Zara is regarded as one of the most successful retailers in fashion industry in the world. It is conducting its business in many countries in an effective manner. The company is committed to satisfying demands and needs of customers, and for this it is focusing on continuous innovation, and provision of new designs that are made from affordable and quality material.
The supply chain of Zara is playing a major role in its success. Zara is achieving success and competitive advantage via its supply chain. The supply chain strategy of Zara is to achieve growth via vertical integration and diversification (Gulati, Mayo & Nohira, 2013). The company is focusing on fast fashion and just in time production (Hubbard, Rice & Galvin, 2015). In order to ensure proper management of supply chain, the company is emphasizing on management of design and order administration, production, suppliers, manufacturers and distributors. The company designs all the products as it comprises of buyers, skilled designers, and market specialists in its team. Further, 50% of production in Zara takes place in its own network (Ferdows, Lewis & Machua, 2003). But, the company also uses sub-contractors in order to effectively accomplish its sewing operations. The company has ensured management of suppliers in a way that all suppliers work close to Zara’s factories. It provides an ease to the company as it can place order on the basis of need. The company is ensuring effective communication so that suppliers can be informed in a timely manner. Effective communication helps the company to achieve its targets within the set timeframe (Harrison & John, 2013).
Manufacturing operations comprises of advanced ironing, clothes packed in hangers with price tags affixed on them. For distribution, the company uses overnight trucks in order to deliver the products in European stores. However, it uses airfreight in order to ensure quick delivery to other countries. The supply chain of Zara is vertically integrated, and this allows the company to supply products in all stores within a period of two to three weeks. Further, with the help of its sophisticated Information technology, the company is collecting necessary information such as sales number on daily basis, which is allowing designers to make an estimate regarding fashion trends, and types of fashions that are in demand, and selling better. The company has facilitated designers with the availability of real time information so that they can decide about the type, color, and cut of fabric for designing new clothes or modifying already existing clothes. All this is enabling Zara to successfully conduct its operations.
Zara is achieving more benefits as compared to its competitors because of rapid response, and maintaining information infrastructure. They are making the company capable of affording extra labor as well as shipping cost that is required for accommodating and satisfying changes in demands of customers and seasons. However, Zara has an additional capacity on hand, which is effective for responding to emerging and changing demands. The total cost of the company is minimized because marked down products are reduced in dramatic manner as compared to the competitors in the market. Strong distribution system of Zara’s supply chain is enabling the company to ensure delivery of products in European market within duration of 24 hours, and in Asian and American market in 40 hours or even less than that. Though manufacturing system of Zara is similar to competitors, yet Zara has achieved more operational efficiencies as compared to its competitors. Responsive supply chain has allowed Zara to increase cost efficiency of operations via economies of scale that are carried out in-house such as cutting, dying, packaging, marketing, and labeling etc. further, it is also enabling the company to maintain inventory in most effective manner such as design led procurement is facilitating the company to prevent inventory build-up, and is enabling the company to become more responsible in terms of inventory. Further, supply chain is also helping the company in keeping the cost minimum, which is because the company is paying just for completed products or garments.
Replenishment strategy of the company is playing significant role in satisfying customers. Zara has introduced tagging system that has improved replenishing system, and allows the company to replenish its stores on frequent basis (Kotler, Burton, Deans, Brown & Armstrong, 2012). This has helped the company to get an idea about most demanding and popular products. The company can develop an idea regarding the products, and makes the products available in the stores so that timely delivery of products can be ensured. Timely delivery of product paves the way to satisfaction of customers (Ajitabh, 2008). The company is gaining advantage from the replenishing as its replenishment infrastructure is facilitating online shopping, which in turn is paving the way to the satisfaction of customer, as they can purchase product of their choice by placing an order, and can also check the availability of product online. Zara is organizing its apparels in an effective manner because of frequent replenishment (Hines, 2004). However, retail sales as well as online sales in case of Zara comprises of low cost, which is adding more profit to the company, and is also increasing customer satisfaction. Moreover, replenishment is allowing the company to display items in a proper manner, which is advantageous for company as well as for customers in a way that customers can get ideas regarding outfit, and can select the dress, leading to their satisfaction. Customer satisfaction ultimately leads to profit of company.
In conclusion, Zara is effectually managing its supply chain, and is achieving competitive edge as well as customer satisfaction with the help of its supply chain. The supply chain of company is making it capable of conducting operations in a better manner as compared to competitors. However, the information infrastructure that Zara needs in order to improve production operations is to consider demand information of customers, which is significant for designers as it helps designers to create more products according to needs and requirements of customers. It should focus on its delivery systems so that product can be placed in the market soon after it is designed by designers. It requires communication infrastructure for getting information, and providing information from and to customers, retail units, and suppliers. Zara has to deal directly with the customers, so it should train its sales personal. Training plays an effective role in making sales person capable of interacting with customers, and makes them capable of responding to needs of customers (Buttle & Maklan, 2015). The business development team of Zara should consider new trends and patterns, and they should communicate to manufacturing or production department. In order to ensure smooth functioning of retail unit, Zara should emphasize on maintaining an open communication, and it should be on the basis of computerized infrastructure. Open communication is necessary for ensuring efficiency of operations (Kumar & Sharma, 2000). Open communication helps in informing the manufacturing department regarding level of inventory and the turnover rate of inventory for specific designs. It should also consider maintaining direct communication associations or links with suppliers, and this should be on new and improved telecommunication infrastructure so that quick delivery of services can be ensured.
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