A Case Study On The Supply Chain System Of Zara Fashion

It is becoming apparent that the ever changing environment in the global marketplace requires a swifter response time from businesses and their supply chains. The era when production was moved overseas, so businesses can take advantage of low-cost labor is coming to an end, because businesses are not only competing on price but also on time. The owner of Zara, a Spanish clothing store knows this first hand, and has turned supply chain management on its ear, making his company the “envy of the industry” (Ferdows, Lewis, & Machuca, 2004).

What is the Zara “business model”? How is it different from the business model of other large clothing retailers? What weaknesses, if any, do you see within this business model? Is it scalable?

They are giving a big help to Zara to have customers by working hard to make their relationship with the customer even better. Zara’s employees would innovative and coming up with new ideas for the company. Zara is known for setting trends into global fashion industry, so the designers/employees need to get more unique and different sort of ideas. They are also giving all their best to provide them a good customer service.

The business idea of Zara is to link customer demand to manufacturing, and to link manufacturing to distribution. And based on this general idea, Zara has several essential elements for its business model. First, speed and decision making, which means that in the external level, Zara need to respond very quickly to demands of target customers, and always keep in style. While for the inside, Zara treasure intelligence and judgment of common employees who enjoy a great deal of autonomy. Second, its marketing, merchandising and advertising strategy. Zara does not spend on virtually advertising, while it spends heavily on stores, and no selling online because of

There vertical integration allows small batches of produce to be distributed and tested out allow them to save more money and cut inventory backlogs. Zara maintains a low cost by avoiding outsourcing (where possible) and producing all its merchandise and produce in home soil in Spain. Also Zara own many fabric dying, cutting and processing equipment that provided Zara added control and flexibility to adopt new trends on demand. Effectively Zara is able to design and manufacture products as well as deliver them in less than two weeks in contrast to competitors such as Benetton and H&M which require at least between five weeks and 4 months lead time to fill orders from its retail operations. One major unique characteristic was that Zara own its in house production which gives Zara the flexibility of quantity, variety, and the frequency of the designs they produce.

No business in this type of industry has total control over the market price and there are no barriers to entry and exit. Because of its monopolistically competitive playing grounds, Zara’s conduct is to increase its market power by producing demand for its heterogeneous products. Through differentiation and cost leadership, Zara attempts to increase market demand by offering new items weekly while keeping a low inventory, thus making its products unique and attractive to consumers. Because of its backward vertical integration model, Zara creates a strong synergy throughout its production process. Zara has sustained a competitive advantage globally by expanding into new markets and becoming more efficient. In a monopolistically competitive industry, Zara is expected to make profits in the short run but will break even in the long run because demand will decrease as average total costs increase. This means in the long run, a monopolistically competitive firm, such as Zara, will make zero economic profit (AmosWEB, 2001).

What makes the middle aged mother to buy cloths in Zara while the daughter aged in mid 20s buys Zara clothing? Because it is fashion able and up to trend. By collecting data and focusing on shorter response times, the company ensures that its stores are able to carry clothes that the consumers want at that time. Zara can move from identifying a trend to having clothes in its stores within 30 days. That means Zara can quickly and catch a winning fashion trend, while its competitors are struggling to catch up. Catching fashion while its hot is a clear recipe for better margins with more sales happening at full prices and fewer discounts. In comparison, most retailers of comparable size

Let us first consider Zara 's main competitive advantage before analyzing how current and potential future strategies will affect this competitive advantage. Zara currently employs a "design-on-demand" retail model allowing the company to bring the latest fashion trends from

The basic strategy for fighting competition is to attract buyers at lower prices, more unique designs, high-quality design, efficient customer service and solid image brand. Thus bargaining power of buyer for apparel industry is high as the products falls under the basic needs in human lives. There is no much difference in terms of products offered by the apparel company, so if buyer is unhappy with the product or service they can easily switch to another brand. Thus, Zara are trying to strengthen its position in the market by using their unique strategy by giving priority to buyer to meet their special needs.

The supply chain from raw material to consumer it's from design and production to distribution and retailing. Zara has unique and rabid supply chain today. Design and production are internal process and are done in company. At Zara's headquarters, there are creative teams of three hundred professionals doing a design process. They responsible for design the designs which will satisfy customer needs and keep pace with fashion. Zara can take a product from concept through design, manufacturing, and store-shelf placement in as

Zara’s product differentiation strategy is based on high quality and low prices. The company wants to be fashionable and desire for everyone. This is the reason of their strategy (low price and high quality).

In comparison to competitors, Zara’s business strategy, in regards to strategic partnerships and cost of production, provide for a strategic competitive advantage. Zara, unlike its competitors such as Gap, Benetton, and H&M, does not use Asian outsourcing. Eighty percent of Zara’s materials are manufactured in Europe, with 50% made in Zara controlled facilities in the Galicia region of Spain near headquarters. Most of Zara’s competitors have 100% outsourcing to cheap Asian countries. Though the cost of production in Spain is 17-20% more expensive than Asia, Zara does have a competitive advantage over its competitors in regards to operations. The local strategic partnerships that Zara maintains with manufacturers in Europe allow for a product throughput time of 3-4 weeks from conception to distribution. To make this happen, the company designs and cuts its fabric in-house and it acquires fabrics in only four colours to keep costs low. The proximity of these suppliers gives Zara great flexibility in adapting their product lines based on up to date market trends and consumer behaviour. It also decreases costs of holding inventory. Zara’s competitors, through outsourcing to Asian countries such as China, sacrifice the benefits of proximity for low labour and production costs.

Quick response of Zara leads it to be successful in the fashion clothing industry. Zara adopts international strategy for its operation. With vertical integration, it benefits Zara in cost aspect, however, it involves some risks. Due to our anaylysis on Zara’s operations, some of the recommendations are made to facilitate its further improvements.

Zara is a clothing company that was founded in 1975 and came from Spain. Its under Inditex group which owns other brands such as Massimo Dutti, Pull & Bear, Oysho, Uterques and many more companies. Zara grew very fast and currently in 2012 has 1,617 stores worldwide. With a large name in the fashion industry, besides that, Zara faces tough competition internationally including H&M, Benetton, and GAP. In order to keep up with the speed chic, Zara need to keep up also with the information system to run their business.

The following article will mainly focus on aspects of supply chain and logistics management of fashion related Retailer Company named Zara, which is expected to boost the value of customers, and sustainability concept is considered to be added benefit to the Zara Company. The advantage is mainly because of Zara company’s designing models that are related with business and they are compared with benefits and disadvantages with other companies which have seen success and also highlight on companies that are not successful. The business related strategies and management of supply chain operations are compared between Zara Company and with other companies like Dell and Myers. The difference in strategies and success is compared between Zara and Dell and also Myers with Zara.