Global Logistics Management at Zara: A Critical Review (NBS-7054A)

This report provides a comprehensive analysis of Zara's global logistics management, addressing key aspects of its supply chain operations. It begins by examining Zara's upstream and downstream network structures, including supplier relationships and distribution channels, with relevant illustrations. The report then explores Zara's transportation strategies, encompassing both inbound and outbound networks, and highlights the use of technology and various modes of transport. Value co-creation in operations is investigated, focusing on how Zara enhances customer value and optimizes costs through its supply chain, including waste reduction techniques and globalization strategies. Furthermore, the report analyzes Zara's marketing channel network, emphasizing the use of technology for communication and information sharing. The feasibility of integrating circular economy and Industry 4.0 principles into Zara's supply chain is also considered, along with innovation-led lean approaches. Finally, the report offers recommendations for enhancing sustainability within Zara's supply chain, drawing on the findings from the analysis.

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LOGISTICS MANAGEMENT AT ZARA
1/6/2020

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Contents
Zara Company’s network structure............................................................................................2
Upstream network of Zara.........................................................................................................2
Downstream network of Zara.....................................................................................................3
Transportation in both inbound and outbound networks...........................................................4
Value co-creation in operations.................................................................................................5
Marketing channel network using technology...........................................................................7
Supply chain dimensions (Circular Economy and Industry 4.0)...............................................9
Recommendation for the sustainability in their supply chain..................................................11
References................................................................................................................................15

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Zara Company’s network structure
Upstream is the source network of business dealers and their own suppliers. (Geissdoerfer,
Savaget, Bocken, and Hultink, 2017). It is important for the retailing companies to maintain
both upstream and downstream network partners respectively. So in this report the upstream
and downstream network of Zara has explained.
The upstream network of Zara
The company Zara has 2 or 3 Network tiers of suppliers. Zara is a famous fashion brand so
they have a focus on the 2nd and 3rd tier cities. China has the largest international market for
the company Zara. The company Zara has 12 suppliers currently which are operating in the
different countries. The company Zara is operating the 345 stores so its suppliers are world
widely to distribute the brand (Wilhelm, et al., 2016). Zara is one of the good know company
which is vertically and strongly integrated into the clothing industry and it also maintains
significant upstream production of clothing along with the textile production.
The central warehouse of the Zara is in Spain where there are the four distribution centres and
every single brand of Zara passes through there only. Company Zara has the 3PL and 4PL
logistics providers as the core competency of the company focus on outsourcing things
(Mehrjoo and Pasek, 2014). Zara has vertical integration production as they introduce the
new products as well as design and manufacture them also. The supply chain management of
the Zara also includes collaboration and coordination which helps in building trust with the
different channel partners.
Example: Company Zara with the help of the upstream networking it becomes easy to access
the local ISP. With the help of the internet access the company Zara can easily make the data
connection between the two ISPs. The company Zara deliver the effective products to their
customers with the help of this networking as it delivers the raw materials to the finished
products. The products of Zara are highly demanded in the market as they have the unique
business model and the low cost retailer. Supply chain networking helps in increasing the
desirability with the cheaper cost.

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Source: theatlas.com
The downstream network of Zara
The downstream supply chain management refers to the coordinating flows of the goods and
information with the customers and the clients. It contrasts the upstream SCM which involves
the buying activities with the suppliers (Geissdoerfer, et al., 2017). The important
downstream activity is the management of inventory, the distributors, retailers and the
wholesalers, all of them strive to carry inventory in quantities which are needed to fulfill
customer orders without overstocking.
Tier 1 is used in the downstream network structure of the company of the Zara. The target
market of Zara is the young people and the people who are trendy in terms of fashion. The
proposed objective function is the new model of the existing distribution network. The
competitive advantage is achieved through the globalization strategy as the company is doing
outsourcing so globalization helps in developing an international scale. The globalization
plays an essential role in the supply chain of the Zara Company as it pushes the supply chain
market of global and the domestic market (Holweg and Helo, 2014). The lower prices and
consumer convenience are given to the company Zara through the effective global supply
chain.
Distribution synchronization of the company Zara is done with the computerized system. All
the information flows through the mail. In the real-time of the company Zara, the information
is collected and analyzed by the company Zara in the computerized system. The vertical
integration is there in Zara and they also used reverse logistics so that they can make business

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more sustainable (Choi, et al., 2016). The business operations of the company Zara is more
sustainable by using reverse logistic. The degree of integration is tight in the company Zara.
The broad arc of integration is used in the company Zara as suppliers reach to the
manufacturers and then they reach to customers.
Example: When an order cannot be filled in a timely manner, this is then called a stock out
and activity stagnates, the second example of the downstream activity is also the customer
service of Zara when the product finally reaches the customers (Gamboa, and Gonçalves,
2014). The buying activities with the supplier in the company Zara has maintained through
the downstream supply chain as it helps in coordinating with the customers and the clients.
The flow of information is passed to customers through this networking.
Source: scmglobe.com
Transportation in both inbound and outbound networks
There are various modes of transport through which an effective supply chain is used. Several
modes include things like railways, roads, air, vehicles, pipelines, etc. The company Zara
uses the high technology transportation system (Perry and Wood, 2018). The company Zara
has a great brand in the market so they want to deliver their products to the customers on
time. The company uses the fastest mode of transportation. The company also uses the ships
which carry out the two-week shipments as the transportation is indispensable.
The company Zara uses the intermodal shipping of transportation in which the shipping has
been done between the different modes of transport such as planes to the truck. The company
Zara uses the two-mode of freight to deliver or ship any services (Choi and Cheng, 2015).

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For example, the company Zara uses the truck to deliver the materials to the railways or to
the ships and to complete this process again back to the truck. The cost associated with
transportation differs from place to place. As per the distance and the country, the cost differs
and it is also associated with the material handling and pallet loading.
The company has been systematically upgrading all the existing platforms for logistics, and
the company has also introduced eco-efficient lighting and electric vehicles for internal
transport and they use 100 percent renewable sources of energy (Ferdows, Lewis and
Machuca, 2013).
Zara works with the suppliers to standardize the packing, by making use of the more
sustainable materials and reusing the boxes of cardboard. That is used by the company to
send their garments to their different stores, which can be used again and again up to 5 times.
(Bhattacharya and Dey, 2019). The company Zara has a great brand in the market so they
want to deliver their products to the customers on time. The company uses the fastest mode
of transportation. The company also uses the ships which carry out the two-week shipments
as the transportation is indispensable.
Value co-creation in operations
Co-creation value is the business strategy of the company Zara whose internal strategy is to
offer a wide range of products with higher quality and the external strategy is to promote the
products and deliver the products to the customers when they are demanded or when they are
needed. The company Zara offers fashionable products and also have the effective styling so
it is their value proposition to the customers.
As the role of the customers and suppliers is changing with the dynamic environment so the
internal strategy is to understand the value and the needs of the customers and to fulfill them
on time (Divita and Yoo, 2013). The company Zara making it happen what the customers are
needed so it is creating their value co-creation in the market. The profit is generated after the
cots by the company Zara by delivering efficient value.
The company Zara has increased their sales through the external marketing channels as with
the help of that communication strategy only the company stay in touch with the customers
and it helps in creating the value creation in the supply chain. The company Zara has the

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trading securities which creates the value creation in the offshore and the international market
(Ferdows, Lewis and Machuca, 2013)
The value creation has taken place between the manufacturing firms and the 3PL and 4PL
providers as every party wants to involve in the logistic company chain to gain the
efficiencies. The offer is given to parties and when they take place the things, the settlements
are done in creating the value.
In co-creating the value network in the company Zara, the major role is played by the
globalization. The business environment is getting affected by globalization so in the
dynamic phase so it helps in responding to the changes with the time and to brings more
innovation in the fashion trends, it is very helpful (Geissdoerfer, et al., 2017). The higher
growth of the company Zara is attained through globalization as in the competitive era it
helps in gaining the advantage and empowering the things.
The economic integration is enhanced through globalization so it creates value for the
company eventually leading the business culture. With the help of globalization the company
Zara can easily communicate with the other employees of the world and can also conduct
business operations in a more effective way (Bhattacharya and Dey, 2019). The competitive
advantage is achieved through the globalization strategy as the company is doing outsourcing
so globalization helps in developing an international scale. The globalization plays an
essential role in the supply chain of the Zara Company as it pushes the supply chain market
of global and the domestic market. The lower prices and consumer convenience are given to
the company Zara through the effective global supply chain.
The value creation in the company is also gained through the optimization of the cost. The
company Zara has started saving the cost by reducing the fewer waste things and optimizing
the cost in a more effective way. The company Zara also uses effective technology like
blockchain technology which helps in creating value in the market as it is more sustainable.
The company attains great value through cost reduction and by standardizing the platform in
an effective way. The cost-efficiency can be optimized by continuously improving the culture
and by using the digitalization process. These are the ways through which the company Zara
has attained the value creation.

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Marketing channel network using technology
The distribution channel of Zara is very much effective as they sell the product in the 77
countries with more than 2000 stores. The company Zara has owned more than 90% of the
stores and has done significant trade over there. The company Zara offers a high-quality
product with the updated fashions so customers oblige them for the latest fashion trends (de
Sousa Jabbour, et al., 2018). The company has benefited many things through the competitive
edge also and from the cumulative pull. The company also did the retails through the website
of the company and uses the company channel only to promote the brand image of the
product.
The distribution channel of the company Zara is online marketing also as they sell the
products through the website and the consumers buy the product in an indirect way. The line
presence was also used by the company Zara as they have lots of customers so this
distribution channel is effective for them. With the help of social media technologies also the
company is also doing an effective marketing channel such as Facebook, Instagram, website,
etc. the company Zara does not have the Twitter site (Mo, 2015).
From this marketing channel network channel, the feedback from the consumers is also
taken. So if there were any outlets which the consumers don’t like can be quickly returned.
The demand and the supply of a particular product can be evaluated through the marketing
channel network.
The major issue and the problem which was found in the online marketing channel is that the
information related to the products is inadequate and there is a lack of knowledge regarding
the product so it becomes difficult for the customers to buy (Sardar and Lee, 2015). The
company Zara can lose their sale opportunities and can deliver poor services to their
customers as their supply chain is not that much effective.
The company Zara can overcome this problem by using effective training programs and by
giving a detailed description of the product so that customers will get the full knowledge of
the product and they set their minds to buy the product. By tracking the performance also the
distribution channel of the company Zara can be improved. Updated technology is used for
assisting the problem of the marketing channel as it helps in tracking the performance and
managing the things.

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Supply chain technology is effective for bringing the closeness in the different distribution
channels as it helps in truly integrating the things and helps in collaborating with the things.
The blockchain is used for effective technology as it enables future supply chain operations in
a more appropriate way.
The company Zara uses symmetrical information as they disclose the information to all the
public through the stock market. The relevant information is getting in all the distribution
channels through the stock information. The supply chain technology which is the block
chain maintains the supply chain security and tracks the products (Mo, 2015). So the
visibility of the supply chain is improved through effective blockchain technology and helps
the customers and the end-users to assess the information (Sardar and Lee, 2015).
The model of Zara’s digitalization helps the company is promising the retrofit approach for
the awareness of the supply chain. In terms of sensing demand, advances analytics are
brought to bear on the POS data, website clickstreams and the social media feeds and apart
from that it offers a new level of awareness regarding the needs of the market.
Supply chain dimensions (Circular Economy and Industry 4.0)
The manufacturing supply chain of the company Zara uses the positive contribution of the
triple bottom line so that high scales can be achieved. The sustainability is achieved through
this approach as it brings innovation with higher scales (Fatorachian and Kazemi, 2018). For
the improvement in the supply chain structured of the company and for aligning the circular
economy and industry 4.0, it is important to reduce or eliminate the wastes. The company
should use the resources in an effective way and maintain the leanness so that sustainability
can be maintained.
There are certain barriers in the circular economy such as the cost of transformation is higher
at the initial level, the taxation system is higher, and there was a lack of secondary raw
material (Korhonen, et al., 2018). So in the company, Zara the major barriers have been seen
in the structural, financial, technological and operational things. The barrier in the company
has been seen in the recycling of the products.
The circular economy approach is used by the company Zara so that the environmental,
social and economic benefits of the triple bottom line can be maintained. This approach of
energy and material also helps in recycling and reusing things (Yip and Huang, 2016). The

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circular economy is the accelerator of sustainable energy as it uses renewable energy
resources with low carbon emissions.
Industry 4.0 is the trend towards the new digitalization system and towards the data exchange
and the automation. Internet of things is the industry 4.0 which mainly focuses on the
interconnectivity and machine learning (Caro and Gallien, 2010). The business operation of
the company has improved through digitalization and they also enable the 4.0 Industry by
leveraging digital technologies. The manufacturers of the company Zara gets benefited from
the Industry 4.0 as it increases the spread of innovation and also reacts with the changes very
quickly.
The company Zara has improved their working conditions and with the help of the digital
presence, it becomes easy for them to increase their productivity. With the help of smart
digital technologies, the supply chain management process is also effectively happening and
operations are happening in a better way. The energy efficiency can also be maintained in the
supply chain through the digitalization (Jiang, et al., 2016).
The company reuses and recycles in its own operations as well. For example, in the
stores the company has dedicated systems for collecting the hangers of the cloth and
security tags as well as that they can be reused, recycles and repaired (Fatorachian, and
Kazemi, 2018). The vertical integration is there in Zara and they also used reverse logistics
so that they can make business more sustainable. The business operations of the company
Zara is more sustainable by using reverse logistic.
The business operation of the company has improved through digitalization and they also
enable the 4.0 Industry by leveraging digital technologies. The manufacturers of the company
Zara gets benefited from the Industry 4.0 as it increases the spread of innovation and also
reacts with the changes very quickly.
Recommendation for the sustainability in their supply chain
Sustainability in the supply chain can be effectively maintained by taking a certain set of
actions by the global manufacturer. Although, the company Zara operate their supply chain
operations through the elements of sustainability only. There are three major elements in
which the company Zara can maintain sustainability. The company Zara has to make the
products or the clothes which are not affecting the environment badly as the first element is to

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preserve the environment (Asgari, et al., 2016). The growth of the company Zara takes place
when there is the shareholder return is higher and the risk management is lower.
In the company Zara, the shareholder return is higher and even risk management is also lower
which helps in maintaining the economic growth of the company. The third important
element of sustainability is the human and the social rights which have to be followed. The
company Zara follows all the rules, regulations and rights and development in the holistic
approach in the company. Zara works with the suppliers to standardize the packing, by
making use of the more sustainable materials and reusing the boxes of cardboard (Chopra and
Sodhi, 2014).
It was recommended to the company Zara that climate change is happening in a large manner
so to maintain sustainability they have to manage the biodiversity of the country and use
fewer emissions of the air and the hazardous gases (Yang, et al., 2015). As the company has a
great reputation in the market so they have to provide more employment opportunities and
also give training and employment to the employees so that more socio-economic
development can happen (Jain, et al., 2012).
The improvement of the sustainability in the company Zara can also be done through doing
fewer waste reductions and using the full utilization of the resources. It was recommended
that the company Zara has to preserve the natural resources and take several actions to protect
the environment as they have a great impact on environmental performance (Shen, 2014).
Sustainable development is also needed as it thrives the global competition of the market and
order healthy communities. The vertical integration is there in Zara and they also used
reverse logistics so that they can make business more sustainable. The business operations of
the company Zara is more sustainable by using reverse logistic.
The benchmarked instances are also needed for improving sustainability as companies
perform better than the average. Benchmarking is used for comparing the performance and
there several indicators such as GDP, Trade balance, global warming potential, investments,
etc. through which sustainability can be measured (Madhani, 2016). The company Zara can
improve its sustainability through the three R factors also so it is recommended that they
should reduce, reuse and recycle to preserve the natural resources. The company should also
reduce pollution and carbon footprints so it is recommended to reduce the global impact.

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