Logistics Management of Zara: A Case Study

The report provides an overview of the company's background, strategic goals, and logistics management strategies. The report highlights the factors behind Zara's logistics management success, including just-in-time production, inventory management, centralized logistics, robust distribution network, and information systems. The report also emphasizes the importance of maintaining a sustainable competitive advantage in the industry.

Logistics Management

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Executive Summary
This report outlines the logistics management system of Zara Retail Company. The
first section of the report will address the background information of company with an
overview to company strategic objectives in the global market. The report also consists a
broad discussion about the Zara strategies in respect with the logistics management in area of
sustainability. There are various aims behind the success of Zara logistics management such
as synergy between organization operations strategy, just-in-time production, inventory
management, unified and central logistics and robust distribution network.
In last, this report offers several recommendations and conclusion that gives various
suggestion to Zara for further expand its operations in the global markets.

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Table of Contents
Overview....................................................................................................................................3
Zara Background Overview.......................................................................................................3
Vision and Mission Statement...................................................................................................4
Zara Strategic Goals...................................................................................................................4
Zara Logistics Management.......................................................................................................4
Factors behind Zara Logistics Management Success.................................................................5
The synergy between Company Operations Strategy............................................................5
Just in Time Production.........................................................................................................5
Inventory Management..........................................................................................................6
Centralized Logistics..............................................................................................................7
Robust Distribution Network.................................................................................................8
Information Systems..............................................................................................................8
Maintaining Sustainable Competitive Advantage......................................................................8
Conclusion................................................................................................................................10
Recommendations....................................................................................................................10
References................................................................................................................................11

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Overview
For any organization, managing supply chain is a fundamental aspect that leads to an
organizational success in both the industry and global markets. With the help of dynamic
strategies, an organization can gain sustainable competitive advantage. Logistics
management is one of the primary aspect Supply chain management. It deals with planning,
implementing and control efficiency. From the corporation manufacturing point to the
distribution and destination of consumption, Logistics management deals with various
information in order to meet the customer needs in an effective manner (Seuring & Muller,
2008). To compete in the market, most of the organizations approve supply chain mechanism
to handle widespread and inclusive information. This will help the business enterprises to
align their operational and management strategies to the supply chain strategies.
For broadly understand the term supply chain and logistics management, the report
use case study of Zara, a Spanish company. Moreover, this informative report critically
analyses and measures the company logistics management strategies.
Zara Background Overview
A global Spanish fashion retail company, Zara was founded outback in 1975. The
company was vertically integrated into an organization called Inditex. The major operations
of the company are in Europe as Zara and the design of their manufacturing system is far
ahead from the other retailers in the industry. In addition, Zara also is known for adopting
latest trends and delivering high quality products at affordable prices (Roll, 2018). In most of
the countries, Zara tried to create fresh fashion so have to make competitive stand in the
market. Moreover, the target group of the company includes those individuals having high
and medium purchasing power and needs of fashionable fashion. Zara also takes advantage of
advanced technology for the development of new merchandise and make the optimum
utilization of the available resources (Fernie, Sparks & McKinnon, 2010). This helps them in
executing new and creative ideas in an adequate time. H&M, Benetton, Gap are some of the
major competitors of the company, however, the company develops as the best regarding
fashion at reasonable prices.

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Vision and Mission Statement
The vision and mission statement of Zara emphases on the sustainable growth of the
society in align with the environmental aspects. This sustainable approach tends towards the
improving of welfare in respect with the general society (Zara, 2011). In addition, the
approach to environmental friendliness focused on developing plans for curbing environment
pollution due to the business operations and activities.
Zara Strategic Goals
 To diversify their activities and operations in the international market to gain market
share globally (Gclitty, 2018).
 To increase profit margins of the company by establishing new stores in the countries
where company already have their operations.
 To create plans for enduring profit both in short term and long term of the business.
 To increase reach in all the markets.
Zara Logistics Management
One attribute of Zara success is their speed and rapid responses to the wants related to
business attention. This can be perceived by the fact as since 1975, Zara has successfully
opened around 2,200 stores in 96 countries around the globe (Forbes, 2018). Moreover, their
revenue and sales are growing annually on continues basis with high margins. The
organization is majorly known for its innovation in the fashion industry and apparels with
quickly delivering of the products to all the stores in the continents with small batches. For
instance, a store manager ordered the cloth within a week and also two times a week the new
fashion reaches (Cambra-Fierro & Ruiz-Benitez, 2009). One of the reasons that help
company in achieving this competitively is their substantial logistics management.

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Factors behind Zara Logistics Management Success
The synergy between Company Operations Strategy
The Zara prodigious growth is connected with the vertical integration to Inditex and
diversification of the various products manufactured by the company. The retail stores get the
clothes manufactured and designed by Zara within a timeframe of two weeks. Its own the
entire value added chain and this makes them involve a new concept of “fast fashion” in
relation to speed to market (Chu, 2017). The manufacturing facilities in Spain allow the
company from quick response with the help of efficient ownership and control. In addition,
the company also have various high-tech distribution systems that enable them to deliver the
products at a faster pace to all the stores across Europe. This all highlight the smooth
connection and coordination between Zara business strategy and its operation strategy.
Moreover, for improving their supply network, Zara uses various marketing research data and
information generated by its sales staff by analysing local differences and customer
preferences.
From the above argument, it can be said that if the company adopts substantial supply
chain and logistics strategies, their future will tend towards success else failure will be
inevitable. For instance, United Technologies Corporation is known for its creative ideas, but
the weak supply chain and logistics system led them behind in the global success (Rossetti &
Choi, 2008).
Just in Time Production
Zara delivers various fashionable and trendy clothes meeting up with all the consumer
prefers and tastes and this all controlled with an integrated process – Just in Time (Lopez &
Fan, 2009). The success of Zara is on manufacturing of superior quality products and for this,
the organization restrict its limit by reserving 85 percent of their capacity for in-season
adjustments. This gives the company a flexibility to meet the annual demand in an efficient
manner with constant launch of various varieties of new products. This strategy is also
supported by their in-house production system, which ensures frequency of the products
contrived. In the changing environment of fashion industry, business enterprises also react at
very fast pace with introducing new fashion in large quantities. From these fresh

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manufactured designs, some are delivered to the retail stores and rest is taken as reserve to
deal with scarcity that may occur in the industry as of indefinite suspensions.
In relation to the customer demand, a feedback is offer by every employee due to the
encouragement of the company. The production department and top management gather this
feedback with the help of stores manager to ensure that the new designs are manufactured
according to the preference of the customers or not. To meet up with customer demand in
more efficient way, Zara operates with additional capacity and this will also handle
fluctuations in demand hold out annually (Dossa, 2015). This approach of the company also
gives them a competitive edge over their competitors as it can sell its products at full price
due to high demand. In addition, market down stock is condensed dramatically distinct to the
customer competitor and this will result in reduction of overall costs.
To strongly commit its supply chain and logistics system, Zara also compels six
months earlier to only 15 to 25 per cent of a season line. The company also sorts 85 percent
of the full price on its clothes, while the market or industry average is 60 to 70 percent
(Gorrepati, 2017). Moreover, their unsold items take a space of only 10 percent of the stock
in comparison with the industry i.e. 17 to 20 percent.
The company understands they do not have to rebate as much they can expend on
other things. The company see more benefits and rhythm in the supply chain. In support of
their logistics system, this helps the company to afford extra labour and shipping costs
needed to lodge in the satisfaction of customer and market demand. This slow flow of the
company product has been proved to be successful as per Just-in-time production.
Inventory Management
From various researches, it is ascertained that if a business piled up lot of inventory in
the firm, it will have severe impact on the supply chain and logistics system. An organization
need to avoid piling up as whether it is finished goods or raw materials. Correspondingly,
Zara knows the significance of efficient inventory management and thus setup consistent and
innovative strategy relating to inventory management (Caro & Gallien, 2010). Moreover, the
company also put in place the inventory optimization model to control the amount of quantity
that is needed to be allotted to each retail stores. Each store receives only what is can sell as
company inventory shipped is highly confined. This helps the company in preventing them

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from situation where the stock is not sellable to the market due to change in fashion or being
outdated.
This shows that Zara is fully aware of the edge – “inventory= death.” Annually, Zara
designs and manufactures 10,000 new models and refills varieties within every one of its 650
stores twice per week, but the capacities of inventory is strictly confined (Basu, 2018). This
helps the company to give their promise to the customer by proving exclusivity and freshness
designs. Moreover, it also avoids building up of larger quantities of unpopular stock and thus
reduces the burden on the supply chain and logistics system. From the above analysis, it can
be clearly said that inventory management is a very significant phase of logistics
management.
Centralized Logistics
One of the key aspect of Zara success is centralization. The organization always takes
decision in a very coordinated and comprehensive manner. These decisions are made in a
predictable way and for the objective of ensuring fulfillment of consumers orders with the
help of organisation retail stores. For instance, each week, the organization sends two orders
to confirm satisfactory monitoring trucks departure at a stated time and shipments are
supposed to the destinations at the particular time (Klaas Jagersma, 2011). When the products
arrived at the retail stores, they are already priced, packed and ready for sale. In realization of
business objectives, Zara also focuses on every activity so as to ensure that all aspects are on
the right roadmap ranging from raw materials, production, distribution and logistics. As a
result of this clearly defined roles, every staff member also involves in the supply chain and
logistics starting from design, procurement, production, distribution and retail. This process
also extends towards the Zara customers in respect with purchase decisions. Their reliance on
centralized order fulfillment helps the company to maintain the operations streamlined
towards the robust distribution network (Tokatli, 2008). However, this success factor was not
perceived by United Technologies in respect with their in effective supply chain and logistics
system.

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Robust Distribution Network
The strong and integrated distribution network of Zara helps the organisation to
deliver commodities in 24 hours to the European stores. Moreover, the company also able to
manages delivery of their products in its American and Asian stores with less than 40 hours
of time (Petro, 2012). This helps them in providing the company products on time to
customers. On the other hand, if a company like United Technologies Corporation have a
poor distribution network, then any customer can easily experience the poor delivery of
products.
Information Systems
Information systems are also a driver of quick response communication strategy. Zara
is using various technologies that help the company in speeding up of complex tasks,
reducing cycle time and operations are being made with full accuracy with zero error. In
respect with the logistics management, every manager in Zara stores carries Casio computers
and devices to share necessary information with the headquarters like data of factory
distribution department, RFID data and son on. Moreover, it also handheld information
related to selling trends, order placement and customer comments. Zara has very strong IT
systems that support its distribution system and logistics management. The company also
uses RFID technology that helps in identification of each product connected to clothing via
radio frequency and a chip inside the alarm at the logistics centres of Inditex. This allows
organisation to track their every product during all levels of supply chain.
Maintaining Sustainable Competitive Advantage
One of the major challenges is faced by the organization in this current dynamic
world is that to maintain a sustainable competitive advantage on their distribution network
and supply chain. In addition, a competitive advantage gives the business enterprise a distinct
edge in the industry where business can develop strategic decisions. Hence, managers need to
plan effectively and ensure those strategies that help organization in sourcing of competitive

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advantage by using sustainable approach for both short period and long run. Zara also
conscious of this ideology and thus set various standards for the establishment of competitive
advantage. On the below following aspects, it bases its competitive advantage.
Operational Effectiveness – Most of the business enterprises try to achieve better than the
rivalries in the changing global environment. They not able to analyse the fact that every
industry or company using same techniques for market penetration. However, Zara is moving
with different strategy and concept. Their demand and supply chain are based on vertically
integrated strategy dissimilar to the other companies who are looking to outsource cheap
labour from china. Moreover, their business model also aimed towards delivering quality
fashionable styles to the customers at reasonable prices (Harbott, 2011).
Strategic Position – Zara also adopts various modern technologies to gain the benefit of
strategic positioning strategy. With the integration of these technologies into internet devices,
Zara is delivering new fashion styles and products to all corners of the world in an effective
manner. Their logistics system is also integrated with new technologies such as cloud
computing, RFID devices, AU, etc. (Bjork, 2014).
Other than these competitive strategies, Zara also preserves sustainable competitive
advantage by sustaining its control in both the global marketplace and industry.
 Moreover, they have distinctive business model and this makes the company
differentiate from the other traditional textile designers.
 Exploring value to consumers by delivering them innovative fashion style at
reasonable rates.
 Dominate the market with the help of effective online strategy.

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Conclusion
It can be said that the key success factor of Zara is their vertically business integrated
model. In addition, the company have outstood with their leadership posting in the industry
due to straddling designs, out-of-box marketing strategy, Just-in-time production, inventory
management and sales strategies. Due to their effective and unique business model, the
consumer demand is effectively met in the shortest time possible. However, the European
textile market is being saturated where Zara is focused on their activities and strategies. This
can be a challenge for the business future market growth and can also affect profitability.
Recommendations
With the help of all the analysis and evaluation made in the report, it can be said that
Zara is in growth stage of its business life cycle. However, due to the changing aspects in the
dynamic business environment, Zara should tactically position itself to meet with the future
uncertainties. For instance, the saturation of market in Europe where the business is keenly
focused their activities and strategies may have a negative influence on the future success of
the organization. Hence, in respect with recommendations, Zara need to expand their
operations in other developing and developed countries to gain more market share. Moreover,
Zara also needs to learn of those competitors strategy, penetrating Asia markets effectively.

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Retrieved from:

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