Key Success Factors of Zara
Question:
Study the logistics and supply chain process of the famous clothing retail company Zara based on the given case study.
Zara is a famous for its effective and innovative supply chain in the retail clothing industry. The company is successful due to effective supply chain process in the business. The supply chain process of the company includes designing, sourcing, manufacturing and distribution of the clothing products. Zara provides quality products and it manufactures the clothes and accessories in such manner that can satisfy the requirements and demands of the customers. This report analyzes on the process of logistics and supply chain management of fashion and Retail Company Zara based on the given case. It is understood that Zara has achieved growth and development in the retail business due to its efficient logistics practices. This report analyzes the source of competitive advantage of Zara by which company can achieve a better market share. Zara was recognized in 1975 by Amancio Ortega. With the active supply chain management process, Zara is successfully able to compete with the competitors lie Gap, Benetton and H&M. The report focuses on the similarities of Zara with Dell and Myer in the market (Ferdows, 2003).
Zara is a successful company in the retail clothing market. The key reason of success of Zara is its logistics and supply chain management. The key activities in the supply chain of Zara are trading, crafting, manufacturing and providing the products to the customers on time. In order to manage the actions of suppliers, Zara has implemented vertically integrated supply chain. Zara considers that there must be different products for the consumers in the market. In this way, company introduces new patterns and designs in its retail area and outlets across the world (Hill, 2009). Further, in terms of former strategy company is trying to selling its products in the operating market quickly. Both tactics adopted by the company is the cause to produce the interest among the customers for the products. Zara never use to promote its products because it believes to develop an exclusive brand name of the products among the customers (LU, 2014). Zara has adopted various strategies in order to administer the logistics and supply chain which is described below.
Zara is managing its system and process effectively so that it can introduce new products in order to attract new customers daily. Zara introduces new products from outline to its outlets in four to six months. It means company has short lead times for introducing new products. Processes and operations in Zara are very fast and it gives quick response to the new fashion and developments. There is the promptness in the process of supply chain of the company which is the core strategy of Zara (Lashen, 2012).
The company always holds large inventory at a time. The reason is that with the low inventory company cannot fulfill the demand of the customers on the urgent basis and it is harmful in the trend of fast fashion. So, company believes that storing large inventory can be helpful in minimizing the risk of wastage. The products of Zara are distributed from effective developing service i.e. Zara Logistica or Corunna Depot. In the company, raw material or inventory is stored and allocated to its retail stores twice in a week. Further, Zara has strong distribution network which is helpful for the company to send goods and products to the European stores within next 24 hours and to Asian and American stores within next 40 hours. Along with this, Zara is using Just-In-Time strategy which is the key success factor for the company in the retail industry (Donald & Stephen, 2014).
Similarities between Zara, Dell, and Myer in the Market
Zara has adopted vertical integration in order to manage its supply chain and logistics operations. The company is focused on designing and manufacturing a bulk of clothing products which attract the customers to buy from the stores. Vertical integration is basically a major key for introducing a new product quickly. Most of the development processes are connected with the main manufacturing grounds in Spain. The company has its individual manufacturing retailers and facilities that are integrated vertically (Lysons & Farrington, 2012).
Zara has unique supply chain process as compared to other companies. There are various factors in the logistics and supply chain of Zara i.e. designing, supplying, developing and division of the products. The Zara’s supply chain and Apple is completely diverse. Apple has straight integrated supply chain and on the other side, Zara has upright integrated supply chain practices. Apple is occupied in the manufacturing the mobile phones and it employs merchants from the third party for providing of the products. On the other hand, Zara manufactures clothing and garment products and it sells the products in the retail stores. Apple has to manage, organize and direct with numerous processes in the supply chain. The supply chains of both Zara as well as Apple are proper and correct based on their business processes. The evaluation of both the companies in some factors is discussed below:
Suppliers
With the vertically integrated supply chain, company is able to have proper control over its traders. In this type of supply chain, company is fulfilling the demands of the customers and manufactures the products easily. In case of Apple, there are number of suppliers to provide the products to the customers. In spite of some risks with the suppliers, Apple is able to provide the products on time. This is achievable as 95% of dealers are living near the production units (Gorrepati, 2016).
Distribution
There are various distribution channels in order to provide the products in Apple i.e. assimilators, traders, vendors, distributors and consumers. Apple follows Business to business model by which 90% of products are demanded by electronic media tools. Apple puts up the products for sale i.e. mobile phones and laptops by the online tools as per the direct model. By investing more cost and time, Apple is straightforwardly associated with the potential customers. This is beneficial to cut transportation cost of the company. On the other hand, clothing products in Zara are allocated in the retail stores two times in a week. For the allotment purpose, finished products are brought from the factories and logistics transporter takes them in the stores. The stores are graded according the transactions and purchasing of the customers. If the sales of any particular product are not superior in the market then the company brings to a close the manufacturing process of that product. Due to this method, Zara is able to eradicate the pointless reserve of unsold products (Christopher and Towill, 2000).
Production Philosophy
In Company Apple, company follows make-to-order strategy. Under this approach, company produces the products in the small period of time based on the demands of the customers. Apple has range of products for the customers and the company also provides all the important associated to products on its online channels. On the other hand, Zara provides new products and designs every time as the company considers that there must be more products for the customers in the market. Zara has approach to trade out the new products as soon as feasible. The key objective of Zara is to provide best quality products in the fashion retail industry. In Zara, customers visit to the stores to check out and purchase new products due to the limitations of the products. The clothing products of Zara are demanded by the customers in various regions. So, the manufacturing idea of Zara provides the choices and inclinations of the consumers and Apple always adopts on make-in-products strategy for the invention of products (He, 2012).
Zara’s Unique Supply Chain Process Compared to Other Companies
In case of unsuccessful company in the supply chain process, Nike is considered. In case of Nike, the company is not as much successful in the area of supply chain and logistics management. The company is very famous for the footwear products in the market. Because of poor supply chain, company is not able to manage its inventory level accurately. On the other hand, Zara is managing its inventory properly and has maintained the unique position as the leader of fashion business. Nike has situated itself as the departmental stores having heavy compilation of the products. But the consumer services of the Nike are not much satisfactory. Further, Nike uses concession sales approaches in order to target the customers. On the other hand, Zara always provides cyclic clothing products along with effective customer services (Mihm, 2010). A well defined and well organized strategic plan is the cause of strong financial position in the market. So, it is clear that Zara is successful in terms of supply chain management as compared to Nike.
In current business environment, it is the major threat for the companies to keep up sustainable competitive in the market. The resources of sustainable competitive advantage are important points where the trades should base their competitive advantage sustainability. So, managers of the companies should always adopt the approaches that make sure the sources of competitive advantage in terms of short as well as long run. Similarly, Zara is aware of this idea, so the company has established the process in order to maintain competitive advantage. The base of competitive advantage of Zara is as follows:
Various companies are facing challenges from this factor in terms of perform better than competitors in the industry. The companies are failed to understand that they need to implement different techniques in the business operations. In case of Zara, the company has applied different approach of strategy in its business (Deogratias, & Harorimana, 2009). The demand and supply chain of the company are built on the vertically integrated strategy. On the other hand, rivals in the industry depend upon the outsourcing of inexpensive employment from China. Along with this, the business model of Zara is designed in order to provide quality fashion styles to the customers at the affordable prices (Cowe, 2011).
Strategic position depends upon various activities from the business competitors or same activities in the different way. In order to gain sustainable competitive advantage and strategic position in the industry, Zara has used effective use of expertise. For instance, the target market of the company is very wide so the company has distinct its target market in a different way not like the normal definitions of target market. Zara is focused on targeting and educating the young people that understands and want to purchase new fashion. With the effective use of innovative technology i.e. internet devices, Zara is able to know all the concerns across the world. Apart from threes two competitive strategies Zara has also maintained its leadership in the retail industry and operating market with some unique strategies (Charles & Gareth, 2012). Zara has:
- Created values for its potential customers by offering them quality and fashion products at the affordable rates,
- Unique business model unlike majority of traditional designers,
- Online strategy in order to continue dominating the market,
- Short lead time in producing new style products and complete the production process in the short time,
- Quickness of production as company completes the production by time and has quick turnover by sales (Dalton, 2010), and
- Advantage of self concept of consumers as company focuses on the self ideas of the customers and attempts to create the products according those ideas.
Comparing Zara’s and Apple’s Supply Chain Practices
There are various similarities among Zara, Dell and Myer. There are some success factors which are similar among these three companies. The logistics and supply chain management is the key reason behind the success of these three companies. The business operations of the companies do not depend upon the distributors for delivering the products to the customers as the companies are selling their products directly to the customers. In case of Zara, company produces clothing products and offers them to the customers by retail stores in every country. Similarly, Dell is manufacturing range of laptops and computers and provides them to the customers by its website. In case of Service Company, Myer is also providing the services directly to the end users (Gallaughar, 2008).
Further, all these three companies have adopted the success formula and it is not easy for other companies to copy the same. Companies are not involved with the expensive and complex business operations so, the products are not so costly for the customers and they can easily purchase them (Romano, 2009). All three companies Zara, Dell and Myer are producing the products based on the needs and requirements of the customers. In terms of business strategies, companies are using success formula to stay competitive in the market. Companies are using effective logistics and supply chain practices which is the key reason for the success in the market (O’Marah, 2016). This is very effective and common for every company to implement effective supply chain practices in order to get success in the market. By improving the logistics and supply chain operations, other companies can also enhance their position and performance in the operating market. Continuous improvements and collaborations in the products are the factors of success of these three companies. Zara is learning continuously and these factors are helping the company to stay competitive. Value chains are also the core competences of Dell, Zara and Myer (Ray, 2010).
Conclusion
The report is discussed about the logistics and supply chain management of famous clothing company Zara. In the report, the comparison of supply chain of Zara is done with a successful and an unsuccessful company. From the above discussion, it is observed that supply chain is an important part for the success and growth of the business. With the effective supply chain activities, company is able provide customer centric services. Further, it is also observed that company is using customized technology logistics and economies of scale for the success. It is recommended to Zara should use online media to sell the products as the customers sometimes do not have time to visit to the stores. Along with this, company should also focus on the various promotional strategies to advertise the products.
References
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Cowe, (2011), Sources of Competitive Advantage, (3rd), Essex, Pearson Education Ltd
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