Discuss about the Marketing Dynamism and Sustainability System.
Zara was founded in the year 1975 by Amancio Ortega to establish a niche market for the fashion merchandise he produces. It spread to nearly 86 countries from the first store in Spain and now operates around 1770 stores. In the year 2012 Ortega’s parent company Inditex Made up by Zara fashion and some other retail concepts and suppliers of the industry accounted for a total sales of US $20.7 billion amongst which Zara’s share stood at a staggering amount of $13.6 billion.
Evaluate Zara’s ability to implement the four activities of planning and control that is scheduling, loading, sequencing and monitoring their full supply chain. How does this contribute to the success of the Zara group?
It is believed that the secret to the mentioned company’s competitive advantage is the efficient supply chain of the mentioned fashion apparels company. The outstretching capability of the mentioned fashion apparels company has been able to attain a positive growth by diversifying with a proper vertical integration. The company also has specifications to adapt to different cultural designs, manufacturers, distributors and retail clothes within a span of just two weeks after the original showpiece is displayed in any fashion walk (Fernie and Sparks 2014).
The mentioned organization is successful in the market just because of its efficient supply chain and its ability to speed up the market by virtue of its wide range of collections and speedy delivery process. The organization has the unique ability to usher in new designs, trendy and modern outfits that are liked by the generation (Childs and Jin, 2015). The fashion company makes sure that it keeps a proper amount of its production in house and also makes sure that its own companies receives 85% of the capacity for in season adjustments. The in house production helps the management to bring a proper flexibility in the amount, variety and frequency of the new products to be launched (de Jorge Moreno and Carrasco 2016).
Zara always depends heavily on the sophisticated fabric sourcing and sewing facilities that are located in close proximity to its headquarters of design in Spain, its main hub of manufacturing (Gallien et al. 2015). The salaries and benefits of the international labors are much higher compared to the salaries of the workers who are engaged in working in the developing world. The company also enjoys a large competitive advantage over the other competitors of the market just because of its special strategy to manufacture 50 to 60 percent of its goods by the middle of the year.
A new trend of clothes or any new design doing the rounds is spotted by the experts of Zara and after the initial nod from the management of the company, the operations team ggets down to business. The designers produce these clothes as early as possible and the efficient supply chain of the company makes sure that the production of the company reaches out to the different stores in time. The idea of the latest trend or the feedback of the customers to Zara’s products is received through the managers of the store who communicate the vital information to the management of Zara. The management in turn provides the message to the designers of the company (Gomes et al. 2017).
Zara has an extra capacity on hand for development and the changes. It has a 4.5 day work schedule with the other 3.5 days goes to compulsory holiday, extra leave and many other breaks and shift changes (Caro and Martínez 2015).
The following operations then transform to frequent shipments which results in a high footfall of customers in Zara stores. The following strategy helps the marketing and sales department of Zara to sell a large number of items at full price because of the sudden sense of insecurity and exclusiveness the company displays. The efficient merchandising of the company helps to reduce the total price of the items and help them to gain a better competitive advantage (Hansen 2014). The fashion company receives back 85% of price on the clothes manufactured by them while on contrary 60 to 70% is the industry average. Whereas the unsold items of the inventory accounts for just 10% of the stock which is much lower than the 17 to 20% of the industry. This shows the huge competitive advantage of Zara and prove s that the company is one of the best in the fashion industry.
Analyze Zara’s effectiveness in managing their capacity constraints and levels of demand throughout the supply chain. Is their evidence of bottlenecks, with the use of drum-buffer-rope of constraints management to overcome bottlenecks?
Zara has its operations spread over a large number of regional and international centers and thus they face a large number of difficulties which acts as a constraint to their organizational growth. Some of the common issues are;
Zara has a well connected and well maintained marketing chain that makes it the best fashion apparels company of the globe. The management of the company has followed a strict policy of not advertising the products in traditional ways like billboard advertisements and journal advertisements. The company in turn has turned to digital marketing which is the latest trend of the industry. The businesses in the modern world are adopting new strategies to meet the demands of the people. Nowadays Zara has focused on the online marketing like marketing in social media to attract the attention of the people (Kim Lee and Lee 2016).
The political system of a country always plays a key factor to the success of a business. The success of the business is determined by means of the positive or negative impacts on the economy on a daily basis. Major political powers as well as some of the local political influences are a key factor in the economic development of a particular city or a country.
Zara invests internationally and has its business spread in around 86 countries of the world. The Spanish origin of the company makes it possess some liberal policies of the government in the labor laws. Media also termed as the fourth element that constitutes the political system has a decent influence on the economic system as they flare up different political issues in front of the company. This particular feature Zara has been forced to keep a tight measurement on its amount of investment (Macchion et al. 2015).
As because Zara is based in Europe it has the capability to adopt to 3 to 4 different colors (Kim Lee and Lee 2016). But in India there are lots of colors used in readymade cloth industry especially bright color. The female and the male clothes must have proper embroidery works as it is the most liked in countries like India. The Indian consumers prefer bright and vibrant colors.
The differences that exist in the cultures of the people in countries of Europe and that of India are mainly because of the designs that have an influence on Europe. Statistics shows that the Indian cloth market is much more costly than the European cloth market. The designs promoted by the mentioned company appeals to the people because of its very small availability in the market. The fashion designing company established two shops in India in the capital city of Delhi and the commercial capital of Mumbai(Macchion et al. 2015).
Describe Zara’s inventory control methods at its various stages of the supply chain. Explain how this inventory control gives Zara a competitive advantage.
Finding excess inventory or excess stocks that have not been sold is always a frustration for the operations department of the company. The supply chain must be designed in such a way that it helps to reduce the loss of inventory and garments (Magrath and McCormick 2013).
The management has implemented the Inventory Optimization Model that helps the company to determine the quantity to be delivered to every retail stores of the company located worldwide through the shipments that go out twice in a week from its manufacturing units. The stock that is delivered to each of these different stores are restricted to the amount that the stores need and does not exceed the requirements. This helps the company to build a brand image of its own and avoid building up of unpopular stocks.
The location of the production facilities to the port and airports help the company to save on the expenses of transportation. The plan of the management must be to take decisions on a proper basis which would be useful to increase the reputation of the brand.
Analyze Zara’s supply chain, determining the level of vertical integration and outsourcing of their global operations. Provide a diagram of the Zara’s current supply chain, indicating which stages they own or outsource, and using data to support your claims. How does this compare to their major global competitors?
Zara’s strong distribution network enables the company to deliver goods to its European stores within 24 hours and to its American and Asian outlets in less than 40 hours (Rao 2014). According to Nelson Fraiman, a Columbia Business School professor who wrote a 2010 case study about Zara, the retail giant can get a product out from concept to store in just 15 days, while the industry standard is 6 months. This brand’s success story shows the strength of its operations. Its cross-functional operations strategy, coupled with its vertically integrated supply chain, enables mass production under push control, leading to well-managed inventories, lower markdowns, higher profitability, and value creation for shareholders in the short and long term.
Zara is all about staying on top of the hottest trends, and exuding an exclusive feel, but its supply chain is the real star of the show. These rock star-level logistics take it from being just another fashion retailer to an industry example of fast fashion done right.
In a challenging economic retail climate, there is one retailer that is crushing sales and swooping in for global domination. You may have heard of the international giant Zara, but if you haven’t, their supply chain management strategy is worth nothing (Robles and Severson 2016). This post looks at Zara’s supply chain success, how they implement an Omni-channel experience, and their vertically integrated strategy that allows them to quickly innovate and alter products.
Rather than outsourcing production to Asia, as many clothing retailers are wont to do, most of the products offered by Zara are manufactured in the dozen-or-so company-owned factories. However, items with a longer shelf-live are outsourced to low-cost suppliers. This gives Zara a competitive edge when supplying consumers with the items they want, when they want them. Zara is able to cater to a wide range of customers by providing seasonal clothing as well as more basic items like t-shirts (Tokatli 2014).
Omni-Channeled business mainly focuses on utilizing the delivery of an efficient supply chain for enhancing a fascinating customer experience. This strategy is contrasted to multi channeled supply chains where the main focus is on the ways in which the customer pays for the different items.
The sudden transformation of Zara’s stock is the result of a proper production process that helps the company to become both agile and flexible. But the main fact that the people are unaware is the control over the supply chains because it is vertically integrated which means that the ownership is restricted to the supply chain of the organization (Varley 2014).
Vertically integrated supply chains are just opposite to the horizontal integrations as they tend to partner with the third parties for the supply of the various component of business (West Ford and Ibrahim 2015). The following strategy helps the mentioned company to keep a tab on the unlimited costs as they does not outsource but receive their necessary items from multiple suppliers. Vertically Integrated Business are also best known for leveraging mass production principles of efficiency.
References
Caro, F. and Martínez-de-Albéniz, V., 2015. Fast fashion: business model overview and research opportunities. In Retail Supply Chain Management (pp. 237-264). Springer US.
Childs, M.L. and Jin, B., 2015. Internationalization Of Fast Fashion Retailers: Does It Follow The Uppsala Model?. In Marketing Dynamism & Sustainability: Things Change, Things Stay the Same… (pp. 693-696). Springer, Cham.
de Jorge Moreno, J. and Carrasco, O.R., 2016. Efficiency, internationalization and market positioning in textiles fast fashion: The Inditex case. International Journal of Retail & Distribution Management, 44(4), pp.397-425.
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Gallien, J., Mersereau, A.J., Garro, A., Mora, A.D. and Vidal, M.N., 2015. Initial shipment decisions for new products at Zara. Operations Research, 63(2), pp.269-286.
Gomes, R.M.D.A.B., Carneiro, J.M.T. and da Rocha Dib, L.A., 2017. A contingent look at retail internationalization: Proposition of a taxonomy and discussion of theoretical challenges. BASE-Revista de Administração e Contabilidade da Unisinos, 14(1), pp.2-15.
Hansen, S., 2014. How Zara Grew Into the World’s Largest Fashion Retailer.[online] Nytimes. com.
Kim, S.J., Lee, J.Y. and Lee, K.H., 2016. Global Pricing Strategy of the SPA Brand: Comparison with GDP and Big Mac Index. Fashion & Textile Research Journal, 18(3), pp.301-316.
Macchion, L., Moretto, A., Caniato, F., Caridi, M., Danese, P. and Vinelli, A., 2015. Production and supply network strategies within the fashion industry. International Journal of Production Economics, 163, pp.173-188.
Magrath, V. and McCormick, H., 2013. Marketing design elements of mobile fashion retail apps. Journal of Fashion Marketing and Management: An International Journal, 17(1), pp.115-134.
Rao, K.G., 2014. Successful International Expansion of a Fashion Retailer: A Case Study of Zara. BS Publications, p.245.
Robles, A. and Severson, R., 2016. Improving supply chain resilience for a fashion retailer: A qualitative and quantitative study(Doctoral dissertation).
Tokatli, N., 2014. Single-firm case studies in economic geography: some methodological reflections on the case of Zara. Journal of Economic Geography, 15(3), pp.631-647.
Varley, R., 2014. Retail product management: buying and merchandising. Routledge.
West, D.C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive advantage. Oxford University Press, USA.
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