The Importance of Supply Chain Management for Business Success
Supply Chain Management is an essential component of any business, large or small. It’s the process of maximising value and ensuring long-term viability by utilising excellent supply chain management. It focuses on the transportation and distribution of resources needed to produce a product, as well as inventory management and delivery tracking of finished goods from point of origin. Putting an end-to-end business plan into action in order to generate commercial and financial value while also getting a competitive advantage over competitors is what dynamic supply change management implies (Hugos 2018). ZARA is an example of a company that has done a good job of focusing on supply chain management. ZARA’s supply chain concepts, philosophies, and procedures, as well as successful and unsuccessful practises, will be examined in this study. In addition, as a result of globalisation, the study will critically assess how logistics and distribution strategy might assist a company in improving its performance. The research will also examine the challenges of building a supply chain strategy, as well as alternative best-practice models and the links between supply chain and other ZARA sectors, taking into account their importance to the company’s performance.
Zara is a well-known Spanish clothing brand and retailer created in the 1970s. Due to a cooperative relationship with consumers and suppliers, Zara is known for completing the design and distribution of a product to its stores in two weeks, which is faster than the sector average of six months. Zara’s ability to respond to changing fashion trends is a significant part of what makes it so appealing. The firm monitors how fashion changes on a daily basis. It sells about 11,000 unique items every year in tens of thousands of stores around the world, compared to 2,000 to 4,000 items per year for the competition. Zara’s business success is founded on a supply network that is exceptionally responsive.
Supply chain management refers to the flow of data within and among operations in a supply chain, as well as the overall process of overseeing how products and services evolve from concept development and natural resources to a final consumer product (Copacino 2019). The movement of commodities, data, and money is controlled and monitored by supply chain management, which is a strategic system. This isn’t only a strategy for cutting costs in a business plan or a goal for increasing operational efficiency within a corporation. Supply chain operations, which include the use of production processes to logistics activities, stock, warehouse, procurement, transportation, cover producing and manufacturing, and shipment. Supply Chain Management is an essential component of any business, large or small. It’s the process of maximising value and ensuring long-term viability by utilising excellent supply chain management (Lambert and Enz 2017). It focuses on the transportation and distribution of resources needed to produce a product, as well as inventory management and delivery tracking of finished goods from point of origin. Putting an end-to-end business plan into action in order to generate commercial and financial value while also getting a competitive advantage over competitors is what dynamic supply change management implies.
Zara’s Successful Supply Chain Management
Following are the key principles of supply chain:
Consumer-eccentric: The foundation of supply chain management is a detailed understanding of your customers and their motivations for buying your product or service. People buy your products to solve a problem or satisfy a desire. To ensure that their organisations can address their customers’ problems or requests more efficiently, rapidly, and economically than their competitors, supply chain managers must first understand their customers’ problems or needs (Blanchard 2021). Understanding the end-to-end network the people, methods, and equipment that must all work together to provide your product or service is essential for SCM. Understanding the succession of causal linkages that occur throughout a supply chain is part of systems thinking. Supply chains are complex systems that can react in unexpected ways, and even minor changes in one component can have a large impact.
Partnership: Supply chain management is impossible to do in a vacuum. Individuals must work with external suppliers and customers, as well as beyond organisational boundaries. Transactional relationships are the product of a self-centred mindset that values short-term profits over long-term benefits (Langley et al. 2020). In the long run, this costs more money because it breeds distrust and a refusal to compromise among supply chain partners. A community in which people trust one another and work together for the greater good is considerably more beneficial to everyone than one in which everyone is only concerned with his or her own personal success.
Adaptability: Supply chains must be adaptive since unforeseen events occur. Adaptability is a metric that measures how rapidly your supply chain can respond to changes in the environment, such as growing or falling sales or disruptions from suppliers. More capacity, a broader range of supply sources, and alternative delivery methods are all examples of adaptability (Waters 2021). Adaptability is often expensive, but it also has a monetary value. The challenge is determining when paying for adaptability is a good idea.
Risk control: When high performance demands are combined with intricate technology and a reliance on worldwide consumers and suppliers, the supply chain will become chaotic. There are a lot of factors to think about, and a lot of things may go wrong (Green 2019). Even a tiny hiccup, such as a late shipment, can set off a chain reaction those results in stock outs, shutdowns, and penalties further down the supply chain. Supply chain management needs a thorough understanding of potential threats, as well as the creation of detection and management mechanisms (Sanders 2020). Risk management is necessary in order to avoid or reduce the expenses of coping with the unexpected. While solid supply networks are necessary for effective operation, risk management is required to avoid or reduce the expenses associated with coping with the unexpected. When risk management is done appropriately, it is possible to capture value in unpredictable times.
International perspective: Every company today operates in a global economy due to the simplicity with which information can be shared and items can be shipped cheaply around the world (Reimann and Ketchen Jr 2017). The company is global, regardless of the product or service they provide. A supply chain manager must be aware of how global factors influence the company’s input and output requirements. They should also think about how competitive they are on a global stage.
Globalisation and Logistics and Distribution Strategy
Innovation and technological development: Business is changing at fast pace and supply chains must adapt in order to stay competitive. To keep ahead of the competition, continuous process improvement and continuous innovation are essential. Continuous process improvement isn’t enough because new technologies have the potential to upend entire businesses. Disruptive innovation is the term for it. A new dominating paradigm emerges when a creative solution to a customer’s problem is devised and adopted (Ben-Daya, Hassini and Bahroun 2019).
ZARA has devised a system for managing supplier and customer interactions. Zara’s business plan has come to a fork in the road. Design, manufacture, shipping, and selling are all part of Zara’s vertically integrated business (El Mrabe, Souissi and Tikito 2019). The following approaches are critical to Zara’s capacity to establish an efficient Supply Chain:
Zara’s procurement department focuses on the number of raw materials required to create the apparel instead of the quantity of final goods. This helps to reduce waste because the user can reuse fabric instead of reselling a garment that doesn’t fit their needs. This is an excellent example of how to improve sustainability while saving money (Scott, Lundgren and Thompson 2018). Zara is able to purchase items on a daily basis because all of its suppliers are located near the company’s facilities and work closely together. Every day, store managers relay client feedback to marketing specialists, who in turn relay it to the construction and operations teams. This real-time feedback mechanism enables the market to respond quickly and flexibly.
Zara approaches local suppliers differently than its competitors. Instead of exporting all of its goods to Eastern Europe or Asia, it decided to make them in Galicia, where the market was more volatile. While lower-cost manufacturing is available elsewhere, the benefits of faster delivery, lower transportation costs, and less vulnerability to fluctuating tariffs and politics outweigh that one element (Backset al. 2020). When compared to bigger, global supply networks, this concentrates on a fewer number of hazards, reducing overall supply risk. By reducing travel, overall carbon dioxide emissions are lowered. Unutilized capacity refers to a large amount of storage capacity that is not being utilised.
To respond to global market developments, maintain an idle rate of up to 85 percent of its facilities. Another innovative technique for increasing output that sets itself apart from competitors’ efforts Zara benefited from highly sophisticated inventory management systems that allowed companies to calculate the exact amount of merchandise needed in each location. Every week or so, they distribute little sums of money. As a result, there’s still an air of exclusivity; few items go unsold, and if an idea fails, there’s plenty of time (due to their efficient Supply Chain) to try something different. As a result, Zara is nearly always successful in locating the appropriate product (Avittathur and Ghosh 2020).
As a result, Zara is nearly always successful in locating the appropriate product. Zara’s strategy is unique, yet it has proven to be successful. If certain attributes are as important to the company as they are to Zara, supply chain executives must analyse them. In view of the growing demand for improved agility, dependability, and sustainability, Zara’s insights are particularly valuable. In the aftermath of a pandemic, how corporations manage their supply chains and strategic linkages will be critical to a successful recovery (Xuejie, Chang and GuangHao 2019)
The Principles of Supply Chain
Zara’s supply chain is well-organized. Cube’s headquarters, as well as the majority of the company’s production, are located in northwest Spain. However, for its major distribution and logistics centre, they chose a more central position. This structure is part of a massive logistics centre being erected in Zaragoza, Spain, by the Spanish government (Aftab et al. 2018). Zara’s manufacturing facility receives raw supplies. The finished items are subsequently delivered to a Zara distribution centre in Zaragoza. These are then distributed to stores all around the world via truck and plane.
A supply chain is a web of connections between upstream and downstream operations, as well as all chain players. In today’s environment, supply networks may be a source of long-term competitive advantage, as an effective supply chain leads to cost savings, and efficiency across supply chain parts contributes to higher profits for businesses (Kummer et al. 2020). As a result, many CEOs have invested heavily in strengthening supply chains in order to increase both top and bottom line earnings. Supply chains can be used as strategic levers during economic downturns because they can be updated to perform better than competitors, resulting in increased earnings and fewer expenses. Streamlining the supply chain with JIT techniques that increase inventory, as well as a focus on lowering price of products soldby lowering supplier expenses, all contributes to a situation that might be immensely advantageous to enterprises (Tortorella, Miorando and Marodin 2017). One of the most significant benefits of Zara’s supply chain approach is the company’s ability to respond quickly to all trends and provide clients with the most up-to-date fashion ensembles in a matter of weeks. Zara’s main goal is to extend its company by utilising vertical synergies.
Within two weeks of the original idea first emerging on the runways, it adapts couture concepts, manufactures, markets, and retails garments. In the fashion industry, it takes an average of six months to produce a new item (Swanson et al. 2017). In order to emulate the ‘quick fashion’ concept, the company maintains its supply chain and focuses on product availability. Second, because Zara rarely produces large numbers, if a style does not sell as well as planned, Zara does not lose as much money because there is less stock to remove. Third, while Zara’s manufacturing process is more expensive, it allows the company to reduce inventory and boost profit margins.
These attributes have given the company a competitive advantage in the fashion apparels sector. The benefits of a vertically integrated, shorter supply chain are self-evident: Zara charges less than one per cent of its revenue for advertising, compared to up to three per cent for competing garment stores. Zara may commit to the majority of the manufacturing line for a season later than its competitors because to the faster turnaround time, necessitating less labour-intensive new item creation. Consumer visit rates are steady due to the high frequency of goods movements (Wang, et al. 2016) .
Zara, on the other hand, has a big number of suppliers and prioritises speed and precision in order to cut down on wait periods. Unpredictability, instability, delivery delays, and raw-material shortages are all risks in the supply chain. Almost all of Zara’s suppliers are located near the company’s manufacturing facilities (Deshmukh and Mohan 2016). Because Zara controls all supply chain routes, expansion to new locations is challenging due to the high cost of transporting such products.
Consumer-eccentric
The current extensive product documentation needs, which are difficult to handle for both Zara employees and vendors, are the most critical components. Because ZARA’s goods were either defective or delivered late, suppliers struggled to satisfy delivery deadlines. Significant changes and adjustments have been made, the order has not been updated in a timely manner, and responses to explanations have been delayed (Aabed 2017). Both ZARA and the provider have issues with this. From this vantage point, the need for more agreements clarifying the criteria and objectives, as well as improved contract evaluation, is clear.
Within each set of beliefs, Zara appears to become more than one organisation, but rather a collection of entities. It was largely spotted by traders, but it was also noticed by Zara personnel who had been given permission. The significant number of reported competing interests in research and societal concerns underscores the need for better internal cooperation. Suppliers are under increased pressure as a result of changing customer demands, which has an impact on the entire supply chain. Designers are under pressure to compete on pricing and novelty in today’s fashion market, which is tremendously competitive. The current situation worries the majority of business owners (Camargo, Pereira and Scarpin 2020).
More personal mutual assistance and stronger cooperation are seen as prospects for success by Zara’s and suppliers’ representatives. Zara’s search for optimal products from a supply-chain perspective benefits from improved customer expertise as a result of supplier participation in conceptual design. Focusing on product homogeneity is one way to reduce the massive quantity of paperwork necessary (Sanders 2020). More uniform procedures are implied by more standardised components, making documentation reuse easier. If there is a change, new products and procedures must be approved. To improve communication, a variety of strategies are suggested. One of them is to expand training in business operations, technology, and commodities, with a focus on cross-disciplinary and department-specific features. This type of training’s main purpose is to improve overall understanding of standard processes and ensure that communication and operational patterns are in sync. Additionally, value-chain education aims to teach students about the value-chain process (Christopher 2016).
SCM can be aided by keeping suppliers and clients in touch on a frequent basis. Customers may have a strong relationship with suppliers if they are treated well. Zara must turn this idea into a reality and incorporate it into their daily operations. Every day, Zara’s strategists collect critical marketing and inventory data from all of the sites and use it to assess the situation.
The raw data is collected using a variety of approaches. Hourly income and renewal data should be reviewed by Zara’s shop management (Madhani 2016). Store staff should place orders instead of waiting for directives from headquarters. Suppliers, project managers, fast modelling workgroups, suitable search, and purchasers all need access to the source data. As a result of feedback, communication and cooperation among different SCM sections would improve.
Financial team: The supply chain and finance divisions of ZARA are tightly intertwined, necessitating consistent communication in both directions. ZARA’s supply chain department must be informed of the finance department’s capabilities and limits. This includes both new company prospects that reduce inventory and operating costs, as well as cash flow issues that restrict purchasing power (Zhiyu, 2020). ZARA’s accounting department checks records and recognises when the supply chain is working on an anticipated expense, such as a specific effort or a shipment of items, to ensure that the sales department is well-supplied. Though there is a chance to get a big number of critical products at a lower price, even if finances are restricted. Similarly, in order to meet the timeline set by ZARA’s finance department, the supply chain may choose to acquire in smaller quantities or postpone orders.
Partnership
Sales team: The ZARA sales department relies on the supply chain to keep goods on hand in order to complete transactions. On the other hand, the ZARA supply chain relies on salespeople to provide ample time between the time an order is placed and the guaranteed delivery date. ZARA’s supply chain experts can assist by predicting the time it will take to get the products on offer. Salespeople can assist by providing precisely what the supply chain can provide (Aggour, Moussaid and Abou 2016)).
Manufacturing team: When all of the necessary components are on hand, production runs more smoothly. The movement and placement of these orders is handled by the supply chain. Manufacturing managers at ZARA, on the other hand, must communicate their needs to procurement and supply staff with enough lead time to allow supply chain movement without disrupting production. Supply chain and production personnel must understand how long it will take to plan and acquire various components during this communication and coordination process, as well as provide solid and higher data on which components are most critical to have on hand, and which parts can be ordered from multiple sources if the primary provider fails (Roederer and Mayrhofer 2021). Because ZARA’s manufacturing can’t move forward without a certain type of glue that can only be acquired from a single supplier, it’s important to avoid squandering resources and stock in the ZARA supply chain. Manufacturing will tell supply chain management ahead of time if ZARA runs out of stock, and purchasing will take low inventory levels seriously. With inventory and purchasing technology, data flow between the supply chain and manufacturing could be improved. Not only will purchasing receive automated updates when components and supplies run out, but a system with built-in purchase sites that are linked to the rhythm of each item’s use, including its online delivery timetable, may be constructed as well (Avittathur and Ghosh 2020).
6. Conclusion
Zara promotes the “fast fashion” distribution network, which entails reacting quickly to changes in customer demand and supplier availability. Zara’s success exemplifies the company’s abilities. Its vertical supply chain integration, combined with its cross-functional strategy, enables it to maintain a tight grip over large-scale manufacturing, resulting in well-managed inventories and higher shareholder value. Zara may save money and enhance sales by focusing on supply chain control in terms of dealings with suppliers. Suppliers are subcontractors who produce raw materials in accordance with Zara’s specifications. The need for intensive training of Zara employees and suppliers, clarification of roles and responsibilities, the development and implementation of distinct provider help to manage cooperation with suppliers, and a thoughtful approach to proactive supplier evaluation are all recognised shareholder equity in terms of Zara’s relationship with its suppliers.
6. References
Aabed, A., 2017. Supply chain in the readymade garments industry (Zara case study). International Design Journal, 7(4), pp.245-253.
Aftab, M.A., Yuanjian, Q., Kabir, N. and Barua, Z., 2018. Super responsive supply chain: The case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), p.212.
Aggour, A., Moussaid, A. and Abou El Hassan, A., 2016. FAST FASHION IN THE MOROCCAN APPAREL SUPPLY CHAIN: ACase STUDY. International Journal of Managing Value and Supply Chains, 7(4), pp.17-24.
Adaptability
Avittathur, B. and Ghosh, D., 2020. Supply chain management as a competitive advantage. In Excellence in Supply Chain Management (pp. 35-44). Routledge.
Avittathur, B. and Ghosh, D., 2020. Excellence in Supply Chain Management. Routledge.
Backs, S., Jahnke, H., Lüpke, L., Stuecken, M. and Stummer, C., 2020. Supply chain strategies of the apparel industry in research: a literature review. Available at SSRN 3558419.
Ben-Daya, M., Hassini, E. and Bahroun, Z., 2019. Internet of things and supply chain management: a literature review. International Journal of Production Research, 57(15-16), pp.4719-4742.
Blanchard, D., 2021. Supply chain management best practices. John Wiley & Sons.
Camargo, L.R., Pereira, S.C.F. and Scarpin, M.R.S., 2020. Fast and ultra-fast fashion supply chain management: an exploratory research. International Journal of Retail & Distribution Management.
Christopher, M., 2016. Logistics & supply chain management. Pearson Uk.
Copacino, W.C., 2019. Supply chain management: The basics and beyond. Routledge.
Deshmukh, A.K. and Mohan, A., 2016. Demand Chain Management: The Marketing and Supply Chain Interface Redefined. IUP Journal of Supply Chain Management, 13(1).
El Mrabet, W., Souissi, N. and Tikito, K., Analysis of Supply Chain Models in a System of Systems Context.
Green, K.W., Inman, R.A., Sower, V.E. and Zelbst, P.J., 2019. Comprehensive supply chain management model. Supply Chain Management: An International Journal.
Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.
Kummer, S., Herold, D.M., Dobrovnik, M., Mikl, J. and Schäfer, N., 2020. A systematic review of blockchain literature in logistics and supply chain management: identifying research questions and future directions. Future Internet, 12(3), p.60.
Lambert, D.M. and Enz, M.G., 2017. Issues in supply chain management: Progress and potential. Industrial Marketing Management, 62, pp.1-16.
Langley, C.J., Novack, R.A., Gibson, B. and Coyle, J.J., 2020. Supply chain management: a logistics perspective. Cengage Learning.
Madhani, P.M., 2016. Enhancing competitiveness: moving from supply chain to demand chain management. Materials Management Review, 12(4), pp.16-19.
Reimann, F. and Ketchen Jr, D.J., 2017. Power in supply chain management. Journal of Supply Chain Management, 53(2), pp.3-9.
Roederer, C. and Mayrhofer, U., 2021. Zara: Managing the global supply chain successfully (No. halshs-03083454).
Sanders, N.R., 2020. Supply chain management: A global perspective. John Wiley & Sons.
Sanders, N.R., 2020. Supply chain management: A global perspective. John Wiley & Sons.
Scott, C., Lundgren, H. and Thompson, P., 2018. Guide to Finance in Supply Chain Management. In Guide to Supply Chain Management (pp. 161-174). Springer, Cham.
Swanson, D., Goel, L., Francisco, K. and Stock, J., 2017. Applying theories from other disciplines to logistics and supply chain management: a systematic literature review. Transportation Journal, 56(3), pp.299-356.
Tortorella, G.L., Miorando, R. and Marodin, G., 2017. Lean supply chain management: Empirical research on practices, contexts and performance. International Journal of Production Economics, 193, pp.98-112.
Wang, G., Gunasekaran, A., Ngai, E.W. and Papadopoulos, T., 2016. Big data analytics in logistics and supply chain management: Certain investigations for research and applications. International Journal of Production Economics, 176, pp.98-110.
Waters, D., 2021. Logistics An Introduction to supply chain management. Palgrave macmillan.
Xuejie, C., Chang, Q. and GuangHao, Z., 2019, August. Research on innovation supply chain management in fast fashion industry—A comparative analysis of ZARA and H&M. In Proceedings of the 3rd International Conference on Education, Culture and Social Development (ICECSD 2019), Guangxi, China (pp. 29-30).
Zhiyu, L., 2020, August. Research on Supply Chain Management of Fast Fashion Enterprises. In 2020 The 4th International Conference on Business and Information Management (pp. 42-45).
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
