...Zara’s supply chain strategy is successful because everything is controlled in house. They control all aspects of the process and have no middle person to deal with. Zara’s supply chain is organized to transfer both hard data and anecdotal information quickly and easily from shoppers to designers and production staff. It’s also set up to track materials and products in real time every step of the way, including inventory on display in the stores (HBR). By controlling over half of its production in house and producing in small batches the company can control inventory and the money involved better than other retailers who outsource most of its production and purchase in large batches. Zara has made major capital investments in production and distribution facilities and uses them to increase the supply chain’s responsiveness to new and fluctuating demands. It produces complicated products in-house and outsources the simple ones (HBR). Zara’s supply chain allows it to get new product to all its stores across the world in 15 days. With a 15 day turn around, it allows Zara who only ships small batches of product to their store’s a chance to refill product as soon as it runs out in store. These advantages allow Zara to have almost a 15% higher margin rate than other retailers. By replenishing stores multiple times a week compared to a less frequent schedule has two major advantages. First it allows the company to invest less money into Inventory which will allow the company to...
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...near the Atlantic, surrounded by fishing villages. In its center, a glass building sits amid acres of green lawn. It’s the headquarters of Zara, the company that introduced the idea of fast fashion some two decades ago, then developed a highly centralized and often studied—but rarely duplicated—design, manufacturing, and distribution system. The building is officially known as the Cube. Those who work there think of it as the brain. The Cube is central command for a fashion empire built on an unconventional idea: speed and responsiveness are more important than cost. Zara is renowned for its ability to deliver new clothes to stores quickly and in small batches. Twice a week, at precise times, store managers order clothes, and twice a week, on schedule, new garments arrive. To achieve this, Zara controls more of its manufacturing than do most retailers: About half its clothes are made in Spain or nearby countries. For Zara, its supply chain is its competitive advantage. Zara’s expanding global reach could finally put its Iberian Peninsula-based ecosystem to the test. Spain has always been its biggest market. But in 2013, China surpassed France to become its second-largest in terms of the number of stores (142). Expansion in China offers challenges for every retailer. And it could put the Spanish clothier in a singular predicament, because Zara is a global company that doesn’t act locally. “The secret to their success has been centralization,” says Felipe Caro, an associate professor...
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...SUPPLY CHAIN STRATEGY FOR ZARA FASHION Which is Zara's main competitive advantage? The blend of technology-enabled strategy that Zara has unleashed seems to break all of the rules in the fashion industry. That the company doesn’t outsources manufacturing to low-cost countries, it keeps huge swaths of its production in-house, enabling Zara to move faster to the style and fashion designs that the consumers are looking for, than its competitors. thethe main difference between the supply chain management and logistics from Zara and from it nearly competitors. Zara’s supply chain is high vertically integrated and keeps most of its operations, including production at the same country (Spain), probably facing more expensive manufacturing costs, but eliminating transportation costs and the time, energy and resources it involves. Some examples between Zara and its competitors are: ASPECT ZARA COMPETITORS The average time from idea to appearance in store * 15 days * 12 times faster than Gap Most of the products you see in stores didn't exist three weeks earlier, not even as sketches Once or twice a season H&M takes three to five months to go from creation to delivery Other retailers need an average of six months to design a new collection and then another three months to manufacture it Inventory Number of Designs 12 Inventory turnover / Year 12,000 Designs Others between 3-4 times Others Averages :4000-6000 An effective supply chain mainly consists in making information flow and...
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...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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...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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...Title of the Report: Zara Case Study Report Name: SeJun Lee Executive Summary Zara is one of the largest international fashion companies in the world, and it belongs to Inditex, one of the world‟s largest distribution groups. This study reviews Zara`s external environment and analyses its internal organisation to make recommendations for improving its core competencies against competitors such as H&M and GAP. This study first reviews the Zara enterprise in terms of PEEST environmental factors, Porter‟s Five Forces and the fast fashion industry life cycle (ILC). The liberalisation of European Union import quotas has had a positive political impact on the fast fashion retail industry. However, rapid style changes generate waste. In addition, recent financial crises have made customers more sensitive to price and tending to buy lower priced goods. However, young people and new Asian customers are more attracted to fashionable clothes. Also, new technology is quickly adopted to survive in a fast-moving market. Using Porter‟s competitive analysis of five forces, the threats of new entrants and substitution are low, and customers‟ and suppliers‟ bargaining power are moderate. However, the intensity of competitive rivalry is quite high because similar fashion firms are competing. Fast fashion has a shorter life cycle for products than most industries. This spurs both creativity and product innovation but demands more efficiency and advanced technology to reduce...
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...Zara Case Study - Answer the following questions using both the case in the text and online research. 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...
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...evaluate whether and how Zara generates sustainable competitive advantage. A firm is said to have competitive advantage when its profits exceed the average of its industry and that of its rivals (Grant, 1991). According to Grant (1991) the RBV sees organizations as a collection of resources which when combined forms organizational capabilities. The goal of every business strategy is to achieve a sustainable competitive advantage. According to Collis and Montgomery (2008) a firm’s resources are responsible for its better performance while working in a dynamic environment which academics term as resource based view of the firm (RBV). The RBV analysis assumes that both resources and capabilities are important for better performance and explains why some firms perform 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...
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...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 vendor for POS terminals could upgrade their...
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...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 areas within the organization. Zara System ...
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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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...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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...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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...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 existing competitors. It also implies whether an industry is attractive or unattractive. Porter’s Five Forces in ZARA are the following: Bargaining power of suppliers: The power of suppliers can drive the price up of raw materials, if there are...
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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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