The following essay will have a brief explanation of the history behind Supply Chain Management necessary to introduce anyone in the subject and then will proceed to analyse Zara (one of the fastest growing fashion retailers in the world) successful use of Supply Chain Management. The company made use of logistics, differentiation, customization and it`s “Fast Fashion model” (among other things) to gain a strategic advantage over its competitors. This essay aims to highlight the key components in Zara`s strategy that enabled them to be successful while also contrasting with different but also successful companies like Myer and Dell in order to establish differences and similarities in their models that enabled them to become big players in a global scale.
Supply Chain Management (or the management of the chain of supplies) is a very broad concept used to describe all of the processes involved between the suppliers of raw materials, whatever they might be, to their arrival on the hands of the main consumer. One could break down most of this process (in a very simplified manner) into purchasing inventory (the purchase of goods to be later sold), physical distribution, logistics involved and customer relationship management (Bechelet, White, Sims & Jaworski 2015).
Even though the advance of technology has vastly improved the way supplies are moved around the world, the efficiency of the process, the means of transportation, feedback response etc. The necessity of moving goods from point A to point B in order to profit (or to obtain goods of similar value before monetary transactions were created has been around since the dawn of humanity’s earliest civilizations. Rome, one of the biggest and most complex empires of human early history illustrates the importance of this process exceptionally well. Rome not built in a day, and neither was Supply Chain Management (Hugos 2014).Its birth can be dated back into the year of 300 AD in the Roman Empire (or even before that). In those ancient times, the Roman Empire got most of its Wheat and Olive Oil from its provinces in North Africa (as the image bellow shows).
(Hugos 2014)
As one can imagine, this was already a much-complicated process back then, especially considering all the technology involved available in those times was rudimentary but for the most part the key elements involved were very similar if not the same. It involved products (wheat and olive oil in this case), facilities in which to store them safely and secure from the elements (rain, wind, sun etc.), vehicles and routes used in the operation. Meaning in order for the operation to be successful it was already necessary to plan the volume of products demanded, how much stock it would be necessary to have to meet demand and how efficiently take them to their final destination. Even in those ancient times, there was already the necessity for a Supply Chain Management system.
Zara is a Spanish clothing and accessories fashion retailer company, founded in 1975 Zara now has almost 2000 stores in over in over 77 different countries. Its parent company, Inditex had a turnover of more than 19 Billion dollars in fiscal 2014 (ending in January 31, 2015), helping reclusive founder Amancio Ortega. A railway worker`s becoming one of the richest persons in the world today and the Zara the fastest growing apparel company brand in the world(Nick George 2011).Zara’s HQ is a futuristic building known as “The Cube” in La Corunna, north-western Spain. From there, staffs churn out 30,000 designs a year, near carbon copies of fashion’s big names. Lightning-fast, locally targeted designs are Zara’s specialty: when Madonna played three weeks of European concerts in 2001, teenage girls went to her later shows wearing knock-offs of the outfit from her first performance.
Zara’s ‘vertically integrated’ business model limits outsourcing, making most of its catwalk copies in-house and ensuring better quality control. When it does use cheap labour, it mostly uses poorer European countries over the developing world. Garments hit shop floors within three weeks of design — blitzing the industry average of six months. Fashion used to sell in four seasons. Zara wants you to buy for one-hundred-and-four. New clothes arrive in every store twice a week — days known by fans as “Z Days” — and fuel the need to turn over your wardrobe. The brand’s global distribution centre, also in Spain, moves 2.5 million items per week. Nothing remains warehoused longer than 72 hours. Clothes ironed in advance, packed on hangers with security and price tags affixed, saving store staff ‘prime selling time’. Records kept of any clothes tried on but not bought, sent back to Spain along with all cash register data. Customers visit Zara on average six times more often than they visit its competitors, causing rival stores to dread its arrival on their turf on average.
When Zara opened a store in China last year, one industry commentator noted, “it just murdered everything around it”. In addition, when the doors of Zara’s first Australian store opened in Sydney in April, 80% of the stock was snapped up within three minutes. Shoppers might love Zara but fashion’s elite are not so happy. One unnamed designer complained, “We spend a fortune researching and working up ideas, then Zara comes along and walks off with them for nothing”. Zara has achieved global success with almost zero advertising, which its founder calls a “pointless distraction” Zara being fast, affordable, pre-packaged fashion. A business built on speed, designed for addiction.
The secret of fast fashion retailing is the ability to generate quick turnover of merchandise in the stores. New fashion designs are shipped at a rapid rate, there are few basics and reorders are rare. The customer knows that she should buy an item she likes when she sees it. The Inditex Group prides itself to deliver quality merchandise in as little as three weeks from its own factories. Designers develop new models daily – sometimes three or four a day reviewed and put into production. It is no wonder that versions of new designs by fashion designers in Paris are in Zara stores within a very short time of appearing on the runway.
Zara with its innovative business strategy it created a robust position in the market. Being a challenging dominating retail cloth market, it is making huge sales and opening the success doors globally. Zara with well integrated in the production and manufacturing of trendy clothes led to the high growth to the industry (Aftab, Yuanjian and Kabir 2017). Various factors that made Zara to reach success are like innovation, integrated business strategy, creation of Omni scale of distributions, customer friendly. With respect to customer friendly, The Company give more importance to time and preferences of the buyer (Anwar 2017). The sale of clothes are for a short duration, once that period of sales gets over there are availability of new clothes with new demands and preferences as per the latest designs. This creates huge demand and customers for the sales leading to the income and growth of the business. The duration is for four weeks and after four weeks, the company creates availability of the new clothes. It also creates competition among buyer in terms of purchasing the product (Beheshti-Kashi 2017).
Omni channels include multiple channels of distribution. This creates more customers, more demands, and more selling of the products leading to more profit (Camman et al. 2017). They know about the customer requirements and demands, and as per their demands, they create new designed clothes in order to gain customers satisfaction (Christopher 2016). It creates more encouragement to innovation and competition in the market leading to a good growth in the success of the business. They have their own supply chain due to which they dominate the entire supply chain by creating fast and trendy sales that led to quick turnover.
Zara Company marked as the greatest supplier in the market. For them customer satisfaction and their demand is everything while dealing in business transactions. Use of creative skills and talents in manufacturing the products, the business achieve d a good growth in terms of economy and financial (Deshmukh and Mohan 2016.). On addition to multiple lines of distributions, it expanded its business everywhere to achieve more success.
Sustainability involves three factors of growth that are economical, social and environmental factors when carried out efficiently without any wastage of resources create sustainability at work place (Ganji, Shah and Coutroubis 2017). Economic factors deals with purchase and sale of commodity with a motive to earn income. Economic variables like production, consumption, demand supply and income effect, when carried out efficiently achieves profit. Social factor includes social welfare maximization with an aim to maximize social welfare. The environmental factor includes encouragement of more of natural resources and protection of the environment (Viardot and Nylund 2017).
Corporate social responsibility helps to understand the stakeholders’ activities for sustainability in relation to various factors like economic, social and environmental factors that leads to creation of sustainable business environment (Irani et al. 2017). Sustainability in business deals with the production of the natural resources using environmental and human capital. Therefore, sustainability at work place will maintain the stability in the business for long-time and it will encourage more environment friendly business.
Are there similarities between Zara Dells and Myers formula for success and could this be suitable for other companies and if so explain why, if not explain why?
All the three firms have achieved growth and success in their respective domains in relation to supply distribution process. There is presence of lean management system in all the three-business strategy (Ivanov, Tsipoulanidis and Schönberger 2017). Zara is the world’s largest retail shop for fashion and clothes with periodic invention of new arrivals. Dell created a made to order process with less time and maintained its supply chain in order to respond faster to the customer. These are not similar in their way of doing business although they all achieve their success in their work (Jamil and Jamil 2017). The focus is to fulfil customer demands and create customers’ satisfaction with the best services in order to maintain business standards and growth.
Analyse the issues in the case and identify logistics management strategies that enable the company to become successful, and or will be necessary for the company to maintain or improve its success in the future.
Logistic management deals with systematic management and functioning, controlling of the organizational activities in order to achieve long-term goals. It includes various process of supply distribution that includes planning, efficient production and flow of resources, stock of goods and services, and adequate resources for production process and the consumption process in order to achieve customer satisfaction (Köksal, D., Strähle, J., Müller, M. and Freise, M., 2017). Zara achieved its success using the proper planning and marketing strategies with addition to logistic supply chain management (Sheehan and Foss 2017). The company by using logistic supply strategies, it increases the number of sales growth, thereby led to the rapid increase in production, consumption of resources (Moon et al. 2017). Efficient and modern means of productive resources created more demand for the purchase of the clothes, leading to maximum profit.
Analysing the issues in the case, and identify logistics management strategies that enable the company to become successful, and/or will be necessary for the company to maintain/improve its success in the future.
Dell includes suppliers, consumers and dell. Whatever consumer places demands to the seller of dell, as per the required demands the order is accepted with the demands that forwarded to the manufacturer (Mukherjee 2017). Therefore, keeping such a good focus on the customers’ needs and requirements for the computers, created a great success in the history of dell (Yip and Huang 2016). Dell invested in the updated technology and modern means of resources led the company with maximum profit (Sandber 2017). Zara with its passion and focus on day-to-day lifestyle and trends of the people it always provided with trendy and stylish clothes that made Zara today a success and a leading retailer in cloths and fashion( Zhu et al. 2017). In terms of global markets, it had made a strong impact in terms of competition as well as in terms of economy (Yu and Solvang 2017).
Analysing the issues in the case, and identify logistics management strategies that enable Zara (page 71 in the text) to become so successful. Contrast this with Dell, Myer, and a top 500-listed company on the Fortune 500. (Apple)
1-Sell direct to customers
2- Disdain from inventory
3- Listen to your customers
Conclusion
The report concludes by providing a detailed analysis on the Zara business industry with the help of logistics and managements supply chain. In order to discuss on the success story of Zara it includes various management goals and strategies. The report concludes by providing few answers to the given questions and evaluating Zara, performances on various important comparisons like dell and Myers. Dell uses horizontal supply process while Zara uses vertical supply process. Zara controls other organizational as it dominates and has ownership authority in sales whereas dell is dependent on the final producers and manufacturer.
Reference List
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