...Case 1: Zara, H&M, Benetton Supply Chain Strategies | Executive Summary The performance of many organizations is highly dependent on utilizing the correct supply chain model. This report focuses on the analysis of the supply chains of three clothing companies: Zara, Hennes & Mauritz (H&M), and Benetton. The analysis was focused on three aspects. First, the supply chain models of the three retailers were compared and contrasted and there was an evaluation whether each of the retailers has the right supply chains for the type of products they offer. Second, the analysis highlighted how the supply chain architecture of the three companies impacts the management of inventory, information, and capacity. Finally, the analysis also included some research on how the supply chain strategies of these retailers have changed in recent times and its impacts on their relative competitive advantage. Based on the analysis, several recommendations around strategic and process improvement were provided for Zara, H&M, and Benetton. The recommendations are further supported by an implementation plan as well as an overall assessment of the risks that the retailers face. Sources of analysis include the two Harvard Business Review Articles “What is the Right Supply Chain for Your Product” and “Rapid-Fire Fulfillment”. The analysis also utilized several research reports from DataMonitor. Analysis Zara, H&M, and Benetton are all clothing retailers that focus on fashion...
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...The case of Zara – The Postponement strategy I) Introduction In order to compete in the world of rising globalization and shortening of product life cycle nowadays, firms have to deal with the demand for increasing product variety to meet the diverse needs of customers. Mass customization has become a requirement for many businesses especially in the dynamic, fast-changing industries. However, the more product varieties, the more difficult it is to forecast demand, control inventory and manufacture. Therefore, some innovative companies have integrated “postponement” strategies with their supply chain operations to gain control of product variety proliferation. Zara is one of the most successful fast-fashion chains in the world, which is famous for its ability to keep itself up to date with fashion trends and the incredibly short time to introduce new products. In order to react quickly to fashion changes and consumer demand, Zara maintains extremely efficient supply chain operations. By properly designing the product structure and the manufacturing and supply chain process, Zara can delay the point in which the final products assume their specific characteristics, thus raising the flexibility to handle the changing demand for the multiple products. This is known as the “postponement” approach. In this paper, we will analyze how Zara achieves mass customization through “postponement”, with a particular focus on the supply chain structure, relationship and enabling activities...
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...Zara – Rapid Fire Fulfillment Peggy Martin February 16, 2014 BUS/3022 Professor Matt Fok The first Zara store opened in La Coruna, Spain in 1975. Today, Zara has grown from one small shop to a major apparel company, having 4,700 stores in 76 countries globally. Zara’s great success can be attributed to its very unique supply chain strategy. (Chopra & Meindl, 2013) Zara’s very successful supply chain strategy is based on the five fingers touching the factory and five fingers touching the customer philosophy. Basically, this means to have full control over all the merchandise until it has been purchased by the customer. Instead of outsourcing or contracting with third-party logistics companies, Zara handles the designing, manufacturing, warehousing, and distribution of all its merchandise. In addition, all logistics functions is handled by Zara, and even put all the price tags on its products before they are shipped out to the stores. (Ferdows, Lewis, & Machuca, 2004) Zara has managed to achieve an excellent strategic fit for the company. All areas of the company, from design to distribution work together smoothly, having the same ultimate goal. Zara’s strategy has allowed them to cut the design to sale cycle time considerably. Generally, in the clothing industry, the design to sale cycle time is anywhere from four to six months. Zara is able to maintain a cycle time of four to six weeks. In addition, the information technology that...
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...reduce their costs while improving efficiency and flexibility. Zara, founded in 1975 by Amancia Ortega, is the world’s largest fast fashion flagship chain retailer owned by Inditex Group and is vertically integrated in all aspects of its business. Zara, according to Ferdows et al (2002), has a decentralized communication and decision making process based on an autonomous ordering of clothing and fulfillment method. Zara’s vertically integrated structure of owning everything from the processes of manufacturing and design of its products to the individual stores is due to the fact they produce more of their products in-house, with only forty percent of its activities outsourced. The outsourced activities include the simpler labour intensive quick turnaround activities such as sewing and basic clothing designs while in-house activities are the more complex, complicated and trendy designs for their clothing. Zara’s top management’s opinion on the concept of most products produced in-house is it increases flexibility and speed as the products have a short cycle time. Zara also produces roughly half of its products within their own factories located in different regions around the world. Zara’s governance structure for gaining access to assets is continuous as they leverage their own assets, keeping their supply of materials within their parent company, Inditex Group. According to Ferdows et al (2002) some the supplies sourced and purchased from other Inditex firms include the dyes...
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...Zara was founded in 1975 by Amancio Ortgeo in 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...
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...Cover Page Business Model Analysis in the fast fashion industry Table of Contents 1. Introduction 3 2. Industry environment of fast fashion 4 2.1 PEST analysis 4 2.2 Five forces analysis 6 2.3 Summary of findings 7 3. Analysis of Zara and H&M 7 2.1 Analysis of Zara 7 2.1.1 Vision, mission and objectives 7 2.1.2 Internal analysis 8 2.1.3 Business model canvas 8 2.1.4 Value proposition canvas 9 2.2 Analysis of H&M 10 2.2.1 Vision, mission and objectives 10 2.2.2 Internal analysis 10 2.2.3 Business model canvas 11 2.2.4 Value proposition canvas 12 2.3 Summary of findings 12 4. Comparison of business models between Zara and H&M 12 4.1 Comparison of business models 13 4.2 Comparison of value proposition canvas 14 4.2 Summary of research insights 14 5. Development of a new entrant 15 5.1 Strategic model 15 5.2 Business model canvas 16 6. Reflection on strategic insights 16 7. Conclusion 17 References 18 1. Introduction Fast fashion is a sub sector of the fashion industry that boasts fast response to consumer demand and efficient distribution of materials and products in the global landscape (Hines and Bruce 2007). Hines and Bruce (2007) also imply that fast fashion could quickly identify and capture business opportunities and transform them into products in a timely manner. As fast fashion retailers need to deliver trendy apparels to end customers, low cost production and efficient distribution become...
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...Study – Zara Abstract The competition of current clothing industry is very fierce and Zara has many competitive advantages in this competition. This paper will analyze on about how the information technology help Zara to make decisions and make their performance more speed. First, a case review from Harvard Business Review will be covered in the introduction to show an overview of current Zara’s business model. Second is the Michael Porter’s model analysis based on Zara that including three generic strategies and five forces. Third, some of IT applications are really help the Zara to make their business more efficient, the applications will be applied in the Enterprise Resource Planning (ERP), Supply Chain Management (SCM) will emphasize a speed supply chain for Zara, and Customer Relationship Management (CRM). Finally is about the relationship between Zara and Peter Drucker’s theory, Zara and Andrew McAfee’s theory, Zara and Hey’s theory. The last part will conclude where is Zara today and make brief recommendations. Table of Contents Introduction 4 Zara and Michael Porter’s Model 5 Generic Competitive Strategies Analysis for Zara 5 Five Forces Analysis for Zara 6 Suppliers Bargaining Power 6 Buyer Bargaining Power 7 Threat of New Entrants 7 Threat of Substitute 8 Industrial Competitors 9 The Value Chain of Zara 10 Enterprise Resource Planning (ERP) 11 Supply Chain Management (SCM) 11 Customer Relationship Management (CRM) 13 Zara and Peter...
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...Zara: Fast Fashion Case Study IEOR 153 Logistics Network Design and Supply Chain Management Niko Katigbak Regine Labog Kevin Leung Ruoyun Li Miranda Ortiz Michelle Papilla Spring 2011 Professor Kaminsky UC Berkeley I. Background Inditex, founded by Amancio Ortega, operates six different chains: Zara, Massimo Dutti, Pull&Bear, Bershka, Stradivarius, and Oysho. Since 2006 when the case was written, Inditex has added Zara Home and Uterque to its collection.1 The retail chains were meant to operate as separate business units within a structure, which included six support areas and nine corporate departments. Each chain addressed different segments of the market, but all share the same goal: to dominate their segment using a flexible business model that could be expanded on an international scale. As the parent company, Inditex focused on providing the corporate services to its respectable chains so that they could accomplish their goals. As a global apparel firm, Inditex’s main development strategy for international expansion is to become the sole or majority shareholder. However, for small or culturally different markets, it extended franchising agreements to leading local retail companies. For countries with l arge barriers to entry and an appealing customer base, Inditex created joint ventures with the possibility of later buying out its partner. Despite the different approaches used to enter into the international market, Zara has shown that there...
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...Abstract Zara developed three strategies to control the whole supply chain. These are closing the communication loop, stick to a rhythm, and leverage your assets. In doing this, Zara is able to coordinate across the supply chain to maintain a fast replenishment and meet capacity. The chocolate candy industry can benefit from buying the source of their supply and controlling its transport. Keywords. Capacity, align, supply chain, rythm To understand how Amancio Ortega developed rapid fire fulfillment with Zara’s is to understand first principles. Ortega’s first principal came out of desperation. Upon cancellation of a big lingerie order by a German wholesaler, Ortega had to find a way to sell his inventory. His solution, open a shop near his factory. This was not only the birth of Zara but also the Genesis of his principal to run his company: open a store close to the factory and be personally involved. This gave rise to, “you need to have five fingers touching the factory and five touching the customer.” (Ferdows, Lewis, & Machucha, 2004) This allowed Ortega to develop a responsive supply chain that designs, produces, delivers, and displays a new garment on the rack within fifteen days. Out of this first principle there are three identifiable actions Zara’s has taken to develop a proficient supply chain. They are closing the communication loop, stick to a rhythm across the supply chain, and leverage your capital assets to increase supply chain flexibility...
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...I . Background Inditex, founded by Amancio Ortega, operates six different chains: Zara, Massimo Dutti,Pull&Bear, Bershka, Stradivarius, and Oysho. Since 2006 when the case was written, Inditex hasadded Zara Home and Uterque to its collection. 1 The retail chains were meant to operate asseparate business units within a structure, which included six support areas and nine corporatedepartments. Each chain addressed different segments of the market, but all share the samegoal: to dominate their segment using a flexible business model that could be expanded on aninternational scale. As the parent company, Inditex focused on providing the corporate servicesto its respectable chains so that they could accomplish their goals.As a global apparel fir m, Inditex’s main development strategy for international expansion is to become the sole or majority shareholder. However, for small or culturally different markets, itextended franchising agreements to leading local retail companies. For countries with largebarriers to entry and an appealing customer base, Inditex created joint ventures with thepossibility of later buying out its partner. Despite the different approaches used to enter intothe international market, Zara has shown that there is no impediment to sharing a singlefashion culture.Zara, a key subsidiary of its Spain-based parent company Inditex, was established in Galicia,Spain in 1975. The brand provides an alternative outlook to the fashion retail business model byrejecting...
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...Zara – Rapid Fire Fulfillment Donald R. Lile BUS – FP3022_assessment 1_1 Fundamentals of Supply Chain Management 3/2/16 Author Note Correspondence concerning this paper should be addressed to Donald R. Lile, Student Capella University, 225 S. 6th St. Minneapolis, MN 55402 dlile@capellauniversity.edu Zara – Rapid Fire Fulfillment Ferdows, Lewis, and Machuca, (2004). Zara, a Spanish clothier has been successful because of the ability to sustain an environment that optimizes the entire supply chain rather than each step. This assessment will identify why the company’s supply chain strategy is successful. This research will also examine how the fast response and information infrastructure aids in this success. And finally, and analysis will be completed on how the company’s unique replenishment strategy satisfies customers. Supply Chain Strategy Ferdows, Lewis, and Machuca, (2004). In an industry where the trend is to outsource, Zara bucks the system. Instead Zara keeps almost half its production in house. Zara designs and manages its rapid-fire supply chain by reinforcing three principles: 1. Close the communication loop 2. Stick to a rhythm across the entire chain 3. Leverage your capital assets to increase supply chain flexibility Zara customers can always find new products on the shelves, but they are in limited supply. Zara designers create approximately 40,000 new designs each year. From these new...
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...| Zara–Rapid Fire Fulfillment | Unit 1 Assignment 1 | | | Capella University | 1/18/2015 | | Abstract This paper explores the case of Zara–Rapid Fire Fulfillment from research conducted in textbook and on website. Keywords: Supply Chain, Supply Chain Management Zara-Rapid Fire Fulfillment Zara is a company that is known for its speed and being responsive over the cost. While this is not how the industry looks at producing clothing in the marketplace, it has worked very successfully for Zara. Amancio Ortega founded Zara in 1975 with the purpose of understanding the world market and what it means to his fashion merchandise. Ten years after he established Zara, he formed a parent company called Inditex which incorporates other retail concepts and suppliers that he built. Zara began in Spain as a small shop near his factory as he was desperate to find out not to go bankrupt when a buyer backed out of an order that had all of his capital tied up and no prospective buyers in sight. This was the beginning of Zara which is now in 86 countries across the world. The Zara brand is known for the delivery small batches of clothes quickly to the stores. In some cases, this may mean a store will receive new garment orders more than once a week. This does not seem feasible to the clothing industry competitors; however, Zara has been doing this for decades successfully with large profits. The key to this is Zara’s supply chain. Zara controls more...
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...|University of Dhaka | | | | | Submitted by: | | ▪ Muhammad Rashedur Rahman (25-034) Zara Introduction: Zara is a spanish clothing and accessories retailer based in Arteixo, Galicia, and founded in 1975 by Amancio Ortega and Rosalía Mera. It is the flagship chain store of the Inditex group, The world's largest apparel retailer, the fashion group also owns brands such as Massimo Dutti, Pull and Bear, Uterqüe, Stradivarius and Bershka. Operations...
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...1.0 Introduction: Zara is the flagship chain store of Inditex group which is owned by Spanish tycoon Amancio Ortega. It’s a Spanish based company essentially known for its clothing and accessories which was founded in 1975 (Mo, 2015). Zara believes in following the fast fashion policy, unlike its competitors. The discipline in Zara’s supply chain management has played vital role in its success (Anonymous, 2005). Zara follows vertical integrated strategy where it has total control of number of business activities such as manufacturing, sourcing, and distribution and retail stores, it allows the organization to accomplish greater flexibility, less stock and fashion risk. The main object of this report is to analyse Zara’s current supply chain and to propose suggestions for their central distribution and alternate solutions for their logistics management costs and their labour cost. 2.0 Zara’s Supply Chain Management 3.1 Supply Chain: Zara is the biggest and most successful chain of Inditex, the design and production is situated in La Coruna in Spain. In order for Zara stores to be able to offer front line style at moderate costs requires the firm to apply a solid impact over the whole supply chain network which incorporates design, purchasing, production, distribution and retailing. Zara utilizes its quick supply chain management to offer the most recent style outlines accessible in stores only fifteen days after...
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...ZARA, IT for Fast Fashion Module 1 A Case Study Prepared by Ritwick Banerjee Date of Submission: 29th September, 2010 Executive Summary My decision is to introduce a new operating system (OS) in segments. The plan identifies a number of non critical stores as pilot case. It introduces the new OS and links the Point of Sales (POS) terminals using internet to the information system at La Coruna. The necessary interface applications get written and tested by the applications development group under the pilot scheme. Training is provided to selected staff. Once the efficiency of the system is established, the existing system gets replaced with the new one in segments. This replaces the phone modem and further cuts down the cost of operation. Zara needs new technology to meet the business strategy, sustain the business plan and create better communication. The operating system DOS is no longer supported by its originator Microsoft. The terminals using DOS should upgrade to Linux operating systems. Exhibit 12 states that one time license cost for Linux system is free. A wireless router will improvise the flow of information with 5 terminals averaging per store. Cost for setting up a wireless router per store is 180 pounds in Exhibit 12. Process Elements Zara is a clothing company founded by Amancio Ortega in 1975 whose business strategy was to meet quickly and accurately the demands of the fashion world. Currently worldwide, there are 531 Zara...
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