Discussion about the logistics management of Zara and comparison
The Fundamental reasons for success, with a comparison to another successful and an unsuccessful company? How can Zara maintain its competitive advantage, here the concept of sustainability may be introduced?
Supply chain management and the strategies related to this process act as a backbone of the organizations in the recent times. The effectiveness of the coverage of the market and the availability of the services and products depends totally on the supply chain strategies of the organization. The supply chain strategies of the organization help to decide the time of introduction of the product or service in the market and the advertisement related activities of the organization (Alexander, Walker and Naim 2014).
The design of the transportation network of the organization and the strategies related to marketing are decided with the help of the supply chain management of the organizations. Controlling the inventory of the organization and visibility of inventory are two main element of the operations of an organization. The inventory turnaround of an organization also depends on the supply chain management strategies of the organization. The health of the inventory of any organization depicts the health of the organizational operations (Brandenburg et al. 2014).
The report is based on the analysis of the supply chain management strategies of Zara which is an apparel and clothing retailer. The supply chain management strategies of Zara are compared with two other companies which are in the retail field of operations mainly, Dell and Myer.
Logistics management strategies of Zara
Zara is a retail based company operating in the field of clothing and it is of Spanish origin. This is a fast fashion company of Spanish origin and the organization was founded in the year 1975 by two people named Rosalia Mera and Amancio Ortega. The organization is the most important brand within the Inditex group which is the largest retailer of the world (Zara.com 2017). Zara started expanding the international operations of the company in the year 1988. In the year 1989 the company entered the US market and further expanded its operations in France in the year 1990. The organization further expanded its operations in many other countries between the year 2000 and 2017. The countries where the organization has its operations are mainly, Singapore, Japan, Malaysia, Russia, Estonia, Morocco, Hungary, Costa Rica, Philippines, Indonesia, India, South Korea, Australia and South Africa (Zara.com 2017). The company first introduced the online retail stores in the year 2010. The website was first introduced in countries like, UK, Italy, Spain, Portugal, France and Germany.
Logistics management strategies of Zara
The supply chain management strategy of Zara has helped the company to stand out from the competition in the market. The strategy of the organization is constructed in a well-defined manner. The supply chain strategy of the organization consists of many stages which are discussed further. The supply chain of Zara starts from redesigning the trends for the market of mainstream clothing, following this is the stage of manufacturing, then distribution of the products and the last stage is the retailing of the products. The whole process can be completed within a time of two weeks (Diabat, Kannan and Mathiyazhagan 2014).
The manufacturing process of the organization is kept within the organizational facilities itself. This enables the company to regulate the frequency of the products and the variety of the new products as and when required. This thereby enables the company to create new trends and products and then launch the products when the new trends are at the peak. This is the major way by which the performance of the organization is enhanced. Zara has the capability to produce fast fashion in the industry and they have also taken advantage of the performance that they have showed on the social media platforms. Zara has an active presence in the digital world through Instagram (Fernie and Sparks 2014).
The looks and new fashion trends are quite easily communicated to the consumers of the company with the help of social media pages of Instagram. The organization has more than 9.7 million followers and also more than 14.7 million posts on their social media page of Instagram. The posts of the company are used to communicate the recent trends and styles available in the stores of Zara. The reference number of each of the products that are advertised in their posts are also available in the posts. This was a quite smart move from the side of the company (Hazen et al. 2014).
The competitive advantage of Zara was gained with the help of this supply chain strategy of the organization. The supply chain strategy of the organization has been studied by other organizations in the market which produce the same items. The production of their goods and the items related to inventory are limited by the operations of the company. This reduces the risk of increased stocks of unwanted clothes and retail items. The company therefore is not compelled to sell their products at discounted rates and they sell them at full prices as compared to the other companies which sell them for 50% of their prices (Martínez-Jurado and Moyano-Fuentes 2014).
Logistics management strategies of Dell and Myer
Logistics management strategies of Dell and Myer
Dell is a multinational company that operates in the field of computer technologies and the base of the company is mainly in Round Rock, Texas. Dell is considered as one of the greatest companies of the world and it employs more than 138,000 employees. The organization manufactures products like personal computers, devices required for data storage, servers, computer software, printers, cameras and many other products (Dell.com 2017).
The supply chain strategy of the organization consists of a complex network of interconnected organizations and mainly in the industry of technology the suppliers of the organization are shared with the competitors. The technology companies need to work with the suppliers of the organization with the help of groups and high standards are set by the company to create ecosystems which are responsible in the social and environmental manner (Dell.com 2017). Dell is a company which is committed towards business practices that are responsible in nature and the standards of ethical behaviour of the company is also quite high. The organization manages the supply chain of the company in a global manner (Mena, Humphries and Choi 2013). Dell has its operations in many different countries which have different cultures and the economic development levels are also quite high. The standards of the organization are universal in nature even though the company operates in many diverse areas. Dell has set many regulations and laws that have to be followed by the suppliers of the company.
Ethical behaviour of high standards and fair treatment of the employees are expected from the suppliers of the company as well. The organization and the suppliers are members of Electronic Industry Citizenship Coalition (EICC) Code of Conduct which is a body that sets regulations and laws for the organizations. The founding member of this organization is Dell which also comprises of the other companies of the world which work together to improve the efficiency and the ethical, social and the environmental responsibilities of the supply chain of global electronics (Monczka et al. 2015). The materials required for the production in the organization are sourced responsibly by Dell according to their policy.
The supply chain of the organization is diverse and ethical in nature. Dell believes in continuous improvement of the resources of the organization and the suppliers are encouraged to view the environmental and social responsibility which helps in the journey of the continuous improvement of the organization. Dell has transparent style of supply and the sustainability of the supply chain is also managed by the organization. The policy of Dell requires the suppliers to participate in the programs of the company to build their capability. The reviews of the business activities of the company are conducted in a responsible manner on a quarterly basis (Parkhi et al. 2015).
Myer is an Australian company which serves the mid-to-up market departments of the store chain of Australia. The company showcases a wide variety of products across the chain of men and women chain of clothing. The other products offered by the organization include, accessories, footwear, fragrance, cosmetics, homewares, furniture, toys, beddings and many more. Myer has proved to the largest store in Australia with respect to its revenue and count of stores as well. The organization was established in the year 1899 by Sidney Myer. The organization expanded its operations since its inception throughout Australia and many other countries as well (Myer.com.au 2017).
The Supply chain of the organization is International and it works in conjunction with the freight workers and the overseas suppliers of the company who are responsible to provide world class services around the world. The organization aims at providing efficient, fast and effective service which is of international levels. Myer tries to develop close relationships with their suppliers. However, the company has gone through many bad phases till the year 2005 (Schaltegger and Burritt 2014).
The supply chain of the organization has gone through many changes after its acquisition in the year 2006 by a private firm from the field of equity trading named TPG Capital. The strategies related supply chain of the organization has been development with the planning and executing the activities. Distributions centres for the organization were opened along with international hubs with new inventory, management systems related to the warehouse of Myer and the e-commerce initiatives were also taken (Seuring 2013). The two requirements of strategies that were now faced by the new owners of the company are,
- The achievement of adequate services throughout the interim period of support of the company and thereby ensure that the provisions related to service are always in place at the end of this period.
- The capability of supply needs to be designed in such a way so that it suits the needs of the operating strategy of the company and thereby maximise the competitive advantage of the company (Myer.com.au 2017).
The organization had go through these changes in their supply chain strategies to improve their business performance and profitability. The operating costs of Myer were by over 50% and the freight related costs had fallen in spite of the increase in production. The production of the company also increased by almost more than 50% and this led to the improvement of the revenues of Myer. The digital presence of Myer was also taken into consideration and it was improved as well (Myer.com.au 2017).
Comparison of the logistics management of the three companies
The supply chain or logistics management strategies of the three organizations are quite different from each other. The supply chain strategy of Zara is much more customer oriented as has been observed in the analysis. The company has taken care of the needs of the consumers as well as the recent fashion trends in the market so that the stock of unwanted materials does not increase. As compared to other companies in the market who have been selling their products at much lower prices to clear their stocks (Sorbi et al. 2017).
The strategy related to supply chain management of Dell is quite different as it is not customer oriented to that level. The products manufactured by the company is also quite different as compared to the two other companies taken into consideration. The company delivers its products to many different countries in the world and has standard set for the suppliers from all over the world. Dell does not design different strategies for the different countries where they operate. This is the major drawback for the company and its operations in all the countries as well (Stadtler 2015).
The strategy of supply chain management of Myer was not appropriate for the company and had affected its revenues and profitability in the years between years 2002 to 2006. The company was therefore acquired by a private equity related firm. The new systems were implemented in their strategy from the year 2006. The new management of the organization aimed to decrease the costs related to production and costs of transportation as well. The online presence of the company was another major issue that was responsible for the downfall of the company (Tatoglu et al. 2016).
The comparison thereby proves that the supply chain strategy of Zara is the most effective in nature. The strategies related to logistics management of the company has provided it an edge over the others in the market. The case study has highlighted this as the major point of discussion as all the other organizations in the market have tried to take lessons from strategies implemented by Zara.
Ways by which Zara maintains the competitive advantage
Zara has gained competitive advantage in the retail mainly with the help of its agile strategy of supply chain. The company adopts the designs, the items related to manufacturing process and other products related to distribution only after two or three weeks after they appear on the catwalks. The store managers and the teams of sales monitor the trends of the market and preferences of the customers in a continuous manner (Touboulic and Walker 2015). The agility of the supply chain strategy of Zara is one of the major features that helps the organization to maintain competitive advantage. This feature has gained the organization the tag of “fast fashion”.
Sustainability of Zara
The fast-fashion requirement of a brand can be described as the obsession of the society related to consumption of products related to new trends. This demand leads to unsustainability in the environment as companies try to fulfil the demands of the consumers by cutting their costs and using cheap materials for production. Zara has however taken many initiatives to maintain the sustainability of their operations. The range of wages of the employees are taken into consideration and the raw materials used for the production (Fahimnia, Sarkis and Davarzani 2015). The company has developed a new material in the year 2016 from the waste of cotton and wood from forests that are managed sustainably.
Similarities between the three companies
The supply chain strategies of Zara and Myer are similar in nature after the changes that have been made in the strategy of Myer in the year 2006. The strategy related to supply chain of Dell is also related to the reduction of costs in the channels of distribution and also maintain strong relationship with the suppliers. However, the most significant similarity between the strategies of the three companies is the usage of online platform for the development of the business and profitability (Turker and Altuntas 2014).
Suitability of the formula of success with the other companies
The supply chain strategy of Zara has proved to be successful for the operations of the company and its profitability in the market as well. This strategy is quite suitable for the retail companies in the market especially in the field of fashion. The reason behind this is the constant changing environment of the fashion industry and emerging trends of fashion. The organizations need to adapt to the changes in the environment to maintain their competitive advantage (Schaltegger and Burritt 2014).
Conclusion
The supply chain management or logistics management strategies of the organization has an effect on the business performance and profitability of the organizations as well. The case study has also mentioned this fact and the Spanish retail company Zara is mentioned in the case study as well. The success of Zara and the advantage that the company has gained over its competitors is mainly due to the successful supply chain strategy of the organization. The strategies of Zara are compared with the strategies of two other companies namely, Dell and Myer. The supply chain strategy of Zara is found to be the most effective among the three companies taken into consideration and they have been successful in increasing the profitability of the organization with the help of this strategy.
References
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