...Zara’s supply chains and operations management | December 23 2013 | | | COVENTRY UNIVERSITY LONDON CAMPUS Student name: Ha Linh Tran Student ID: 4569196 Module title and code: 214LON Supply chain and Operations Management Tutor’s name: Dr Amanda Mao Assignment title: Zara’s supple chain and risks of management Date of submission: 23rd December 2013 Word count: 2169 CONTENTS Page 1. Introduction 2 2. Overview of Zara Corporation 2-3 3. Risk identification and assessment in Zara’s supply chain a. Supply chain and risks management definitions 3-5 b. Supply risks 6-8 c. Technology and facilities risks 8 d. Human rights and cooperate responsibility failures 9-12 4. Conclusion and Recommendation 13 5. References 1. Introduction Supply chains have expanded rapidly over the decades, with the aim to increase productivity, to lower costs and fulfill demands in emerging markets. The increasing complexity in a supply chain hinders visibility and consequently reduces one’s control over the process. Supply chain...
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...68 countries as of January 2007 and has become a leader in customized fashion retailing. Learning from his early bad experience, Ortega developed a highly vertically integrated operation where a majority of the company’s production processes are kept in-house. Zara’s operational brilliance does not rest upon one specific operational component, but rather on a very unique and almost counterintuitive “jigsaw puzzle” of supply chain structure that has allowed it to grow market share and sales, even in times of economic decline. Zara has developed a business model with some basic operational goals: provide consumers with affordable and stylish clothes in very short lead times, supply small quantities of each style to reduce inventory risk and cost and increase the number of available styles and choice. It has created a unique value for its customers – offer very affordable and cutting-edge designer knock-off fashion much faster than its competitors. Its main competitors –H&M, Gap and Benetton – have all developed traditional supply chains that include heavy outsourcing to low-cost labor countries, long product cycles and a focus on a bottom line per-unit cost, rather than focusing on the value of the whole chain. Zara’s success is largely due to the unique combination of operational elements of...
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...operations (e.g., responsive production, excellent logistics) have been well documented. That has not kept The Economist from offering up a new article on the company which may not offer any great insight but has some interesting numbers (Global stretch, Mar 10). The secret of Zara’s success is its speed—four weeks for a new fashion idea to hit the shops—and the feedback that store managers send to head office, to help it fine-tune its ideas. There is also firm control from Spain, the sole logistics hub. Although 34% of Inditex’s manufacturing is outsourced to Asia, and 14% to parts of Europe including Turkey, those tend to be the more basic items. The high-fashion stuff, 49% of what it sells, is cut and finished in Spain though some sewing is done elsewhere. So this structure clearly makes sense. Long lead times and the concomitant inventories are more tolerable for basic T-shirts and such that will essentially always be carried. Labor savings from sourcing in Asia are likely more than enough to offset the added holding cost. That wouldn’t be true for products with more “fashion content” that may sell today but not tomorrow. Keeping that work in or near Spain shortens the lead time and avoid supply-demand mismatches. But how long will Zara be able to keep with this model? Particularly if the real growth opportunity is in Asia. A big question, however, is how far [Inditex] can go on growing from its home base. Now that 15% of its sales are in Asia, does it make sense to run...
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...Citations (within the text) and a bibliography are required. Be sure to provide an overview of the case in a short paragraph prior to answering each question. List the question you are answering prior to your answer. Vertical Supply Chain Zara uses a vertical supply chain, which is an uncommon strategy in the fashion industry. A company that operates in a vertically integrated strategy has total control of the various business activities, such as designing, manufacturing, sourcing, and to distribution to retail stores. This gives the company total business management. 1. As completely as possible, explain the supply chain for Zara from raw materials to consumer purchase. (5 points) Zara makes about 40% of their raw material (fabric) and produces more than half of its own clothes. (Kotler and Armstrong). The remaining 60% is outsourced from within Spain, mostly from the La Curuna. Designing of clothes at Zara is done by creative teams of over 300 professionals at the headquarters in La Curuna, Spain. (Supply Chain Brain). After the designers complete a design they are sent to Zara’s production system to cut the fabric. The design is then sent for sewing by one of several hundred local cooperatives. After sewing, the clothes are returned to Zara’s facilities for ironing by an assembly line of workers. After this, the items are wrapped and transported on conveyor belts to a group of giant warehouses. This just-in-time (JIT) system enabled the company to establish a business...
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...better than others in an industry. Using RBV as a framework this essay aims to examine how ZARA generates sustainable competitive advantage. (Opening is good, you have been able to introduce theory that would be discussed the essay). “A fast fashion system combines quick response production capabilities with enhanced product design capabilities to both design latest products that capture the latest consumer trends and exploit minimal production lead times to match supply with uncertain demand” (Cachon and Swinney, 2011). Fast fashion is widely gaining recognition as being a key enabler for success for modern fashion retailers (Barnes and Lea-Greenwood, 2006). Fashion retailers such as ZARA, H&M and Benetton have adopted this strategy in order to enhance its business system and gain competitive advantage. ZARA was established in 1975 and is the flagship of Inditex (Industria de Disen˜o Textil) of Spain. In a relatively short span of time, ZARA became the largest and most internationalized of Inditex’s chains. At the end of 2001, it was operating in 507...
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...1. What is innovative about Zara? What are the major differences in Zara’s supply chain when compared with that of M&S? Zara focuses on constant variety of product offerings to the public. Its goal is to always have new items available on its stores, with limited simultaneous SKU variation and very short shelf life. It focuses on young buyers, who are looking for inexpensive, yet fashionable, clothes. This segment has little concern about quality, but places high value on good looks and in-store experience. The major differences in Zara’s supply chain are: * Fewer SKUs (25.000, in 1986), with just 3 sizes and limited colors; * Optimized design process, with one “library” of styles and slight alterations to provide the sensation of new products to the public; * Allocated sourcing team on Beijing, reducing delays and negotiating quick-response production with suppliers; * Dramatically shorter lead times (365 days vs. 22-30 days); * Smaller inventory levels; * Go-to research on market trends and product acceptance (test shops); * Recent sales data can strongly influence most of the steps on the supply chain. 2. Why is it so difficult for M&S to start playing the “fashion” game? What do you think of the programs launched by Peter Salsbury in response to the troubles at M&S? M&S has great concern with the quality of its products. Placing 200 people on the technology sector of its buying team is a proof of that (these 200 employees have among its...
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...I – Company Profile (ZARA: The Technology Giant of the Fashion Word) Historical Background Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega. The first Zara store opened in 1975 at A Coruna, Spain. Its first store featured low-priced lookalike products of popular, higher-end clothing fashions. The store proved to be a success, and Ortega started opening more Zara stores in Spain. During the 1980s, Ortega started changing the design, manufacturing and distribution process to reduce lead times and react to new trends in a quicker way, in what he called "instant fashions" or “fast fashion”. The company based its improvements in the use of information technologies and using groups of designers instead of individuals. In 1988, the company started its international expansion through Porto, Portugal. In 1989 they entered the United States and in 1990 France. This international expansion was increased in the 1990s, with Mexico (1992), Greece (1993), Belgium and Sweden (1994), etc. until the current presence in over 70 countries. Zara stores are company-owned, except where local legislation forbids foreigner-owned businesses. In those cases, Zara franchises the stores. III – Questions for Discussion 1. As completely as possible, sketch the supply chain for Zara from raw materials to consumer purchase. - Zara makes about 40% of their raw material (fabric). The remaining 60% is outsourced from within Spain, mostly from the...
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...Introduction Nowadays, there are a variety of businesses and business strategies; some of them survive among the intense competition, some of them bow out of their respective industries. In order to compete, the business has to find the best ways to adapt in their industry. For example, Porter’s model and the five forces help gage how businesses should adapt. These forces affect the value chain and the generic strategies that help build the framework that can help the businesses know their position and their competitors’ position to make a strategic plan for the business. ZARA is the world largest clothing retailer operating in 86 countries ("INDITEX Group - Zara", n.d.). ZARA was founded by Amancio Ortega in 1975 ("ZARA - Spanish Fashion's First International Company | don Quijote", n.d.) ZARA had their first store in La Coruña, Spain, which is now the currentmain headquarter. The success of ZARA is a very interesting story so in this paper the discussion will be over ZARA’s position and its competitors’ position by applying Porter’s Five Forces. Another focus will be the generic strategy and value chain. Lasitaporn Kraikruan Porter’s Five Forces Porter’s Five Forces are tools that can help a business understand their business position, current competitive position, and its profitability level by considering the tension of 5 forces: Bargaining of suppliers, bargaining of buyers, threat of new entrants, threat of substitute products or services, rivalry among...
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...1.As completely as possible,sketch the supply chain for Zara from raw materials to consumer purchase. supplier ☞ manufacturer ☞ wholesaler ☞ retailer ☞ consumer 2.Discuss the concepts of horizontal and vertical conflict as they relate to Zara. Horizontal conflict is a conflict occurs among firms at the same level of the channel. Zara’s distribution network reduces conflict among retailers and wholesalers in some extent. Vertical conflict is a conflict between different levels of the same channel. Zara’s business model makes that it’s impossible for wholesales and retailers make the biggest mark-ups.what’s more, retailers consult a assistant to check what mew designs are available and place their orders according to what they think will sell best to customers.It reduces the conflict between designers and customers. 3.Which type of vertical marketing system does Zara employ? List all the benefits that Zara receives by having adopted this system.（Zara使用的是哪种VMS？并说明因此受到的好处） 3、corporate VMS Benefits: （1）It can recongnize and respond to fashion trends quickly.Also it will create products that mirror trends and get those products onto shelves much faster and more frequently.The new and different things can entices customers. (2)Except faster,it is prolific. (3)Smaller batches assumes less risks if an item doesn’t sell well. (4)The repeat patronage is very high. (5)All of these lead zara more competitive. 4.Does Zara experience disadvantages from its “fast-fashtion” distribution system...
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...overnight, that truly sustainable advantage might seem like impossibility, but there are winners and the Zara chain is one of them. The Zara fashion chain, founded in 1975 in Arteixo, is perhaps the world's most successful clothing chain. Zara has helped its parent, the Spanish firm Inditex, grow from obscurity in the mid. 90’s to the world's third largest pure-play fashion retailer after the Swedish H&M and US-based Gap Inc. with financial performance well ahead of these rivals. With 1021 shops, at 13.04.2007, in 55 countries, Zara appears to have found the formula for success: Give the public what it wants, at the lowest possible price, in the shortest time possible. In order to think about how the firms achieve sustainable advantage, it's useful to start with two concepts defined by Michael Porter: operational effectiveness and strategic positioning. (I) OPERATIONAL EFFECTIVENESS According to Porter, the reason so many firms suffer aggressive, margin eroding competition, is because they've defined themselves according to operational effectiveness rather than strategic positioning. Operational effectiveness refers to performing the same tasks better than rivals perform them. Everyone wants to be better, but the danger in operational effectiveness is in "sameness". At its heart Zara is building on a vertically integrated demand and supply chain, while most other textile chains rely on outsourcing and cheap labor in China. It enables company to short turnaround times and achieves...
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...The objective of this case study is for Mr. Salgado- Head of IT, as the decision maker to evaluate the existing DOS/IT software and to evaluate the need, opportunities, effectiveness, risks and potential advantages to upgrading the IS systems. Introduction: Zara a Spanish clothier has turned the rules of the supply chain management to create a super responsive network and profit margins that are an envy to the fashion industry. Zara operates on a vertically integrated business model. The existing software applications have been developed in house and have provided the business teams with adequate and timely information, which has led Zara to maintain its position as a leader in the fashion industry. Zara has been successful in retaining its unique position and profitability by dedicated customer responsiveness and a strategy based on rapid response, short lead times, surplus capacity and a de-centralized decision-making process. Zara has a unique approach to advertising and marketing and maintains a cost advantage over its competitors and is able to maintain its brand and customer loyalty. Issue Identification: The existing operating system is far behind current technology, the POS systems, which works on a modem and phone line are plug and play and need minimal, set up. Zara faces the possibility of the vendor /DOS supplier ceasing to maintain the software. The vendor support for this hardware along with a DOS operating system is short-lived. The hardware...
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...28 Apr 2011 WK 5 Zara Case Study 1. As completely as possible, explain the supply chain for Zara -- from raw materials to consumer purchase. 5 pts. Zara makes 40% of its own fabrics and produces more than half of its own clothes. Work that has to be contracted out is done by local companies to maximize time efficiency. Zara stocks all raw materials/ fabric, cuts its own fabric and contracts the sewing to local companies. By stocking the raw material, Zara cuts down on time for getting end product to consumers. Having all this material and labor done locally to include stocking end product and shipping via jets, to distant locations and by truck to local locations, has streamlined the logistical process for Zara and is a role model for new businesses. 2. Discuss the concepts of horizontal and vertical conflict as they relate to Zara. 4 pts. Horizontal conflict is conflict that occurs among firms at the same level as opposed to vertical conflict which occurs between different levels of the same channel. Zara has minimal vertical conflict due to headquarters receiving data from individual stores where 300 professionals carry out the designs. Individual store managers spot trends, send data to Zara headquarters and "shazaam" a new design is on the market sometimes in less than two weeks. This is a prime example of teamwork at its best and shows in Zara's bottom line profits. Zara's approach to design is closely linked to their customers. A non-stop flow of information...
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...Which type of vertical marketing system does Zara employ? List all the benefits that Zara receives by having adopted this system. Zara employs a Corporate Vertical Marketing System. Zara has managed to build a system that is controlled from a single place and that it allows it for quick response, decision and problem solving. Because Zara’s parent company Inditex owns most of the resources needed for the process of clothing design, production and distribution it is able to “control most every aspect of the supply chain, from design and production to its own worldwide distribution network” (Armstrong & Kotler). Vertical Marketing System Introduction In an organization, effective marketing strategies play an important role in boosting the performance of the business. In the integration of the corporate leaders in pursuit of their financial objectives, the creation of marketing system has been established. The creation of vertical marketing system is introduced and defined as a distributing channel in which the manufacturer, wholesaler, and retailer act as a single system. An organization that can control the product and services until it reached to the end consumers is the plain example of vertical marketing system. Apparently only few of the businesses around the world successfully managed this type of system. It may define as a difficult approach to maintain the sales and effectiveness but it serves as the strongest point of the organization to boost the various...
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...channel is a set ofintermediary companies, people or agents who manage the movement of products and services from the manufacturer to the final user. All firms which take title to the product, or assist in transferring title as it moves from manufacturer toconsumer form part of thedistribution channel. A marketing channel aims to provide acompetitive advantage to the organization. It is related to supply chain management as both are involved in supplying a service or a product to the end users. Both are involved inpartnerships that are developed between organizations performing adjacent, linear steps in the chain. The supply chain or the marketing channel is viewed as a whole rather than a set of fragmented parts in order that activities, the basic units of competitive advantage, can be configured, confined and performed in different ways torival chains (Bradley, 2003). This paper will discuss the logistics, marketing channel and supply chain of an International clothing company – Zara. The company was chosen because of its unique and innovative distribution channel andsupply chain management. Company Background In 1963, Amancio Ortega started a small company in Spain that manufactured women’s pajamas and lingerie products for garment wholesalers. In 1975, after aGerman customer cancelled a sizable order, the firm opened its forts Zara...
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...La Coruna, Spain and is a leading retail outlet today. Zara’s sales make up 64.8% of its parent company Inditex group revenue and has stores in more than 86 countries. Because of its responsive and unique supply chain sales had increased by 10.1% from 2011 to 2012 fiscal year end. Zara has grown rapidly with a strategy to be highly responsive to changing trends while keeping prices affordable. Zara’s success is because of its responsive supply chain designed around customer needs based on real-time feedback received from store managers. This enables designs to be created or altered to meet customer trends. Zara manufactures in small batches, manages all functions in-house, holds retail stores to strict timetables, ships items on racks with price tags, leaves large areas empty in expensive stores, and allows occasional stock-outs. Zara has total control over design, warehousing, and distribution functions that allows the company to manufacture and have an item ready for display in 15 days normally this process takes design houses months to complete therefore higher net margin on sales than competitors. Zara keeps at least 50% of production in-house and outsources only labor intensive jobs, such as sewing to a select few suppliers, this goes against the industry norm, but it gives Zara control over the entire supply chain. This prevents supplier delays and results in the product reaching the customer faster. Zara’s designers are young, ambitious, and energetic individuals...
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