Competitive Advantage Using Supply Chain Management

Supply Chain Management: An International Journal, Volume 7, Number 5, 2002, pp. 271 – 282;

Supply chain management is a practice that involves the planning, supervision, and implementation of strategies and controls to direct the movement of goods and services provided to customers. The intent of this essay is to incorporate a synopsis of existing literature and to provide the reader with a general understanding of how supply chain management correlates with the organizational design and structure of modern firms. The essay comprehensively reviews the components of supply chain management and their integration with functional areas within an organization. The information presented in this essay

To start, Schroeder, R., Goldstein, S., and Rungtusanatham define supply chain as “the set of entities and relationships that cumulatively define materials and information flows both downstream toward the customer and upstream toward the very first supplier.” Schroeder, R., Goldstein, S., and Rungtusanatham goes on to identify supply chain management as “the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer.” Organizations have to prepare themselves to the best of their ability in order to provide or their customers. Customers expect to receive the upmost service, regardless of the type of organization they make contact with.

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.

Supply chain management is a complex undertaking that must involve more than one organization’s efforts to succeed. A tremendous amount of skill, time, and money must be present to build and develop relationships, discover and implement a strategy, and use the capabilities of the chain to build quality at an efficient financial rate. Allowing for these requirements, it leaves one to wonder whether supply chain management is a viable option. The answer is yes, because an organization needs a strong supply chain to compete and be profitable in the marketplace. The key points for supply chain management should be to meet customer demand, produce excellent customer value, enhance responsiveness to change, build a network that can resist risk, and develop financial success.

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).

Supply chain management (SCM) is based on the philosophy that firms operating in a supply chain are oriented to the provision of goods and services for the ‘final customer’ (Lambert and Cooper, 2000) . The literature strongly suggests that that cohesive collaboration in the supply chain can provide important benefits such as added value, efficiencies and client satisfaction (Stock, Boyer and Harmon,

This article is about supply chain management (SCM). Its importance in the field of operation management. Supply chain management was discussed from the past three decades. This article tells about how supply chain management developed and how it will proceed in the future. The term “supply chain management” first appeared in the practitioner literature in 1982, which said that SCM is a way to manage resources and assets in a better way.

For many companies outsourcing has made the difference between the company staying in business or going into bankruptcy. Nevertheless, there are restrictions to outsourcing which can bring “unintended consequences.” If these concerns are not addressed, these “unintended consequences” can convert into a corrupt business strategy. (Mourdoukoutas, 2011).

Young (2012) writes that supply chain management (SCM) is a function of collaborating firms working to improve operating efficiency and to leverage strategic positioning. In addition, Young references this function as not only the physical attributes of product distribution, but also to include related information, such as production or delivery status, and the capability to access such information. Such capabilities allow SCM to be an important link in fulfilling customer needs and providing value. Young adds that in the current customer-driven market, the perceived value of the entire relationship

Effective supply chain has gained a very high prominence in the current market scenario. The numerous amounts of demands from the customers has increased significantly over the past decades. They not only expect a reliable and good quality product/service, they also want it to be delivered to them well in time. The decline in product life cycle and the quick

Zara brand products are part of the Inditex Group which was founded by Amancio Ortega. Zara brand products currently compete in what is called the fast fashion industry. Fast fashion is a trend in the fashion industry where companies produce and sell new clothing trends within the market as quickly and cheaply as possible (Fernando, 2015). This is made possible by new innovations within the supply chain management of these companies. Innovations are precisely the way Zara has become one of the top fast fashion businesses in the industry. By utilizing their core competencies along with efficiently managing their supply chain, Zara has developed a way to give customers what they want faster than anyone else (Hitt, Ireland, & Hoskisson, 2017, p. 100). Zara has done an excellent job at defining its business strategy and utilizing their core competencies to create value for their customers which is why they keep coming back. This also brings in new customers to purchase from Zara. The purpose of this paper is to examine Zara and various aspects of their business.

The brand is well-known for its capability to distribute new clothes to the stores “fast and in a small batch, twice a week”, the store managers order clothes and other items, on a schedule that they follow in all Zara stores, so the new garments arrived just in time. To reach this Zara controls most of its supply chain than the majority retailers do. On opposed to H&M, Zara keeps a nearly all of its production in-house.For Zara, the supply chain is its competitive advantage. In house production allows it to be elastic in the quantity, occurrence, and multiplicity of new products that are gone to be launched. Zara commits only 15 to 25% of a season’s line. And it curls in only half of its line by the launch of the season, sense that up to 50% of its garments are designed and manufactured during the season. If items become highly popular all of the unexpected, Zara respond directly and create a new design in that popular style, so that gets new stuff into stores while the trend is still

Zara and Benetton’s supply chain both share some common components within their supply chain models, but a few distinguishing factors make them their own. All supply chain models must include planning, designing, maintenance and control of all materials and information in order to efficiently satisfy its customers’ needs and wants (Schroder, 2000). Zara being known for their ‘fast fashion’ is claimed to take only two weeks to develop a new product and have shipped to stores, and ready for shelves. Zara is a vertically integrated retailed, meaning that their supply chain is owned by their company and usually each member of the supply chain produces a different product or service. Unlike other apparel retailers, Zara controls most of the steps included in their supply-chain, including designing, manufacturing and distribution of the products. Zara uses a just-in-time (JIT) system, with this model it allows the company to have self-containment throughout the stages of materials, manufacturing, product completion and distribution.

Vertical integration, a distinctive feature of Zara’s business model, has allowed the company to successfully develop a strong merchandising strategy. This strategy has led Zara to create a climate of scarcity and opportunity as well as a fast-fashion system. However, Zara’s strategy creates some weaknesses. Their vertical integration has more advantages than drawbacks but it is important to recognize its limitations. Vertical integration often leads to the inability to acquire economies of scale, which means Zara cannot gain the advantages of producing large quantities of goods for a discounted rate. Higher costs are then incurred for the Inditex