Zara's Supply Chain: Logistical Movement, Design, Inventory & Control

This report provides an in-depth analysis of Zara's supply chain, focusing on logistical movement, network design, and inventory management. It identifies logistical issues, such as product movement challenges and waiting times, and explores the utilization of the HUB and Spoke network model. The report evaluates Zara's supply network design, highlighting the company's agile, just-in-time policy and unique approaches like local manufacturing and demand prediction. It also discusses modern inventory management methods and traditional models like re-order points and EFQ, ultimately aiming to provide a comprehensive understanding of Zara's supply chain operations and strategies.

Running head: SUPPLY CHAIN
Supply Chain of Zara
Name of the student
Name of the university
Author Note:

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Abstract
The following report is based on the logistics management of ZARA. The report has provided
the different types of the data regarding the likes of the supply chain management tools, supply
chain management strategy and the different kinds of logistical management tools like that of
inventory management. The report has provided a clear and detailed report based on the
logistical perspectives of the company. The beginning of the report is marked by the
identification of the different kinds of the logistical issues faced by the companies especially
ZARA. It also discusses the importance of implementing the HUB and Spoke networks in the
organizations. The evaluation of the supply network design and the discussion of the modern
methods of inventory management has been the other points that has been discussed in the
report.

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Table of Contents
Introduction......................................................................................................................................4
Issues involved in relation to effective logistical movement of products.......................................4
Problems or examples from ZARA.............................................................................................5
Utilization of the HUB and Spoke Network................................................................................6
Evaluation of the supply network design of a Product....................................................................7
Best Design for ZARA................................................................................................................8
Impact on Inventory and Control...............................................................................................10
Case Study and consideration of how the assets assist the logistical and operational flow of
products..........................................................................................................................................10
Critical Discussion of the modern methods of inventory management in an operational
management...................................................................................................................................12
Modern Methods of Inventory Management.............................................................................12
Traditional Models like re-order point and EFQ.......................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

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Introduction
A supply chain networking can be termed as the evolution of the basic supply chain. The
ever changing environment of the market like the development of new and advanced business
features, change in the technologies and changing demands of the customers have changed the
supply chain management process in the organization. The business organizations can often be
part of large network of organizations, a supply chain network can be used to highlight
interactions in between the different types of the organizations. Each and every business
organizations can easily purchase the different products in order to build the network for the
supply chain. A supply chain network can be said to be the group of a number of different
physical locations, different vehicles for transportation, supporting systems through which the
products and services of the firm markets are managed and delivered in a proper formation.
Logistics management is that particular part of the supply chain management that plans,
implements and controls the efficient and effective flow of the goods and services along with the
proper storage of the goods and then properly delivering them to the customers by meeting all
the demands and the specifications as needed. A proper blend of an efficient logistics and supply
chain structure is essential for the success of the organization in the market.
Issues involved in relation to effective logistical movement of products
According to, Choi et al. (2016) Logistics can be defined as the process that interferes
and communicates with the workforce of the organization along with the other companies,
customers, vendors, carriers and many more similar as such. The process of logistics is
responsible for the delivery of the goods at the door of the customers. The delivery process starts

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with the collection of the finished products from the vendors and then ends after the proper and
effective delivery at the door of the customers. The logistics process however, has some major
issues that are tackled by the logistical service providers. According to, Christopher (2017) the
most important issue in the providence of the logistical services by a company refers to the issues
related to the movement of the products. The movement of the products is considered to be the
most important factor in the organizational effectiveness of a logistics company. On the other
hand, Choi et al. (2016) has said that better the movement of products by a company, the better
will be the company’s logistical prowess. The movement of the products must complement the
strategy of the business in order to ensure success of the business. The ability to complement the
business strategy according to the goals of the organization helps the business organization to
ensure success (Christopher, 2017). The management of the companies must also ensure a
smooth movement of the goods. The presence of a fluid movement rather than the normal
process of delivery and transfer of goods can make the supply chain one of the most effective in
nature. The absence of the fluid movement cannot ensure a supply pipeline.
The agile supply chain management strategy of Zara is basically based on the Just-In-
Time policy through which the management of the company has adapted the technology and
principles of the customer value and modernization (zara.com, 2019). The just in time policy
helps the company to be effective and efficient in nature and allows the management of the
company to supply the materials to the customers through a smooth process.
Problems or examples from ZARA
The fashion industry where ZARA deals is a fast moving industry and the management of
the organization needs to be at its very best in order to ensure success. Storage of a fast moving
industry in the back of a warehouse is not the optimal solution (zara.com, 2019). However this

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cannot be ensured all the time as the supply chain of ZARA fails to meet such specifications
each and every time. The management of Zara is always at its toes during collection and delivery
of the goods. A better response time with sheer quality can ensure effectiveness. According to
the management of the organization around 5% to 7% of the sales revenue is incurred on
shipping costs which also includes the cost of unnecessary movement of the goods. Another
important problem that exists in the supply chain logistics of ZARA is the inappropriate and
inadequate management of waiting times (zara.com, 2019). For example, waiting for the
approval of the shipping documentation or inefficiently organized picking jobs leads to
unnecessary cost escalations and wastage of time.
Utilization of the HUB and Spoke Network
Most of the large logistical companies have been able to achieve huge success by the
implementation of the HUB and Spoke networking (Christopher, 2017). The utilization of the
HUB and Spoke networking has been key to the management of the companies as such a process
helps them to achieve a better competitive advantage in the market. The HUB and Spoke
network of the organization is designed to keep the costs down. The claim is supported by Coyle
et al. (2016) as he says that the following distribution networks receive the product from
different origins, consolidate the products and then send them directly to the different
destinations. The Hub and Spoke Model can be easily introduced by the management of ZARA
to ensure a better logistical set up. There are a few examples of companies who have attained
success after the implementation of the following model. LOWE’s implemented the following
model to encourage growth and gain a healthy market share. The company set up the network of
nine different distribution centers for its current set of 850 stores. Each of the distribution centers
have been designed to support at least 100 to 125 different stores of the organization. More than

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50% of the inventory of the company moves through these distribution centers. The model was
an instant hit in the company and thus ZARA can try out the similar model in order to ensure
success in the market and to make a centralized distribution center.
Evaluation of the supply network design of a Product
According to, Fernie & Sparks, (2018) the design of as supply chain network for any kind
of industry or business involves the arrival to a satisfactory design framework by consideration
of the different kind of elements like product market, process, technology, costs, external
environment and different kind of factors and their impact beside the evaluation of the alternate
scenarios that easily matches the requirements of the business enterprises. On the other hand the
study of König & Spinler, (2016) contradicts this claim as they say that though the supply chain
network has been there for a long time, the management of the business organizations from
different kinds of industries has been adopting them now because of the new trends in modern
business marketing. The growing uncertainty and the volatility in the business environment
along with the combination of the supply chains have grown more complex and global in nature
(Mangan, Lalwani & Lalwani, 2016). On the other hand most of the supply chain organizations
have matured to the level from where the organizations are capable enough to use different kinds
of sophisticated technologies.
A supply chain according to, Oliveira et al. (2015) is defined by the suppliers, plants,
warehouses and flow of products from the origin to the final customers. The location along with
the number of the different facilities is a crucial factor to the success of the supply chain and the
supply system of the business organization. The global and complex nature of the supply chain

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management is becoming difficult for the organizations to analyze the impact of the factors like
that of;
 External Factors like the changes in the government regulations or the different changes
in the in the demand of the people or the changes that leads to the demand of the business
and the environment.
 Apart from the external factors there are internal factors that includes the likes of the
growth plans and introduction of new sources of revenue
The design of the supply chain network involves the determination and consideration of
the different kind of elements like that of the;
a. Market Structure
b. Market Segment
c. Cost of procurement
d. Cost of sales
e. Production Costs
f. Over heads
g. Market Segment
Best Design for ZARA
The management of ZARA must choose a capable and efficient supply chain design that
complements its strategy in order to ensure the success of the company globally. As mentioned
earlier, the management of ZARA has implemented the just in time agile policy to answer to the
supply chain issues (zara.com, 2019). The success of the company is driven by means of a very
rapid time to market which is best defined as fast fashion. The process involves keeping up with

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the latest trends of fashion and bringing new trends to the fashion market as quickly and cheaply
as possible. The agile supply chain of the company aids to the following process and helps the
organization to be a profitable fashion brand and sustain rapid growth in the future years. The
main reason behind the success of the company rests on some of the unique approaches. These
are as follows;
 Procurement Methodology- The procurement team of the fashion company does not
work with the total number of the manufactured clothes but mainly work upon the
amount of the raw materials that are in need of manufacturing all the different kind of the
clothes.
 Local Manufacturing- The management of ZARA presents a drastically different
approach than its competitors. Rather than outsourcing the production in other places, the
management of the company decided to manufacture its products in Galicia. The lower
cost of production can be achieved in other regions, the faster time to market, reduced
transportation costs and low exposure to changing tariffs and politics outweigh that one
factor.
 Production Feedback- The customer feedbacks are shared with the market specialists of
ZARA who analyze them and provide exact details of the wants and need of the
customers.
 Supply Proximity- The presence of the vendors and the suppliers close the factories of
production provide a unique and superior advantage to the business organization.
 Ability to predict demand of the customers- The ability to predict the demand of the
customers provides a huge competitive advantage to the business organization. The
company reaps the benefits of a very competitive and efficient inventory management

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that helps the organization to determine the exact amount of the quantity of items needed
for each of the stores.
Impact on Inventory and Control
The presence of a high inventory cost, decentralized supply chain and multiple sourcing
is believed to be a good and effective strategy in order to maintain a proper flow of the fashion
products. The rise in the inventory costs leads to a rise of the suppliers (Oliveira et al. 2015). On
the other hand, the study of Schönsleben, (2016) says that the inventory policy of the company
must be well defined and analyzed properly in the strategic level by the use of demand
forecasting techniques in order to capture the maximum market share and to reduce the risk of
customer unsatisfactory.
Case Study and consideration of how the assets assist the logistical and operational flow of
products
The Fulfillment Centers of a company helps the e-commerce owners. It helps the owners
to outsource the warehousing and shipping facilities. The following activity helps the companies
to relieve online business of the necessary physical space to store all kind of products that are
termed to be beneficial for the merchants. It also does not need the management to directly
manage the inventory of the company. The management of the inventory is a present form of
operational problem for different kinds of online stores. It is also an essential component for the
cultivation of the best possible customer experience. According to, Yu et al. (2016) the online
stores have a better and advanced way of managing the inventory with the presence of an
outsourced fulfillment center.

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The management of a business organization must be capable of fast, radical changes and
those changes that aspire to be the best in the market (Yu et al. 2016). The presence of an
efficient management system means a quick and fast response to different changes, being
accurate, presentation of minimum clerical effort and staying up to date. The case study is based
on the discussion of e-commerce and the future of the distribution centers of e-commerce. The e-
commerce industry has came a long way in the last few years and has evolved into a
sophisticated, technologically advanced and a prominent growth channel. The online shopping
gradually continues to increase in numbers as people prefer such marketing due to the absence of
time to buy things physically, giving a visit to the stores. Most of the companies like Alibaba,
Amazon have re-laid the path of the marketing in terms of the expansion and innovation
activities. In most of the ways the developments made by the management of the business
organization has set the stage for the delivery and over increasing demands of the consumers.
The study of Mangan, Lalwani & Lalwani, (2016) says that the E-Commerce distribution
centers are up against the huge demand and pressure. The exception being that the employees of
the company are now much more active and they take actions on an order within minutes the
order is placed. Such an incredible response rate from the part of the employees of the e-
commerce organizations develops a better productivity for the management of the company. The
better productivity of the company helps to ensure the success of the organization in a planned
and phased manner. The e-commerce companies of the modern days are much more advanced
and capable. The management of the e-commerce facilities has applied different kinds of
technologies that have been important for the organization of the business. The major growth in
the e-commerce industry and the channel of the organization has led to the increase in the e-
commerce orders. The orders apart from increasing have also become more complex as well as

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advanced. The reality is that with the growth of the channel, the Distribution centers must ensure
they’re prepared to tackle operational procedures. On the other hand according to, Oliveira et al.
(2015) in order to effectively manage orders, the retailers must leverage a sophisticated
warehouse management system (WMS) that helps in the increases the efficiency of their
distribution center. A clear and transparent example on the same can help to understand the rise
of technology and its impact on productivity. An order of 20 same items of the same size and
color will require a sophisticated system to generate the speedy delivery of the items in a
systematic and scientific manner. The presence of an advanced WMS system and warehousing
facility can help the organization to deliver the products within a very short time.
Critical Discussion of the modern methods of inventory management in an operational
management
Modern Methods of Inventory Management
The importance of maintain an effective and efficient inventory management is
recognized by each and every of the modern organization today especially the different players
in the supply chain management like that of Wal-Mart. Some of the major techniques of
inventory control are as follows;
a. Just in time- Just in time strategy has been developed by the Toyota Motor company and
has been one of the best successful models till date. The management of the cart company
used it to optimize its production process while reducing the inventory. The presence of
the JIT model of inventory management helps the organizations to control its inventory in
a scientific and systematic manner. The following process involves the exact amount of