Zara’s Supply Chain and Logistics Management Strategies
Question:
Identify logistics Management strategies that enable Zara to become so successful.
Logistics and supply chain management is significant aspect for ensuring the growth and success of business in prospective industry and competitive business world. By adopting excellent logistics and supply chain strategies, the companies are able to get more competitive advantage against their competitors. It includes the process of storing the goods and services and their supply and distribution to end customers, so that they can satisfy their needs and demands. In this report, there is the discussion about the supply chain and logistics management of Zara. Zara is one of the most successful fashion retailers all over the world. The organization is implementing different strategies for managing the distribution of products and services, which are the major reasons behind the success of company. These strategies and success factors are compared with two companies, i.e. Myer and Dell. Furthermore, the supply chain of Zara is compared to an unsuccessful organization, i.e. United Technologies Corporation. At the end, it finds out the similarities between Dell, Myer and Zara’s success formula.
By holding the top position in fashion and textile industry, Zara is developing various strategies under its supply chain and logistics management. These are the major factors behind the success of company. There are some components, which make it more successful in the textile industry. By this, the organization has been able to attain its objectives by implementing highly efficient logistics and supply chain processes (Axelsson and Jahan, 2015). These processes and components are given below;
Zara has maintained its systems and processes in such a way that it can launch new products very fast and distribute them in retail stores within 4 to 6 weeks. It indicates that the lead time at organization is shorter than its competitors. Manufacturing and other operations are very fast at Zara and it requires the extent of agility to respond to the current trends and fashion. This swiftness of the logistics management at Zara is the major assistance to its major strategy (Beske, and Seuring, 2014).
The growing position of Zara is connected to the vertical integration with its parent company, i.e. Inditex and diversified range of products and services (Tomlinson, and Fai, 2016). It has its manufacturers, distributors, warehouses and retailers. It manufactures cloths in lot, which is delivered to the retail stores, from where customers can buy the products. Vertical integration is the major success factor for launching the new products quickly. After selecting new designs, organization manufactures the garments and supplies them to the retail stores in the timeframe of two or three weeks. Most of its manufacturing premises are located in the Spain and all the facilities are integrated vertically (Christopher and Russell, 2008).
Under its supply chain and logistics process, Zara is adopting the Just-in-Time production policy, under which company manufactures the products according to the changing trends and fashion. In the situation of new fashions, the organizations respond quickly by manufacturing new designs and fashion cloths. Some of these newly designed garments are sent to its retail stores and some of them are kept to handle the situation of shortage that may occur in the market due to indeterminate delays (Sindi, and Roe, 2017).
Comparison of Zara’s Supply Chain and Logistics Management with Dell and Myer
The products of Zara are supplied from manufacturing premises in Spain through Corunna Depot and Zara Logistica. It does not store the inventory and distribute to its retail outlets twice in a week. The organization has a solid distribution network, which enables Zara to deliver the finished products to its Americana and Asian stores within 40 hours and to the European stores in 24 hours.
Moreover, Zara has implemented lower inventory system at a time, because it thinks that it is hazardous for fast changing trends and fashion. About fashion industry, it is true that which is required one day can be out of fashion on next day. This is the reason company does not store large inventory to reduce the chances of wastage (Coyle, Langley, Novack, and Gibson, 2016).
The major reasons behind the success of Zara are such as; its Just-in-production policy, manufacturing process and ability to provide the products within appropriate timeline. There are various differences between supply chain and logistics of Zara and Dell. The major difference between both the companies is that Zara is implementing vertically integrated supply chain, while Dell is executing horizontally supply chain (Rushton, Croucher, and Baker, 2014). There are some bases, which can be taken into consideration for comparing and contrasting the supply chain and logistics of Zara with Dell. These bases are given below;
Zara is very powerful in introducing new designs and products rapidly and launches its cloths and accessories in very limited outlets. On the other side, Dell is using make-to-order strategy, which is customized in very short duration according to the needs and requirements of customers (Crandall, Crandall, and Chen, 2014). It assembles laptops, computers and relevant accessories that can be personalized.
The communication strategy at Zara is very effective for establishing communication with its customers. It releases new collections and designs weekly or monthly. The designers at Zara depend on sales of cloths and response from customers. This is the major weakness of Dell that it does not make focus on the international styles and changing technology. The only source of feedback at Dell is the number of orders, received from customers.
Moreover, Dell is reducing extra costs of warehousing, so it has low costs of inventory management. There are some actions, such as; direct delivery, supplier storage and retail storage, which are cutting additional costs, whereas, Zara has built its warehouses to store its fabrics and cloths and deliver them to stores effectively (Gallaughar, 2008).
Dell is using indirect distribution channel, which includes several parties, like; retailers, assimilator, distributors and end consumers. Its B-2-B model allows most of its suppliers to purchase the products online. On the other hand, Zara delivers its products from manufacturing facilities in Spain. It does not store large inventory for long time and garments are delivered to its retail outlets two times in a week (Peteraf, Gamble and Thompson, 2014). It manufactures the products and services after considering the needs and preferences of the customers. In the situation of excess stock at stores, it tops the manufacturing and eliminates excessive storage of products, which are unsold.
Myer is an Australian departmental store, which is trading in all the states in the country. It is one of the largest retail stores in the country. However, it is successful in the industry, but it did not attempt to segment the markets by considering the characteristics and variables of customers. It does not segment the market by considering demographic and psychographic variables of consumers, whereas Zara has divided the market as per their lifestyle and demographic features. Myer is using direct framework of supply chain, which enables the organization to communicate its activities and processes (Gleghorn, and Harper, 2015). It delivers the products from manufacturing premises to final stores, where the people can buy them, whereas Zara includes different intermediaries under its logistics, like; retailers and wholesalers. Same as Zara, this organization is also getting success in offering products on appropriate time. Myer is also managing its stock effectively and practices market research and manufactures the products and services accordingly. The flow of products and services is very slow at Myer, but Zara is implementing Just-in-Time production.
However, United Technologies Corporation is successful due to its innovative and excellent idea and business approaches, but it is not getting success in the field of logistics and supply chain management. In spite of weak supply chain, it is able to organize its inventory level effectively. Zara’s distribution network is very powerful, but United Technologies has confronted poor logistic system, which has led the company in weak delivery of products to its customers (Turker and Altuntas, 2014). This indicates that there is a major difference between logistics and supply chain operations of United Technologies and Zara. Because of this, it is failed to manage its supply chain operations properly.
For each and every business, the major threat is to achieve competitive advantage and sustain that competitive advantage in prospective industry. There are some sources of comparative advantage, which are major points, where the organizations must put the sustainable competitive advantage from. In an organization, the management should execute the tactics and strategies, which will make sure, that sources of competitive advantage are viable in both long term and short term as well (Gorrepati, 2016). There are two major aspects, which are the important bases for the Zara’s sustainable competitive advantage. Two aspects are stated below;
There are so many companies which confront the issues in performing better than its competitors. They are unable to understand the fact that every company is executing some approaches and strategies. However, Zara implemented a unique approach for increasing its operations efficiency and effectiveness, which helped the company in attaining competitive advantage with sustainability. The supply chain and logistics of the organization is created on the basis of vertical integration, whereas competing firms depend on recruiting the people from cheap labor cost nations, like; Mexico, China etc. Moreover, Zara has applied an exclusive business model, which is developed to provide new and changing fashion cloths to its potential customers (Grosvold, Hoejmose, and Roehrich, 2014).
For an organization, it is an important step to determine the strategic positioning of a business. It is essential to analyze that how an organization competes and serves its consumers in the target markets. Strategic positioning of an organization includes implementing processes of other organization in same or diverse ways. Zara has used modern and advanced technology to have the benefits of strategic positioning tactics. For example, the target audiences of Zara are wide, as it has segmented the market in different way. The primary target market for the company is educated people and who are from young generation; because company believes that these people understand the changing trends of fashion (Jacobs, and Chase, 2013). By the use of internet and advanced technology, Zara is spreading its business operations and fashion trends all over the world. This business expansion is supporting the organization in attaining more competitive advantage with sustainability.
For attaining competitive advantage with sustainability, Zara is implementing a unique business model, which is quite different from other players in global textile industry. The company is enhancing value for its consumers by providing them new trends and fashion clothes on affordable prices. The major reasons behind successful competitive advantage are implementation of online business strategy and utilization of modern technology. In this way, execution of above-mentioned strategies is enabling the company to sustain the competitive advantage against its competitors (Kunz, Karpova, and Garner, 2016).
Apart from above given differences, there are some similarities among the success factors of these three companies, i.e. Dell, Zara and Myer. One of the major factors behind the success of these organizations is use of effective supply chain and logistics management. These do not depend on distributors to send the garments to the market because they directly provide the products to customers (Madsen, and Walker, 2015). Dell manufactures the computer, laptops and other accessories and provides them to customers through its website. Like Dell, Zara also provides the garments to its potential customers through its retail outlets and Myer offer retail products and services to its final customers directly.
The success formulas, which are adopted by these three organizations, can be imitated by other organizations. They can decrease the complex processes, which make the manufacturing process cheaper and customers can buy the products on cheaper rates. The companies are manufacturing and offering the products and services after considering the needs and requirements of customers (Papadopoulos, Gunasekaran, Dubey, and Balta, 2016). By implementing effective strategies, they are getting success and sustainable competitive advantage in their markets. The success formula, executed by the companies can be suitable for other firms also. It is significant for all the companies to adopt an efficient logistics and supply chain system. By improving their logistics and supply chain, other firms can enhance their position and performance in the prospective industry (Mangan, and Lalwani, 2016).
Conclusion
It is hereby concluded that supply chain and logistics management play an important role in the success of an organization. By looking at Zara’s case, it is very clear to state that success of this company is attributable to its vertical integration approach. By the implementation of different strategies, the organization is able to approach the top position in international textile market. In the above report, the success factors of Zara are compared to the Dell and Myer. Both the companies, i.e. Dell and Myer are adopting effective tactics and strategies under its logistics and supply chain management. The report describes the differences and similarities among Zara, Dell and Myer.
After considering the above analysis, it can be suggested that Zara needs to become more focused on business expansion to different locations worldwide. It will assist the organization in gaining more market share in international textile market. Moreover, it should make focus on the marketing and advertising activities, so that it can increase its brand image and reputations among a large base of customers. In this way, Zara can enhance its position in the textile industry and become number one in this industry.
References
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