Zara is unique from others. Zara uses customized technology, logistics, and economies of scale and these all are the key factors Zara’s success. From the comparison with Myer and Dell, it has been observed that Dell is engaged in the production of computers, and it hires suppliers from the third party for supply of products to the customers. The customer services of the Myer are unsatisfactory. On the other hand, Zara launches seasonal fashion products to attract the customers with proper and effective customer services. Companies can use the strategy of Zara because it is a learning organization.
Continuous improvements, collaboration and improvements in the products are the concepts of learning organization. Zara is learning continuously and these factors are helping to from the company in the competitive market. Learning organization can be described as the organization which includes collective and individual learning and partnership with the supply chain. So, the training and cooperative are the characteristics of Zara (Dalton, 2010). Value chain analysis is also core competence of Zara. Brand value is the main source of competitive advantage. The value chain of Zara shows that the company has brand value in the market. Zara has ranked 219 in the top 500 brands (Cowe, 2011).
Conclusion and Recommendation
This report has been discussed about the supply chain and logistics management of Zara in the competitive market. In the report, the comparison of Dell and Myer with Zara also has been done in the report. From the above analysis, it has been analyzed that supply chain is the important factor for the business of any organization. The supply chain analysis of the Zara is unique from others. The supply chain analysis of Zara describes the internal value chain of the company. The services of the company are customer centric services. Along with this, the company uses customized technology, logistics, and economies of scale and these all are the key factors Zara’s success. Zara is the learning organization and because of efforts in supply chain and knowledge management which are the cause of success. The strategy of Zara is customer centric services. Because of supply chain management, the Zara is able to gain competitive advantage in the fashion industry. Further, Zara does production of clothes and garments in different parts. Due to control on the all part of business, Zara is able to identify the preferences of the customers in the changing environment of customers. Thus, the strategy and logistics management of Zara is very successful in the market.
Although Zara is very successful in its supply chain and it only focuses on the production of new products. The company does not use online sites for the selling of products because it believes that customer should visit the stores physically. There is the recommendation for the Zara that it should also use the online selling because sometimes customers have no time to visit to the stores.
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
Donald, W., & Stephen, R., (2014), Global Logistics: New Directions in Supply Chain Management, Kogan Page Publishers
Ferdows, (2003), Zara Case study. Supplier Chain Forum: an International Journal, 4 (2), pp 62-67
Gallaughar, (2008), Zara case: Fast Fashion from Savvy Systems, PhD Case, accessed on 8th December 2016 from https://www.flatworldknowledge.com/node/440129#web-621509
Gorrepati, K., (2016), Zara’s Agile Supply Chain Is The Source Of Its Competitive Advantage, accessed on 8th December 2016 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
LU, C., (2014), Zara supply chain analysis – the secret behind Zara’s retail success, accessed on 8th December 2016 from https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success
Mihm, (2010), Fast Fashion in a Flat World: Global Sourcing Strategies. International Business & Economics Research Journal, 9 (6) pp 55-63.
O’Marah, K., (2016), Zara Uses Supply Chain To Win Again, accessed on 8th December 2016 from https://www.forbes.com/sites/kevinomarah/2016/03/09/zara-uses-supply-chain-to-win-again/#3032002b63ae
Ray, (2010), Supply Chain Management for Retailing, IND: Tata McGraw-Hill Education
Romano, (2009), How can fluid dynamics help supply chain management? International Journal of Production Economics, 118, 467
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