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Supply Chain Management in Zara Assignment

   

Added on  2021-04-17

21 Pages4429 Words365 Views
Running head: ZARA0Supply ChainManagementCase Study: ZaraTable of Content

ZARA1sIntroduction................................................................................................................................2Task 1.........................................................................................................................................3Zara’s Supply Chain Management.........................................................................................3Porter’s Five Force.................................................................................................................3Zara’s Competitive Advantage..............................................................................................5Task 2.........................................................................................................................................6In-House Manufacturing........................................................................................................6Outsource Manufacturing.......................................................................................................6Zara’s Manufacturing Process................................................................................................6Task 3.........................................................................................................................................8Uncertain Demand.................................................................................................................8Predictable Demand...............................................................................................................8Task 4.......................................................................................................................................10Importance and Advantage Zara Gain by Replenishing its Stores......................................10Technology Used by Zara....................................................................................................10Task 5.......................................................................................................................................12Retail Sales vs. Online Sales................................................................................................12Conclusion................................................................................................................................14References................................................................................................................................15List of FiguresFigure 1: Zara's Logo.................................................................................................................2Figure 2: Zara's Supply Chain....................................................................................................3Figure 3: Zara's Distribution Centre.........................................................................................11Figure 4: Zara's Online Store...................................................................................................13Figure 5: Zara's Retail Store.....................................................................................................13

ZARA2

ZARA3IntroductionThe aim of this report is to analyse the case study of Zara and critically assess the advantagesgained by the company due to its responsive supply chain. Zara is a Spanish fast fashionretailing company which was founded in 1975; the corporation is a subsidiary of Inditexgroup. The firm offers its services in 96 markets and 46 online markets (Inditex, 2018a). Thisreport will discuss why Inditex has chosen both in-house and outsourced manufacturing forproduction. This report will analyse why Zara decided to source product with predictabledemand from Asian manufacturers and products with uncertain demand from localmanufacturers. This report will evaluate the advantages Zara gained by replenishing its storesfor multiple times a week and analyse whether its infrastructure is best suited for retail oronline sales.Figure 1: Zara's Logo(Source: Zara, 2018)

ZARA4Task 1Zara’s Supply Chain ManagementSupply chain management (SCM) is referred to the management of the flow of goods andservices in a company. It involves processes relating to movement and storage of rawmaterials for manufacturing, work-in-progress inventory, and finished goods till they areready to be consumed by the customers (Christopher, 2016). Due to effective supply chainmanagement, Zara has generated a competitive advantage over its competitors in the clothingretail industry. Effective supply chain management allows Zara to introduce new designs forits customers every week and change more than 75 percent of their merchandise display inevery 3 to 4 weeks. Responsive supply chain is referred to a network of firms that are capableof generating wealth for business while operating in a competitive environment by reactingquickly and cost-effectively to the rapidly changing market requirements (Kim and Lee,2010). Responsive supply chain is important for Zara because it enables them to offer latestproducts and sell more products at full price.Figure 2: Zara's Supply Chain(Source: ARCH, 2018)Porter’s Five ForceThe five forces model was given by Michael Porter which assist in analysing the competitiveenvironment in which a firm or product works (Huggins and Izushi, 2011). Threat of New Entry (Low)

ZARA5The uniqueness and high profitability attract a large number of investors to the retailingindustry; however, there are high barriers to entry. It requires high fix costs and investmentsfrom the corporations because it involves high selling, administrative and general costs.Customers also value brand equity, therefore, the threat of new entry for Zara is low(Gremme, 2014).Supplier Power (Low)The supplier power is high when companies face high costs while switching to a newsupplier. For Zara, the supplier power is moderate because the firm has entered into legalcontracts with its suppliers which make it difficult for them to raise prices or manipulate thedesigns. Furthermore, Zara maintains a positive relationship with its customers which avoidany disputes between them.Buyer Power (Moderate-high)The customers of Zara are ranged between middle to upper-class individuals who possess ahigh purchasing power because they have more income at their disposal. Zara has a positivebrand image because it focuses on satisfying customers’ demands. Buyers have moderatepower because most of them are loyal towards Zara because the company offer diverse andnewly designed products every week (Trehan and Mehta, 2014).Threat of New Substitutes (Moderate low)Zara operates in the fashion industry which is very unpredictable with a large number ofcompetitors operating in the sector. Through Zara has differentiated itself from its maincompetitors, which include GAP, H&M and Marks & Spencer, due to constant innovations,creative designs and effective supply chain due to which only 10 percent of its stock remainunsold.Competition Rivalry (Moderate-high)Zara faces very fierce competition in local, European and international markets from itscompetitors such as GAP, H&M and MANGO. However, Zara has gained a competitiveadvantage over its competitors due to effective supply chain management. GAP offers lessaffordable products, H&M offer less quality and MANGO is based on franchising system,whereas, Zara is able to deliver high-quality designer clothes at affordable prices to itscustomers (Mann and Byun, 2011).

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