Business Logistics: Zara's Supply Chain Management Strategies

This report provides an in-depth analysis of Zara's logistics management and supply chain strategies, which are key to its success in the fast-fashion industry. It identifies issues within the organization and examines the strategies behind its successful operations, comparing it with both successful and unsuccessful examples from the fashion industry. The report also introduces the concept of sustainability, highlighting Zara's policies for achieving a competitive advantage in a highly competitive business environment. Key strategies discussed include limited production runs, a 'fast fashion' approach, and maintaining a balance between supply and demand. The report further explores Zara's advanced customer experience, quality product delivery, improved communication, and marketing strategies, while also identifying areas for improvement within the company's system.

Running head: LOGISTICS MANAGEMENT STRATEGY FOR SUCCESSFUL
BUSINESS
Logistics Management Strategy for Successful Business
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Executive summery
This assignment is about analysing the logistic management and supply chain
strategies behind successful business process of fashion retailer Zara. This report has
identified issues within the organisation and analysed strategies behind its successful
operation by comparing it with a successful and an unsuccessful example from fashion
industry. Besides, the concept of sustainability has been introduced with example of Zara’s
policy of achieving competitive advantage in such a competitive business environment.

2LOGISTICS MANAGEMENT STRATEGY FOR SUCCESSFUL BUSINESS
Table of Contents
Introduction....................................................................................................................3
Logistic management strategies: Fundamental reasons for success..............................3
Produced designs are limited and one of a kind.........................................................4
‘Fast fashion’ strategy................................................................................................4
Balance between supply and demand........................................................................5
Comparison with another successful and unsuccessful organisation.............................7
Maintenance of competitive advantage..........................................................................8
Providing advanced customer experience..................................................................8
Zara provides quality products as promised...............................................................9
Improved internal and external communication: engaging stakeholders...................9
Improved marketing strategies...................................................................................9
Issues identified within system of company................................................................10
Recommendation and conclusion................................................................................11
References....................................................................................................................12

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Introduction
Zara is known for its fastest growing business model in fashion apparel industry. The
company has achieved its success based on its logistics management strategy and world-class
supply chain community. Consequently, it is able to restrict the chances of ‘product
obsolescence’, one of the major issues faced by premium apparel brands. Most of the apparel
businesses face the difficulty of managing products in stocks which are not on demand and
on the other hand, they have to deal with the increased inventory cost simultaneously. There
is a strategic approach behind their successful logistics management. This report is going to
identify issues within the organisation and identify strategies behind its successful operation
by comparing it with a successful and an unsuccessful example from fashion industry.
Besides, the concept of sustainability will be introduced with example of Zara’s policy of
achieving competitive advantage in recent times.
Logistic management strategies: Fundamental reasons for success
It has been observed and approved by business experts as well that Zara’s logistics
management and supply chain management strategies are the key component behind the
company’s success. However, as per the study of Choi, Chiu and Chan (2016), the entire
supply chain and logistics management have not developed in a day without struggling with
risk. Fashion industry is highly uncertain. It is not easy to predict the market trend and nature
of customer preferences is dynamic too. Traditionally, designers and stores are the one who
push a design or style to market. On the contrary, contemporary styles are mostly influenced
from movies and television series characters’ costumers. Celebrity wardrobe has been
influencing public demand dominantly since a long time. Therefore, strategy of pushing the
market to buy something they have designed is difficult. That is why Zara has always been

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aligned their design on customers’ demand. The goal is to reach the consumers with adequate
flow of desired products faster than competitors but with more efficiency.
Along with logistics management strategies there are various reasons behind
consumers’ acceptability of the brand. It has maintained a leading position by following few
managerial guidelines.
Produced designs are limited and one of a kind
As per instructions, production units produce in small quantities initially. It gives
them chance to collect feedback and work on that particular fashion line. Therefore, it can be
considered as an effective way to understand a design’s acceptance in market. The findings of
Kohtala (2015) suggest, as a result the organisation does not have to think about increased
inventory cost due to large production of clothes which have been rejected by the targeted
customer base. Zara has been experiencing fast turnover rates since the day of beginning
following this strategy. Business experts argue that it has a bad effect on budget to invest on
multiple designs yet they have been amazed by the fact as well that the company uses same
material and opt for different designs to remain cost effective in this term as well.
‘Fast fashion’ strategy
Zara allows their marketing team to perform detail research on market demand as
mentioned before. Based on that implies a pull model on their inventory and supply chain
management (Ülgen and Forslund 2015). They give platform to no less than 1000 designers
every year and train them as per the pattern of store sales and contemporary fashion trend.
Their response has become quick and consumers never come with complain of not able to
order the desired items. The distribution of the production has been maintained keeping the
headquarters in central. It is the Spain store which evaluates and distributes products to
different countries keeping the different requirements in mind.

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Besides, IT system is improved enough to maintain centralised distribution
successfully. Traditionally it is an issue of fashion industry that from the distribution centre
and warehouse it takes almost 10 months to come to stores. However, as described in
McNeill, and Moore (2015), with the help of fast transportation and following QR (quick
response) strategy executives manage the operations in an advanced way. Strategies are to
maintain a partnership between retailers and local distributers for sharing information
distinctly and secondly, installation of relevant technologies and software for uninterrupted
flow of supply.
Balance between supply and demand
When the company has been saturated by implementing QR strategy, like Zara has
thought of differentiating their strategic orientation by implementing ‘in-time manufacturing’
concept into system when they confronted with such saturation. Zara, as discussed in Orcao
and Pérez (2014), in order to maintain a balance between demand and supply try to stick on
in house production only. As continuous communication between hired merchandise and
central unit takes more time than usual to understand requirements and implement
accordingly. Zara feels it would be great to centralise the manufacturing, designing and
distribution unit to avoid extra hazards. It will help them to keep a balance with the market
demand at a considerable speed.
The organisation has become so successful in its motive that it was considered for
academic research and according to findings, there are certain rules to accomplish
organisation goals as far as fashion industry is concerned. The following aspects have been
acknowledged by the researchers as supply chain principals of fashion industry which have
been obtained by the brand for ensuring successful implementation of logistics management
and managing such a vast supply chain network.

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 The organisation prefers to segment the customers according to geographical
boundary as requirement of service changes from one location to another. After
performing the segmentation, supply chain policies are adjusted by different segment
requirement to ensure profitability.
 In order to sustain the flow of profit Zara communicate with logistics network
regularly to make the system customize for the segmented market.
 Observation of the market is important to understand consumers’ tendency. Zara,
therefore, plan according to beforehand market research and revise the resource
capacity accordingly across the supply chain network. Further, every product
development unit has their separate designers, marketing and sales planner. It is
helpful in terms of maintaining internal communication (Wieland and Marcus
Wallenburg 2013). Less confusion regarding information and instruction makes the
business operation more efficient.
 Supply chain networks are motivated to deliver the production as speedily as
possible keeping the different demands in mind. They have started to rely on
automotive production to speed up production efficiently. Store managers are required
to place orders twice in a week. Shipments are prepared for delivery within one day.
This helps to manage increased traffic at Zara stores as consumers can have desired
product on time.
 Zara has been managing supply of products strategically to keep the inventory cost
within budget. Producing garments and shoes in small lot is an exceptional
characteristics of Zara that has been mentioned before. Not only it helps to address
trend and feedback, but also it creates a sense of exclusive collection. According to
Chiu et al. (2014), it is kind of psychological pressure on customers whether to take a

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particular product or waiting can leads to ‘out of stock’ status. Following this
shoppers’ visit stores and it enhances revenue and profitability.
 The organisation has developed their IT infrastructure to maintain seamless
communication to build support system at multiple levels of network. This
infrastructure has been made to make everyone informed about various product range,
service and important decisions.
 In addition to that, Zara has been following all the political and legal norms to
operate business. They do not believe in cost effective outsourcing as they have
established in house production units to speed up delivery and keep the balance
between demand and supply.
Comparison with another successful and unsuccessful organisation
Companies have the authority to control behaviour of supply chain network. As
supported by Meixell and Luoma (2015), changing customer preferences can push the
suppliers to align with right standards of regulation and improve internal policies regarding
sustainability. Managers can develop such practice not only by implementing various policies
but also by offering incentives, digital aids and support of training. Zara knows well how
success of supply chain management can bring sustainability. Online fashion brands like
Misguided, Boohoo and ASOS are examples of successful logistics and supply chain
management. As per Wu et al. (2013), speeding up the manufacturing process maintaining
the key preferences of targeted customer base, it takes only two weeks to bring a product
from concept to display. The advantages of having online facility is that, products do not
have to be delivered to the store all the time to reach the customers. It has been observed that
their two week policy is beating Zara’s fast fashion strategy not only in terms of faster
production and distribution but also transformed nature of shoppers.

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Unlike Zara, there are several examples of unsuccessful supply change management
in fashion industry. An example can be given from food industry. Hershey’s failure was the
timing when they tried to launch new method of receiving major orders during festive season.
However, their supply chain were not prepared for the excessive traffic in stores and online
too. As a result, they could not fulfil huge Halloween orders and lost a huge amount of
monetary resources as well as reputation in this due course. The same is true for any service
sector. Without revising the capability of supply chain network and without allocating
resources in a proper manner no business can be successful in balancing market demand and
supply. Therefore, in order to learn the facts which are not going to help to grow as a business
that are, it needs to operate organisation with visionary outlook in every of managing supply
chains.
Maintenance of competitive advantage
There must be many strategies behind increased profitability yet there are things
beyond efficient supply chain management which have assisted Zara to gain a sustainable
competitive edge in market. According to Boons et al. (2013), innovation and diversification
is important as far as marinating a sustainable business is concerned.
Providing advanced customer experience
There was a time when retailers used to consider products’ quality as the unique
selling point. However, the contemporary market is wide and customers have immense
experience of shopping and idea about varied products. Hence, apart from offering quality
product Zara arrange loyalty programme for customers so that they wish to visit stores
repeatedly. The ‘fast fashion’ concept has become successful in terms of making the
customers convinced for visiting their stores in search of ‘limited collection’. The term

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limited collection is a strategic and result of producing garments in small lot to check its
acceptability first.
Zara provides quality products as promised
Customers used to focus on discounts, sales and trendy designs at cheap price.
However, current shopping behaviour reveals different theory. Customers’ have started to
believe in brand loyalty and ready to pay deserved amount for quality products. According to
Song and Parola (2015), Zara has detailed understanding of adding value for as per
consumers’ preferences. Customers who do not hesitate to value quality, tend to be extremely
brand loyal. Not even at the cheapest price, Zara has always been trying to deliver branded
quality at a price which appeals customers highly (Wook Chae and Chang Lee 2013).
Improved internal and external communication: engaging stakeholders
With the progression of time, Zara has evolved a lot as far as advanced data and IT
infrastructure is concerned. Therefore, the brand managers are now able to keep an eye on
social networking sites to follow the consumers’ analysis on those media platforms. This data
are important for creating a brand image and engage the customers more with the marketing
procedure. Moreover, they consider customers’ opinion as well in terms of improvement
regarding offered product and services. As discussed in Grabara (2013), customer oriented
service has made them align their service, logistic management and product line closer to
market demand. Hence, it has become feasible for them to gain competitive advantage.
Improved marketing strategies
Zara has improved its promotional techniques and has started to raise campaign
everywhere, even if there is minimum possibility of gaining exposure. That means, Zara has
posted their campaign in every possible place wherever they have found audiences. Starting
for traditional campaign procedures to contemporary social media strategy Zara has

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advertised through every mode for gaining publicity. Using social media as a tool for
addressing feedbacks and faults Zara has designed their marketing strategies that way too for
remaining extremely competitive.
An organisation which comes with competitive nature, is able to perform well in
terms of business and it gives them strength to sustain in market for longer period.
Issues identified within system of company
As mentioned before, Zara has been operating successfully in market mainly because
of its efficient supply chain management. The case study has confirmed that Zara’s designers
prefers to conduct a close market research before designing any new clothing line as it helps
them to align their products with current market trend. Zara follows a business model, called
‘fast fashions’, where consumers can be well updated with latest fashion trends and styles.
According to the contemporary shopping behaviour of young generation mostly, they are
relying more on online shopping than visiting a store (Wu et al. 2013). During various
research it has been observed that following this way consumers are able to save their time
and simultaneously they find online fashion apparels are trendy and pocket friendly too.
However, as per the study of Preibusch, Kübler and Beresford (2013), online purchase
requires more personal information than a store visit. Many consumers with traditional
viewpoint trust and commitment do not shop from online sites yet the number is
comparatively low.
Taking leverage of social media, competitors are advertising their offering which help
online brands to keep their brand top of the trends. As described in Fernie and Sparks (2014),
issues occur when online brands are speeding up their production close to the market demand
which has enable them to capture market value. Hence, all of the competitors are beating
Zara in terms of being ‘Fast Fashion’. In order to attain competitive advantage Zara must

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come up with new strategies as their unique logistics management strategy which has led
them towards success. Zara’s well-structured supply chain management is not a secret
anymore. Therefore, it has become easy for competitors to imitate those strategies and
implement to gain accomplishment.
Recommendation and conclusion
In order to reduce the competition with online brands who are offering trendy designs
in affordable prices, Zara can opt for opposite pricing strategy. They can follow high pricing
strategy for premium quality apparels and for student friendly clothing line they can though
for product diversity and different pricing strategy. It will help them to combat the
competition as well as assist to sustain for longer period in turbulent business environment.
Logistics strategies must be operated in a manner which would be non-imitable for
competitors. By maintaining brand loyalty, Zara can reach its sustainability goals.