Analysis of Zara's Supply Chain Strategy

The assignment is to analyze Zara's supply chain strategy, which has been a key factor in the company's success. The document reviews various articles and research papers on the topic, highlighting the importance of customer co-creation, sustainable supply chain network design, demand forecasting, and lean supply chain management in the fashion industry. It also discusses the impact of belonging to virtual brand communities on consumers' affective commitment, satisfaction, and word-of-mouth advertising.

Running head: Supply chain management
Supply chain management

Supply chain management
Abstract
Zara is well reputed manufacturing company in the world which was founded in 1975.
Zara is considered one of the biggest brands of Inditex. The company makes unique strategies
after considering the various elements of market. The firm has approx 2000 stores in the
marketplace. Cost leadership strategies are being used by Zara to reduce the prices of products
and maintain efficiency. The company monitors the external factors to eliminate risks and to
increase revenue in the international market. Apart from this, the organization is satisfying the
needs and requirements of consumers by rendering attractive and stylish products to them.
Additionally, Zara wants to sell the dresses in different style, and designs by producing
innovative products. SWOT analysis is done by the firm to analyze the opportunities and threats
of the market. On the other, the paper explains issues and challenges of the market which may
influence the goodwill of Zara adversely. Additionally, it describes that how the organization
overcome on the issues and challenges of market. Furthermore, here is the discussion about the
supply chain management of Zara which helps to make good financial position in the market.
Further detail of the task has been stated below.
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Table of Contents
Abstract.......................................................................................................................................................2
Introduction.................................................................................................................................................4
Transport in Zara supply chain....................................................................................................................5
Various issues in Zara.................................................................................................................................8
Solutions to handle these issues.................................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12
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Supply chain management
Introduction
The paper provides a brief overview about the supply chain management of Zara. Zara is
a well known and reputed company which provides fashionable and attractive products to the
customers across the world. The firm uses strong business model to becoming successful in the
market. The organization uses innovative and updated website where the basic and important
information is given related to the company. It explains how various issues destroy the
organization’s image in the market. In today’s modern world, various issues such as waste of
time, political, social and gas on deliver route issues are faced by the firm.
Zara is a Spanish fast fashion retail company which provides several products to the
customers in the world. The organization was incorporated by Amancio Ortega and Rosalia Mera
in 1975 having it’s headquarter is situated in Spain (Inditex, 2018). It is the main and unique
brand of the Inditex group and Zara is the biggest retailer of apparel. Zara brands include
Massimo Dutti, Oysho, Zara home, Bershka, and Uterque. Along with this, Zara is bringing
responsible, unique and attractive fashion in the market and it improves the quality of customer
service in order to attract and retain the large number of customers (Inditex, 2018). The firm has
nine stores in Spain’s largest cities. In addition, Zara is achieving growth and success through
diversification with vertical integration model. It is one of the successful brands in the world.
The products of Zara include men and women’s clothing, accessories, children’s clothing and
shoes. Furthermore, Zara uses effective and efficient supply chain management to satisfy the
needs and requirements of the clients. The mission of the firm is to satisfy the desires, needs and
preferences of the customers in the international market. Moreover, the organization promises to
provide new design products at affordable prices (Martinroll, 2018). Also, Zara uses effective
and unique promotional and advertisement strategies to increase the number of customers in the
rivalry market. There are various competitors exist in the market such as Chanel, Burberry, Hugo
Boss, Versace and Christian Dior which may influence the image of Zara in the world. People
who have high purchasing power buy the products of the company. The firm is well known for
its dynamic brand. In addition, the organization uses SWOT analysis, porter fiver forces model
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and Pestle analysis to evaluate and identify risks factors and challenges of the global market
(Tokatli, 2014).
Transport in Zara supply chain
Transportation plays a vital role in Zara supply chain management. Zara provides unique
and attractive transportation network to the customers in the market. In addition, the organization
maintains coordination with all aspects of logistics. Further, it provides quick and fast response
in supply chain (Nagurney, 2010). Along with this, fast delivery is possible through unique
transportation. The firm distributes the products and services within 2 weeks. Zara’s
transportation is based on software designed and created by the organization’s own teams
(Cudney and Elrod, 2010). The firm uses trucks, ships, trucks and Air cargo for transportation.
Apart from this, workers, drivers, packaging materials and vehicles are needed to move from one
place to another. The distance and weight factors may influence the transportation costs. Zara
selects right and suitable mode of transportation when products move (Sardar & Lee, 2015).
De Brito and Van der Laan (2010) defines that supply chain management is a
management of the flow of products and services which includes movement and storage of stock,
finished goods and raw material. It helps to attain customer’s value and achieve sustainable
competitive benefits in the market. Aabed (2017) said that Zara is one of the biggest fast fashion
industries in the international market. In today’s era, the company is trying to improve efficiency
and increase profits (Qrunfleh & Tarafdar, 2014). Along with this, supply chain activities cover
everything from production, product development, sourcing and logistics as well as information
system which are needed to coordinate these operations and activities (Aabed, 2017). Qrunfleh &
Tarafdar (2014) noticed that supply chain management is the primary and dynamic success of the
Zara. By using the supply chain management, the organization creates cheap and stylish products
at appropriate prices. Apart from this, the firm is monitored on the sensitivity and flexibility of
the market. Zara has gained the advantages of flexible supply chain and agile for manufacturing
innovative fashion items in the marketplace (Sorescu, Frambach, Singh, Rangaswamy &
Bridges, 2011). By considering profit margins, the organization has been able to overcome the
rivalries in the world. Supply chain strategy is a significant performance driver for the firm to
stand out against the competitors across the world (Krause, Vachon and Klassen, 2009). Supply
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Supply chain management
chain management plays an empirical role in performance and productivity of the firm. It also
helps to maintain elasticity, price and quality of the products and services as it also improves the
performance of suppliers. The following factors include in supply chain management of Zara
(Aabed, 2017).
Demand forecast: It is vital to attain competitive benefits in the marketplace. Zara business
model evaluate demand forecasting to produce goods and services across the world (Nenni,
Giustiniano & Pirolo, 2013).
RFID: The firm uses effective RFID (Radio frequency identification) technology to maximize
the revenue and returns. Zara maintains unique and effective system to track the location of
accessories and clothes in a suitable way. RFID system helps to track the data in an efficient and
effective way (García-Álvarez, 2015).
Agility: Agility is an important element of supply chain management which is needed to beat the
rivalries in the global market. The stores get their orders within two days of placement and take
two deliveries per week. It is very complex task for the company to make effective supply chain
and logistics management. Zara must monitor supply chain visibility in order to manage agility.
Lean management: It is a strategy to explore and flourish the business activities and operations
of Zara effectively and successfully. It is long term strategy of the company to maximize the
profitability and revenue. Along with this, it also helps to enhance and encourage the
productivity of the labors. Zara uses five techniques of lean management to minimize the risks
and challenges of the market (Wee and Wu , 2009).
Just in time production: The Company delivers variety of fashion products according to
choices, preferences and requirements of the customers. To analyze and evaluate the choices of
the customers, just in time production process is used by the organization (Bhim, Garg, Sharma,
2010). Apart from this, Zara sets a considerable amount of its production in house and make sure
that its own factories preserve approx 85 percent of their capability for in-season adjustments. In
addition, the wages of European employees are more than developing countries employees. Store
managers also collect feedback from customers to check the quality of the products. In this way,
Zara uses unique just in time production process (Cortez, Tu, Van Anh, Ng & Vegafria, 2014).
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Agile: By using agility, the company has been able to provide unique products and services
easily to the customers in the competitive market. In addition, agile also helps to focus whether
how much money spend in stores to understand and measure which designs are being bought
from the marketplace.
Customer value: The firm has been able to identify and analyze the needs, choices, values and
wants of the customers. In addition, Zara collects reviews and opinion from customers to satisfy
the needs and requirements of the customers (Holweg & Helo, 2014).
One piece flow: It is the way of producing and manufacturing small qualities of goods and
services to match the wants and desires of the customers.
The productive use of procurement and outsourcing can lead to a unique and effective supply
chain. There are various advantages of supply chain that have been discussed below.
Outsourcing: There are several elements upon which Zara decides whether it should outsource
any process or it should operate in-house. The outsourcing rises when the tasks performed by the
firm can be done appropriately from any outside organization. The outsourcing helps to procure
money for the firm as it also helps to utilize the resources.
Focus on core activities: The outsourcing can ensure a company to monitor on operations and
activities which provides various benefits to the firm (Wang, Lai, & Shi, 2011). Three types of
products are being produced by the company which includes high quality segment, low quality
segment and medium quality segment. The high quality segment is primary products of the firm
rather that two segments. Zara follows the outsourcing methodology which is being followed by
Nike (Distelhorst, Hainmueller & Locke, 2014). Focus on core activities is one of the biggest
benefits for Zara.
Cost and efficiency savings: The outsourcing also leads to effectiveness and cost savings. It is
the major benefit of outsourcing. The United Kingdom, India and United states are major
example of cost savings.
Reduce overhead: Overhead cost includes rents and utilities which are saved by the company.
The lower labor cost helps to reduce overall cost of overhead and production.
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Operation control: Operations control is possible through supply chain management. The
skilled and experienced employees are appointed to monitors and control the operations and
activities (Hartmann & Moeller, 2014).
Although, Zara is providing several benefits to the customers across the world but still some
risks and challenges are also considered that have been detailed below.
Loss of business knowledge: It is one of the biggest risks which is involved in the Zara supply
chain management.
Vendor failure to deliver: The suppliers play a significant role to distribute the products and
services to the customers, if suppliers are unable to fulfill the orders then it will destroy the
image and goodwill of the firm in the marketplace. Therefore, the vendors should focus on the
delivery and quality of the products.
Productivity fluctuations: It is another risk which may influence the growth and success of
Zara. The company should analyze and measure risks and challenges of the market to attain
rivalry benefits in the international market (Fawcett, Waller & Bowersox, 2011).
Various issues in Zara
There are various issues are faced by Zara during the production and manufacturing of
the fashionable products and services. The several issues have been stated below.
Waste of time issues: It is one of the biggest and significant issues in the company which may
influence the growth and success of the firm adversely. There are enormous reasons of waste of
time in the organization. Interruption is main cause of waste of time in the company. It is
observed that people waste up to 2-3 hours per day of productivity based on interruptions
(Terwiesch, Diwas & Kahn, 2011). In addition, they take long break during the work. As a result,
it affects the outcomes and performance of the workers as well as organization. Along with this,
Zara conducts too many meeting as it is time consuming process. It also affects profit and
revenue of the company negatively. Socializing with coworkers is also biggest and significant
cause of waste of time in Zara. The managers and leaders are unable to focus on the activities
and tasks of the employees due to socializing with co-workers. In addition, facebook, internet
and personal emails are used by the workers at the workplace while conducting business
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Supply chain management
activities and operations. Therefore, the employees are not able to focus on the tasks and duties
properly. Moreover, the workers are unable to clear projects which have been assigned to them.
It is also considered time consuming process in Zara (Terwiesch, Diwas & Kahn, 2011).
Political issues: In today’s modern world, political system is volatile and unstable which may
influence the economic system of the country. Every nation does not have the same rules,
regulations and policies. Therefore, the government policies and plans can destroy the brand
name of Zara if they are not friendly.
Merchandise: Zara Company is based in Europe, so it has 3-4 colors that are used by its interior
decorators. But in India there are tons of colors which are used in readymade fabric industry
(Nagurney & Nagurney, 2010).
Social issues: The social issues influence the progress and success of Zara. Social issues arise
due to culture and language differences. The culture of India is different from European culture
therefore, it affects the long term goals and objectives of the company. The social issues may
also influence the sales and financial image of the organization in the competitive market. Apart
from this, in India people like traditional fabric clothes for special occasions which are missing
in Zara company. Sometimes, the firm is unable to understand the culture, values, choices and
preference of the customers thus, it could affect the profitability of the organization (Liz Barnes,
and Gaynor Lea-Greenwood, 2006).
Legal issues: In India, some specific rules and regulations which have been made by
government for foreign companies are also influenced the success of Zara. The company has to
follow rules and regulations that have been made by Indian government to sale the products and
services in the rivalry market.
Weather: It is an important factor which may affect the customer’s choices and preferences in
the marketplace. Indian weather and climate are completely different from Europe because of its
five seasons such as spring, fall, summer, monsoon and winter. All these weather conditions
affect the sustainability and sales of Zara (Cortez, Tu,Van Anh, Ng & Vegafria, 2014).
Economic issues: Economy is a critical element which could influence the business activities
adversely. Zara uses great strategy with affordable prices. Therefore, if the economic activity
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declines and customers are cost cutting, then people may switch away from the luxury brand like
Zara. Hence, it influences the production and outcomes of Zara. Unequal distribution of wealth
is also a biggest issue in Zara. Therefore, the whole population of India must not be considered
as a mark market of Zara (Tokatli, 2014).
Gas on deliver route: Moving products from one place to another place is never free, it
comprises several issues in the marketplace. Gas on deliver route is one of significant issue in
Zara which could destroy the image of the company in the world. Fuel prices are unpredictable
and change continuously. Fuel price is main threat in today’s competitive world for Zara. The
price of crude oil fluctuates constantly which may affect the progress of the firm. The fuel
efficiency for vehicle to deliver the fashionable products depends on various factors such as fuel
quality, burn temperature and type of engine. Along with this, the company needs to arrange
appropriate security when products are transferred from one place to another. Risk of robbery
and theft is involved while products move from one location to other. Packaging is another issue
in Zara which could affect the quality and security (Swain, Matousek, Scott, Cooper, Smink,
Bolman & Riviello, 2015).
Apart from these issues, Zara’s vertically integrated model is the biggest threat to the
company’s success. This model does not provide accurate and appropriate information to the
firm. Furthermore, it is quite complex to stand out against the local retailers in their domestic
market. In addition, Zara’s business model is dependent on changing fashion which is not good
for the organization. All these challenges are being faced by Zara in the international market.
Solutions to handle these issues: There are several suggestion have been provided to handle and
reduce issues and challenges of Zara which have been detailed below.
 Zara needs strong and unique management team to overcome the waste of time issues.
Along with this, effective training and development coaching shall be provided by the
organization to the workers for handling the issues and challenges. The founder of group
should take effective and dynamic decisions to implement and initiate the policies, plans
and strategies (Elizabeth and Cassandra, 2011). It will help to reduce waste of time within
the organization.
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 Strong and dynamic human resource management team would be required if the company
wants to eliminate social, economical and cultural issues. It will also help to reduce the
prices of the products at the marketplace. Workforce diversity is also essential to handle
the waste of resources and capital in the competitive market (Arun, 2014).
 Along with this, effective and unique rules, legislations and policies shall be made by
human resource management in Zara to deal with legal issues in India. Also, it will help
to conduct business operations and activities successfully and effectively. Effective and
unique promotional strategies must be used by the firm to explore and flourish its
business widely (Royo-Vela & Casamassima, 2011).
 Moreover, Zara should use faster modes of transportation such as air to reduce the issues
and challenges of transportation. The firm must focus on the security of the products and
services. Insurance of products must be done by Zara to insure the good and services
(Yelland & Dong, 2014). It will help to protect the products from external factors of the
market. Effective packaging shall be done by the organization to ensure security and
safety of the products. Fuel prices should be considered by the company while delivering
the products. Along with this, appropriate prices of fuel must be set by Zara to maximize
the sale in the rivalry market (Nakhata, 2008). It will also reduce the fuel issues which
could affect the delivery of products.
 The company should develop and build the centre of central distribution to render the
stylish products in a hassle free manner. Additionally, marketing survey must be
conducted by Zara to understand and analyze the current fashion and trends of the
market.
Conclusion
On the above mentioned aforesaid event, it can be concluded that Zara has potential for
the sustainable progress because it provides competitive benefits in the fashion industry. In
addition, the company maintains unique business model to gain several opportunities at the
marketplace. Apart from this, the organization uses strong and unique supply chain and logistics
management in order to improve efficiency and productivity. Dynamic strategies and policies are
made the firm to conduct the business activities and operations in an effective manner. In order
to attain the growth and success, Zara needs to bring changes in its strategies and policies.
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Moreover, the company is enjoying competitive leadership in fast fashion industry. To cope with
the rivalry markets, the firm has to introduce some innovative and attractive fashion products. It
is noticed that Zara should focus its distribution strategies to distribute the products
appropriately. In addition, here is the discussion about the issues of Zara which may affect the
outputs of the firm. Waste of time is one of the biggest threats for the company. Along with this,
it explains the benefits and challenges which are involved in supply chain management of Zara.
In this way, the firm can make a strong financial image in the market.
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