Executive Summary
This report aims to study the supply chain management and logistics of fashion retailer, Zara, to boost customer value. The concept of sustainability and competitive advantage is considered with other business models and compared with successful and unsuccessful company. The study is compared with the supply chain management and business strategies of Zara with Dell and Zara with Myers.
Introduction
Zara was founded and established 1975 by Spanish born Amancio Ortega Gaona. The actual store dealt with the products of the manufacturing company Zara, was an outlet for cancelled orders of women’s night wears and lingerie. These have made a strong foundation for realizing the association between producer and retail trade (Ferdows et al, 2003). Major priority of Zara and its parent group Inditex, is customer and a demand centric supply management (O’Marah & Hofman, 2010). Though Zara is a global multi-national company, but it is a subsidiary of Inditex which is world’s biggest apparel retailer. The Inditex group owns more than 100 textile companies. Zara is the flagship brand of Inditex, captivating maximum sales (Gallaugher, 2008).
PESTEL Analysis of Zara
PESTEL analysis and Five Forces Model analysis made to determine internal and external environment and its competitive advantage. Detailed analysis has revealed tough competition with Zara and its main contenders are Gap, Benetton, and H&M battling for market stake. In 2008, Inditex paved its way to reach the top of success and became world’s biggest fashion retailer (Hall, 2008). But the global economic condition has changed. Nowadays products have shorter life span, with markets more unstable demanding so that no company rests on its glories (Christopher, 2005)
Zara’s speed of delivery, vertical integration, its deployment of Just-in-Time operations and use of technologically advanced logistics processes is the key to its success. Collaboration of chief tasks, strategic use of organizational resources and core competencies contribute to Zara’s competitive advantage.
Report
This report entails a deep analysis of Zara’s strategic method to Logistics Management, customer value and competitive advantage, comprehending the influence of supply chain in this. Theoretical frameworks related to study are, Porter’s generic strategies (1980), Just-in-Time manufacturing and supply chain patterns are studied and other related factors are organizational culture, modernization, education and knowledge management and disposition of core competence. Zara’s business strategy has been compared with Dell and Myers.
Comparison between Dell and Zara’s Logistics Management
Dell and Zara, both are prosperous corporations. One manufactures computers while the other one apparels.
Dell’s Supply Chain
It is very simple indeed consists of three main players: consumer, Dell and the supplier. The customer places the order, Dell procurer the supplier and parts, immediate assembly and supply to the customer.
Zara Supply Chain
Its supply chain is completely dissimilar from the other one. Designing, sourcing, manufacturing, distribution to outlets, are the main functions of supply chain.
Point of Difference
Type of supply chain of Dell
Dell follows horizontally integrated supply chain whereas Zara a vertically integrated supply chain. Dell is isolated from the production process, hires third party suppliers for the finished goods and delivery.
In contrast, Zara has full control over different phases of production of garments. The company is successful due its full control over the trade, from crafting, to manufacturing, and to delivery. Total control on the company enables them respond quickly to the changing fashion and customer preferences. This control permits Zara to issue new designs in a short duration of time. Another benefit of horizontal supply chain is that it is controlled easily since minimum responsibilities are there in the assembly line. On the other side, Dell have to coordinate a number of small procedures, control the whole thing and make necessary changes which is much easier. Both are correct for respective companies.
Suppliers
Zara follows vertically integrated supply chain so it exercises control over suppliers. Demand is easily met and manufacturing is easily achieved. Dells manage supply chain very well since 15 suppliers’ delivers 85% of their services. Although they have number of suppliers but speed and accuracy is the primary concern for Dell to their services of clients. Risks are involved like uncertainty, insecurity, shortage of goods and delay in delivery. But instead of lessening their stocks, Dell stresses on high speed delivery of products. This is possible since 95% of suppliers are located close to the manufacturing unit.
Production philosophy
Dell follows make-to-order strategy. Such a strategy is custom – made in a very short span of time for respective customer that is orders are made as per the requirement of the customer at reasonable prices. Sometimes the core competencies of partner firms or suppliers and information technology are leveraged, such as the Internet, to incorporate a value chain. Dell provides range of customized products on its website. They also design products which are easily customized.
Zara is keen in introducing new designs and launching new products very quickly. They believe more styles are equal to more choices. They launch products in a limited showroom in which stores receives few pieces of the new product. This strategy of making the product exclusive sold out the stock quickly also generates curiosity in customer about their next launch, making the next product exclusive and demanding. The strategy of lower quantity is equal to limited supply is equal to compulsion purchase. Zara does not advertise their products because they do want a brand image. Their target is product and customer’s expectation of their products. Since products are limited, customers frequently store to check new arrivals. Some clothes are highly demanding in some region while the other clothes in other region. For an instance, in India demand for summer clothes is very high for their tropical climate, whereas in Europe demand for woolen clothes is very high due to their cold climate all through the year. Europe being the fashion capital of the world can market their products in other region such as Asia. Such a production philosophy serves the customer’s tastes. Dell puts forward their philosophy of make-in-order products.
Storage
Dell has low inventory costs with no extra cost on warehouses. They have 7 hours of inventory instead of 10 days. Other costs like warehouse, direct delivery, supplier storage with transporter or retail storage with direct customer pickup helps them cut cost. Dell has no inventory policy. On the contrary Zara has number of warehouses to store their garments and circulate them efficiently.
Distribution
Indirect Distribution Channel of Dell includes: retailers, suppliers, assimilator, distributors and the end customer. The B2B model followed by Dell allows 90 percent of suppliers to order online. Dell sells its laptops, PCs directly online as per the direct model. This way the in-between stages are removed that add more time and cost, and Dell is directly connected to its clienteles. This upshots transport costs of Dell.
Products of Zara are shipped from the manufacturing site in Spain through Corunna depot or Zara Logistica. The inventories are not stocked and are distributed to the Zara stores twice in a week. For overseas distributions, the inventories are carried to the Spain border, and the logistics carrier of the country takes it down to the stores. Stores order more stocks from offers, commercial manager takes the orders and passes on to the logistics who handles the stock. Stores are graded according to their sales and accuracy of orders, this rank governs their priority level for supplies of order. If any product is not selling in the market their production is immediately stopped. This means that no stocks will be piled up. If a product is not selling in certain stores, the company stops production of that product. This eliminates unnecessary stocking of unsold goods. This process adapts to consumer’s preferences quickly.
Communication
New collections and designs are updated weekly and released. Zara shop managers places order via La Corunna on sold and unsold products. This reports a product is to be kept or changed, and new designs are to be created or not. The designers depend on apparel sales, criticisms and remarks from customers. This communication system is cost efficient speed up their process. This is Dell’s weakness since they lack foresight about international styles. The customer orders are their only feedback.
Comparison of Myer with Zara
Myer has made no effort to segment their markets along demographic lines and psychographic lines of customers and their use of products, whereas Zara has segmented the market along demographic lines and lifestyle lines. Zara brands itself as the leader of fashion industry offering money value. Myer’s “My Store” concept is ambiguous. It has a general target of market. Zara’s target group is between 20 – 35 year old young fashion markets. Whereas, Myer positions itself as a departmental store with extensive collection of products, but unsatisfactory customer service. It uses discounting sales strategies to invite more customers. Instead, Zara is motivated on launching seasonal fashion products with tempting promotional demonstrations and adequate customer services.
Supply Chain Management Strategy
The companies are more focused on strategic supply chain management (SCM) of occupational improvement and achievement (O’Marah and Hofman, 2010). Strategic logistics management is a major source of customer satisfaction and competitive advantage.
As a new model (Skjott-Larsen et al, 2007) SCM is focus
Executive SummaryThis report aims to study the supply chain management and logistics of fashion retailer, Zara, to boost customer value. The concept of sustainability and competitive advantage is considered with other business models and compared with successful and unsuccessful company. The study is compared with the supply chain management and business strategies of Zara with Dell and Zara with Myers.IntroductionZara was founded and established 1975 by Spanish born Amancio Ortega Gaona. The actual store dealt with the products of the manufacturing company Zara, was an outlet for cancelled orders of women’s night wears and lingerie. These have made a strong foundation for realizing the association between producer and retail trade (Ferdows et al, 2003). Major priority of Zara and its parent group Inditex, is customer and a demand centric supply management (O’Marah & Hofman, 2010). Though Zara is a global multi-national company, but it is a subsidiary of Inditex which is world’s biggest apparel retailer. The Inditex group owns more than 100 textile companies. Zara is the flagship brand of Inditex, captivating maximum sales (Gallaugher, 2008).PESTEL Analysis of ZaraPESTEL analysis and Five Forces Model analysis made to determine internal and external environment and its competitive advantage. Detailed analysis has revealed tough competition with Zara and its main contenders are Gap, Benetton, and H&M battling for market stake. In 2008, Inditex paved its way to reach the top of success and became world’s biggest fashion retailer (Hall, 2008). But the global economic condition has changed. Nowadays products have shorter life span, with markets more unstable demanding so that no company rests on its glories (Christopher, 2005)Zara’s speed of delivery, vertical integration, its deployment of Just-in-Time operations and use of technologically advanced logistics processes is the key to its success. Collaboration of chief tasks, strategic use of organizational resources and core competencies contribute to Zara’s competitive advantage.ReportThis report entails a deep analysis of Zara’s strategic method to Logistics Management, customer value and competitive advantage, comprehending the influence of supply chain in this. Theoretical frameworks related to study are, Porter’s generic strategies (1980), Just-in-Time manufacturing and supply chain patterns are studied and other related factors are organizational culture, modernization, education and knowledge management and disposition of core competence. Zara’s business strategy has been compared with Dell and Myers.Comparison between Dell and Zara’s Logistics ManagementDell and Zara, both are prosperous corporations. One manufactures computers while the other one apparels.Dell’s Supply ChainIt is very simple indeed consists of three main players: consumer, Dell and the supplier. The customer places the order, Dell procurer the supplier and parts, immediate assembly and supply to the customer.Zara Supply ChainIts supply chain is completely dissimilar from the other one. Designing, sourcing, manufacturing, distribution to outlets, are the main functions of supply chain.Point of DifferenceType of supply chain of DellDell follows horizontally integrated supply chain whereas Zara a vertically integrated supply chain. Dell is isolated from the production process, hires third party suppliers for the finished goods and delivery.In contrast, Zara has full control over different phases of production of garments. The company is successful due its full control over the trade, from crafting, to manufacturing, and to delivery. Total control on the company enables them respond quickly to the changing fashion and customer preferences. This control permits Zara to issue new designs in a short duration of time. Another benefit of horizontal supply chain is that it is controlled easily since minimum responsibilities are there in the assembly line. On the other side, Dell have to coordinate a number of small procedures, control the whole thing and make necessary changes which is much easier. Both are correct for respective companies.SuppliersZara follows vertically integrated supply chain so it exercises control over suppliers. Demand is easily met and manufacturing is easily achieved. Dells manage supply chain very well since 15 suppliers’ delivers 85% of their services. Although they have number of suppliers but speed and accuracy is the primary concern for Dell to their services of clients. Risks are involved like uncertainty, insecurity, shortage of goods and delay in delivery. But instead of lessening their stocks, Dell stresses on high speed delivery of products. This is possible since 95% of suppliers are located close to the manufacturing unit.Production philosophyDell follows make-to-order strategy. Such a strategy is custom – made in a very short span of time for respective customer that is orders are made as per the requirement of the customer at reasonable prices. Sometimes the core competencies of partner firms or suppliers and information technology are leveraged, such as the Internet, to incorporate a value chain. Dell provides range of customized products on its website. They also design products which are easily customized.Zara is keen in introducing new designs and launching new products very quickly. They believe more styles are equal to more choices. They launch products in a limited showroom in which stores receives few pieces of the new product. This strategy of making the product exclusive sold out the stock quickly also generates curiosity in customer about their next launch, making the next product exclusive and demanding. The strategy of lower quantity is equal to limited supply is equal to compulsion purchase. Zara does not advertise their products because they do want a brand image. Their target is product and customer’s expectation of their products. Since products are limited, customers frequently store to check new arrivals. Some clothes are highly demanding in some region while the other clothes in other region. For an instance, in India demand for summer clothes is very high for their tropical climate, whereas in Europe demand for woolen clothes is very high due to their cold climate all through the year. Europe being the fashion capital of the world can market their products in other region such as Asia. Such a production philosophy serves the customer’s tastes. Dell puts forward their philosophy of make-in-order products.StorageDell has low inventory costs with no extra cost on warehouses. They have 7 hours of inventory instead of 10 days. Other costs like warehouse, direct delivery, supplier storage with transporter or retail storage with direct customer pickup helps them cut cost. Dell has no inventory policy. On the contrary Zara has number of warehouses to store their garments and circulate them efficiently.
Distribution
Indirect Distribution Channel of Dell includes: retailers, suppliers, assimilator, distributors and the end customer. The B2B model followed by Dell allows 90 percent of suppliers to order online. Dell sells its laptops, PCs directly online as per the direct model. This way the in-between stages are removed that add more time and cost, and Dell is directly connected to its clienteles. This upshots transport costs of Dell.
Products of Zara are shipped from the manufacturing site in Spain through Corunna depot or Zara Logistica. The inventories are not stocked and are distributed to the Zara stores twice in a week. For overseas distributions, the inventories are carried to the Spain border, and the logistics carrier of the country takes it down to the stores. Stores order more stocks from offers, commercial manager takes the orders and passes on to the logistics who handles the stock. Stores are graded according to their sales and accuracy of orders, this rank governs their priority level for supplies of order. If any product is not selling in the market their production is immediately stopped. This means that no stocks will be piled up. If a product is not selling in certain stores, the company stops production of that product. This eliminates unnecessary stocking of unsold goods. This process adapts to consumer’s preferences quickly.
Communication
New collections and designs are updated weekly and released. Zara shop managers places order via La Corunna on sold and unsold products. This reports a product is to be kept or changed, and new designs are to be created or not. The designers depend on apparel sales, criticisms and remarks from customers. This communication system is cost efficient speed up their process. This is Dell’s weakness since they lack foresight about international styles. The customer orders are their only feedback.
Comparison of Myer with Zara
Myer has made no effort to segment their markets along demographic lines and psychographic lines of customers and their use of products, whereas Zara has segmented the market along demographic lines and lifestyle lines. Zara brands itself as the leader of fashion industry offering money value. Myer’s “My Store” concept is ambiguous. It has a general target of market. Zara’s target group is between 20 – 35 year old young fashion markets. Whereas, Myer positions itself as a departmental store with extensive collection of products, but unsatisfactory customer service. It uses discounting sales strategies to invite more customers. Instead, Zara is motivated on launching seasonal fashion products with tempting promotional demonstrations and adequate customer services.
Supply Chain Management Strategy
The companies are more focused on strategic supply chain management (SCM) of occupational improvement and achievement (O’Marah and Hofman, 2010). Strategic logistics management is a major source of customer satisfaction and competitive advantage.
As a new model (Skjott-Larsen et al, 2007) SCM is focus
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