Case Study Zara

Tying up too much capital in products that are not in demand could be a fatal mistake for struggling small businesses. Moreover, Inventory management can mean the difference between success and failure for some companies. According to the New York Times article, Macy’s was able to post a profit last quarter thanks in large part to improvements it made to its inventory management system. In spite of the unstable economic conditions and the huge competition in the market such as J.C Penny and Kohl’s, Macy’s was able to get market share and raise their profit. In this paper, I will be briefly discussing the inventory management history at Macy’s and how the changes in inventory management helped the

In this final paper for Managerial Finance I will attempt to show how the supply chain inventory management method can be affected depending on the situation of the retailer. Studying the control method for problems in inventory, which would include both, excesses in inventory as well as shortages, and hoping to minimize loss.

Zara’s rapid growth and success are attributed to its strategy of highly responsive to changing trends with affordable prices. To achieve this, Zara uses a combination of flexible and quick sources in Europe and low-cost sources in Asia. As we known, Asia own the cheap raw material and labour for manufacturing, hence most of its apparel manufacturers have moved to Asia to reduce production costs. To reduce inventory holding and forecast error, Zara usually produce its apparels after the start of a sales season for a typical retailer, along with the forecast postponement of decisions until after trends are known. Inditex owns 8 distribution centres (DC) in Spain for distributing all finished products to all its stores worldwide. Even though the products are manufactured outside Spain, all the finished products must be concentrated into these 8 DCs before distribution. This allows store inventory to closely match local customer demand and reduce holding costs of over-inventory. (Sunil Chopra & Peter Meindl, 2016,

Second, in fulfillment, we can also see speed in responding to demand. For example, the replenishment, as well as production will be optimized according to supply and demand as quickly as possible. Besides, the fulfillment will commonly completed in one or two days, clothes flowed quickly, and without stopping, from factories to DCs to stores, where they were immediately put on the sales floor. Third, in design and manufacturing, we can find how Zara respond quickly to demand. Zara brought out new items continuously throughout the year, including both changes to existing garments and entirely new creations. The network of production had made design from conception through production and into the DC in as little as three weeks. Besides, Zara did not have to predict what would be selling six months, or even one month, in the future; it could continuously sense what customers wanted to buy and respond “on the fly.” All these operations reflect the speed-chasing and target-oriented nature of Zara business.

“Zara has pioneered leading-edge fashion clothes for budget minded young adults through a tightly integrated vertical structure that cuts delivery time between a garment’s design and retail delivery to under three weeks (against the industry norm of three to six months)” (Grant, 2010, p.212)

Therefore it has become crucial to have an agile and responsive supply chain set up for both these companies. The main objective of the strategy is to reduce the lead times related to the process of getting new designs with good quality and right price into the retail stores in order to have the ability of responding to new market conditions and fashion trends. To achieve these objectives, Zara and Benetton have set up some supply chain strategies that resemble each other in many ways; they both focus on delivery, flexibility, efficiency and responsiveness to the production requirements of the company. Moreover, Zara controls every step of the value chain, closing information loop quickly, leveraging ownership of own asset, even trades off cost benefits to increase responsiveness of total system. In production stage, Zara has smaller batch productions compared with Benetton, this leads to a faster inventory turnover and quick response for Zara which is also equivalent of manufacturing's JIT to the retail sector. On the other hand, Benetton has based its supply network on two models of Industrialized Model and Commercial Model, sometimes referred as a dual supply chain. These models use two ways of planning. One is sequential approach aimed at minimizing costs and

The Spanish retail chain Zara has unique supply chain management practices that enable it to gain a competitive advantage over other fashion retailers in the industry. Zara’s rapid response time enables the firm to quickly respond to changing fashions while deliberately under producing products. This strategy, which is supported by competencies in logistic management, design and information systems, allows the company to maintain less inventory and higher profit margins and is a key factor to Zara’s success. The firm should continue to add value by seeking new opportunities to expand in the retail market and maintain their sustainable growth.

According to the author, inventory management is neglected or treated as less important area for strategic advantage. Inventory managers tend to keep

Nowadays, in an era that has advanced technology and a place in the world. Everything can be linked only at your fingertips in the times of rapidly developing with the sophisticated technology of today. Therefore, an inventory system is also not lagging behind in introducing a method of keeping an inventory data systematically and safely. The system plays a very important role in improving the competitiveness of a business. Usually, organizations today face too many challenges to achieve the cost, speed and reliability. Efficient inventory system really help in order to make sure the store’s performance and data record is always in good condition and secured from abusers. The system basically to ease the admin to manage the

An additional method Zara utilizes to ensure the right product is produced is to constantly monitoring the sells at every store in real time through the use of computers. Sells managers are the individuals that play out this strategy. When the clothing sells well or does not sell well, they can quickly let the designers know to swiftly create new designs (“Case 3-4. Continued Growth for Zara and Inditex”, 2013). However, the competition is changing their strategies in an attempt to successfully compete with Zara. The methods that Zara has implemented to ensure fast fashion is truly fast has pressured the competition into reducing their lead times on stocking their stores (Hayes & Jones, 2006).

Inventory management has two very different, but effective methods: Vendor managed inventory, and consignment inventory. A company may choose to utilize either of these two methods to manage inventory. If a company is able to manage inventory, they will be better able to work the company's capital to the fullest extent. The following paper will identify the differences between the two as well as identify what type of company is best suited for each method.

Inventory management is primarily about specifying the size and placement of stocked goods (Wikipedia 2010). Inventory management involves a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling, and related costs are kept in check (Wikipedia 2010).

Inventory management: Inventory management is the total control of the inventory and lacking this fundamental understanding can lead to big overstock, or backorders. Inventory management includes:

Here we are going to discuss Zara’s supply chain or network. Design the starting point is a collaborative phase where teams of creative professionals carry out the design process and store managers who act as trend spotters and report everyday to headquarters. When it comes to materials Zara’s supply chain is unique where they make 40 percent of their own fabrics. As for cutting they produce more than half of its own clothes and even things that are farmed out are done locally to maximize time efficiency. Zara cuts fabric in-house and then sends the cut designs to one of several hundred local

While fashion used to be sold in four seasons, Zara divides it into 104 seasons with new clothes arriving in every store twice a week. Customers are offered the latest designs in limited quantities that ensure a sort of exclusivity (Tokatli, 2007). Through this method, Zara can react immediately with the changes in the market and reduce the risk of producing large quantities of less popular items the customers do not want. If a product does not sell well, there are small numbers of it in store and it will be marked down quickly and replaced with new ones. With the fast fashion system, Zara can minimize the inventory and lead times, which affects pricing and customer satisfaction.