Through the use of literary articles and other academic material this paper will review the strategic supply chain initiatives that gives Zara an advantage over it’s competitors. The report will examine other fashion retailers supply chain model to show how Zara has mastered the supply chain model to gain advantage over others. The Report will also examine the following areas. i. Origins and history of the organization. ii. Examination of Zara’s supply chain model. a. New product design. b. Manufacturing. c. Distribution & Logistics. d. Store size and layout. iii. Examine other supply chain in high street fashion. iv. Compare and contract findings of Zara and other retailers. The overall aim of the report is to show how Zara while trading in a highly competitive market has produced a supply chain model, which is unique. This uniqueness has led to the overall success of Zara and helped to make the organization a worldwide success. Origins and history of the organization Zara is a sister company of the Inditex Group which is owned by the Spanish tycoon Amancio Ortega. Inditex is one of the world’s largest fashion retailer and its foundation dates back to 1963. Zara opened it first store in 1975 near the Inditex headquartered in La Coruña, Spain. The store featured low-priced lookalike products of popular, higher-end clothing fashions. In 1979 the Zara brand had 6 stores. These stores proved to be successful, and in 1988 it opened its first store outside Spain. However, by 1990 Zara had stores across the world, ranging from stores for example in Oporto, Portugal, New York, and Paris. According to Inditex Annual Report 2012, Zara opened a total of 120 stores in 2012, thus reaching 1,925 stores in 86 markets worldwide. Zara sales i... ... middle of paper ... ...gistics department. They are shipped by time zone to allow Zara to better meet customer demand. Zara utilizes the services of third party logistic providers to manage all its freight and delivery’s. It takes two days to ship merchandise by truck to their European retail stores. The non-European shipments are shipped by air. When the deliveries arrive in store the merchandise process downstream is simplified. Store will receive all orders on ready to hang assembly, all store assistance need to do is hang the rail, remove the protective plastic cover and items are ready for sale. Store size and layout Stores receive delivery of products twice weekly. These deliveries are based on information received from its stores worldwide. This insures that Zara is always offering what the customer wants. This may be exciting designs or items redesigned to suit consumer demand.
Zara, as one of largest apparel retailer over the world, has changed the process of the whole fabric of the industry. Operation strategy of Zara involves having little stock, fast updating collections and communication within process of operation etc. Zara renew its products twice a week to pursue latest fashion, on the other hand other competitors only update once a season,
Zara sources fabric, other inputs, and finished products from external suppliers. It has purchasing offices in Barcelona and Hong Kong. This gives Zara a competitive advantage towards the costs of goods sold, as it can purchase from both Europe and Asia according to prices. Buying more from China in the future might reduce even more the costs of goods sold.
Zara’s strategic and successful use of information technology in its production and distribution system was acknowledged in 2006 when the company received the Wharton Infosys Business Transformation Award which honors excellence and innovation in information technology. Inditex received the Enterprise Transformation Award for, “redefin[ing] the business model for the fashion industry by reducing the time taken to get merchandise from the design to in-store phase.” Zara also has expanded its range of merchandise to include house wares like bed and bath linens, tableware, rugs, and other home accessories which are available for purchase throughout Europe from its website, www.zarahome.com, and are shipped directly to customers.
The fundamental business strategy of Zara is very simple which is linking customer demand to manufacturing, and liking manufacturing to distribution. Zara has been running their business in fashion industry which is susceptible to seasons and quick changing customer tastes. Zara has been approached to and considered their business as a perishable commodity business just like a fresh baked cake or bread to be consumed quickly.
Fast fashion is getting faster and cheaper, but who bares the cost for the rising demand for this type of clothing? Most of the time, the effects are felt in the countries where the brands are not even sold and where they are produced. Consumerism has a lot to do with the success of stores like Uniqlo, Forever 21 and Primark. These types of stores are making fashion accessible to all, and thus trends are becoming more and more short-lived, making people always wanting newer and cheaper items. Inditex, Zara’s parent company, grew its number of store from 500 in 1995 to more than 2500 in 2015. Hennes & Mauritz (H&M) had fewer than 400 stores in 1995, and now has over 3500 (The Economist, 2014). Most of these brand’s clothing items are so inexpensive
The manufacturing process is also a very important part of the Zara brand. The company follows a small batch manufacturing process, which is 20% higher than the competitors. However, this is catered for due to inventory turnover. More so, the orders are taken twice a week and it takes roughly about 3 weeks, starting from the concept to the distribution centers and being displayed in the stores. The following diagram shows the business model of Zara:
Therefore their consumer promise is also the force behind the combination of their environmental and preservation guidelines used through the group 's supply chain. Zara, has been a groundbreaker in conveying new fashions, new designs, and new ideas rapidly to its stores. Zara’s tenacious thrust of on-trend products into the supply chain channel keeps its stores in stock on the latest fashions at lucrative prices. Lots of their new concepts have come from some of the fashion shows that just ended in New York, Paris and Milan will soon be on Zara’s racks.
Since its founding, Zara has employed a strategy that has given them unparallel control over their supply chain. Company founder Amancio Ortega once said that “you need to have five fingers touching the factory and five fingers touching the customer.” This is exactly what Zara does today. They own over 50% of their production facilities, and produce almost all of their non-basic products in house.(2) This strategy allows them to have a great deal of control over their production and transportation schedules, and gives them the freedom to manage production capacities. Although the capital investment would have to be quite large, the Target corporation could reap the same supply chain benefits that Zara sees if it were to own some of the production facilities used to manufacture its clothing.
The company uses a distribution system called the hub-and-spoke structure (Rodrigue, 2007). This process starts by them first collecting all of the packages through drivers assigned to specific routes. They have people who monitor traffic and road conditions so they can keep transportation time as low as possible. This first step usually consist of state to state travel. This is so specific states can get dropped off at the nearest hub so they can start to undergo the second part of the process. The start of the next step is the packages get unloaded and then sent up to the sort aisle to be sorted to the corresponding belt. This process usually happens quite fast because the unloaders and sorters have to move at 1,200 packages per hour. After the sorters send the packages to the corresponding belt, they are then sent to be loaded on a truck. Not all packages are sorted correctly so when the loaders get a miss sort they put it on a belt that sends it back to the sorters to be resorted. Once the truck is full it is then sent off for the last step of the process. The last step off the process is the dropping off of packages at its proper location. This process seems quite simple but it took lots of planning among upper level employees to get this system to
Zara is present at 63 countries with a net of 992 stores located in emplacements privileged of the principal cities.
This paper describes the various aspects of the Zappos case. The objective is to evaluate the depth analysis of the Zappos strategy. It enables to determine the Zappos strategy, business model & marketing strategy, and smartness of the Zappos acquisition.
Many clothing companies encounter difficulties in terms of monitoring consumer behaviour and managing customer demand. However, these difficulties are solved by implementing a business strategy known as fast fashion. Fast fashion is “a business model that encourages new designs in stores every few weeks instead of every fashion season.”( Okonkwo, 2009 p.229). The retail fashion industry has seen a major transformation in recent years. Fast fashion companies introduce the newest collection of clothes in accordance with their research of latest fashion trends and are manufactured rapidly and efficiently to enable consumers to benefit from the latest pieces at lower prices. This assignment discusses the concept of fast fashion by identifying the relevant characteristics and how they affect company approaches to capacity planning. It will also look at how fashion companies meet their demand and how it contributes to Zara’s success in particular.
ZALORA’s first priority is the shopping experience is easy, fun and hassle-free for all its customers. Our aim is therefore to take this understanding and craft the best shopping experience.
For example, occasionally M&S has products shipped to Asia to be created, then back to the UK for packaging and labeling, and back once again to Asia to be sold in their retail stores. This increases production costs and time, placing them at a disadvantage to Zara. Zara uses two main centers for their products, a supply center in Beijing and it’s manufacturing center located in Spain. M&S also creates collections in mass numbers compared to Zara, therefore, failed designs cost the company far more money. Zara’s success in inventory turnover lies in the process of creating far less product, keeping its exclusivity, and decreasing its risk of profit
Facilitating functions are those which make the process easier for both, the manufacturer and consumers. Zara is a proud owner of 90 percent of its stores in brick and mortar, located mostly in popular and dense traffic locations, which is meant to be an efficient advertisement technique.