Supply Chain Management: Zara and Uniqlo Case Study Report

This report provides a comprehensive analysis of the supply chain management strategies employed by Zara and Uniqlo, two prominent players in the global fashion industry. The report begins with executive summaries and introductions that outline the core strategies of each company, focusing on Zara's design-driven approach and Uniqlo's emphasis on low pricing and high quality. It then delves into detailed case studies of both companies, highlighting key aspects such as Zara's use of technology, vertical integration, and low inventory strategies, and Uniqlo's focus on product innovation, cost reduction, and its SPA model. The analysis further explores critical success factors, performance evaluations, and the application of supply chain drivers within each company, including the three decision phases, push or pull views, and supply chain capabilities. The report concludes by synthesizing the findings, offering insights into the competitive advantages and challenges faced by Zara and Uniqlo within the dynamic landscape of the fashion retail industry.

Running head: SUPPLY CHAIN MANAGEMENT
Supply Chain Management Strategy
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Executive Summary
This report deals with the supply chain management strategy in the context of Zara and
Uniqlo. However, these two organizations are very popular in the global fashion industries.
However, development of new design is the core strategy of the supply chain management of
Zara as product manufacturing is the part of supply chain management. On the other hand, low
pricing strategy with a high quality product is the prior area of Uniqlo. Price is one of the
important drivers of the supply chain. It has been received that cost reduction is necessary for
each organization to achieve profitability. For this reason, Uniqlo planned their product design
before one year of launching their new products. This supply chain planning enables them to
purchase raw materials with low price. Low inventory strategy is a unique supply chain strategy
of Zara that reduces the risk of vast inventory with old products. In the context of Zara, their
maximum production is done in Spain while in the context of Uniqlo their core production area
is Japan. Hence, it has been received product differentiation, cost reduction; sourcing and pricing
are the vital stages of supply chain management strategy.

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Table of Contents
Introduction......................................................................................................................................4
Summary of the two cases...............................................................................................................4
Case study of Zara........................................................................................................................4
Case study of UNIQLO................................................................................................................6
Analysis of the critical success factors in context of Zara...............................................................7
Analysis of the critical success factors in context of Uniqlo...........................................................9
Analysis of the performance of the two firms...............................................................................10
Three decision phases in the supply chain management of Zara...............................................10
Three decision phases of supply chain management in context of Uniqlo................................11
Push or pull view in the supply chain management......................................................................11
Supply chain capabilities, scope of strategic fit and implied demand uncertainty in context of
Zara and Uniqlo.............................................................................................................................12
Use of various supply chain drivers in context of Uniqlo and Zara..............................................13
Conclusion.....................................................................................................................................13
References......................................................................................................................................15

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Introduction
Supply chain management is associated with three aspects including operational, tactical
and management leaves an overall impact on the business strategy (Dedhia 2017). Product
development, customer’s management, logistic and vendor management are also parts of the
supply chain management.
Any company can select the strategic global suppliers by leveraging the entire purchases
of an organization. This current study deals with the supply chain management in the context of
Zara and UNIQLO. These two organizations are very popular in the international fashion
industry. However, the blend technology of Zara allows them to be a major outsource
manufacturer in the low-cost countries. On the other hand, UNIQLO has developed a positive
impact on the inexpensive clothing market. This study will give a brief overview of the supply
chain management strategy of such two organizations and their operation process in the global
market.
Summary of the two cases
Case study of Zara
Zara is a well-known fashion industry in the global market. Hence the blend technology
is one of the vital strategies of Zara makes a good record for Zara in the fashion industry. This
organization is a major player in the outsourced manufacturing in the low-cost countries. Zara
keeps huge swaths in their in-house production process. Between the year 1996 to 2000, this firm
becomes tripled in size and gained a huge profitability (Zhelyazkov 2011). However, due to the
poor strategic decision of the competitors, Zara is going to be one of the fastest global fashion

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industries in the international market. On the other hand, the profitability regarding the supply
chain management is high in Zara among the fashion retailers. Over the period of time, Zara
becomes the devastating and innovative retailer in the fashion market. In order to manage the
problems related to the outsourcing, Zara has been started to lower their price to enhance their
profitability and sales revenue generation. However, to reduce the labor cost many fashion
retailers have used the children as a worker that leads them to face ethical issues in the lower cost
countries. Hence, for the fashion marketers, it is important to not only think about the ethical
practices for their own firm but also for their partners and the suppliers. However, by using
vertical integration and the technology coordination this organization is able to improve their
manufacturing process and logistics management (Gallaugher.com 2017).
Zara is mainly popular for their unique design in the fashion market. This organization
prefers to develop the design based on the customer demand rather than exhibiting their
innovation through the catwalk fashion show. Data regarding what has been sold and what are
the customer expectations go to The Cube in La Coruna. There is a team including 300 fashion
designers involved in developing 2000-4000 items. However, the designers of Zara are mostly
young and they are able to take feedbacks from the customers. Zara establishes a plan to make a
contract to the manufacturer and tool up the production. After that, they ship the items to their
wear house and from there the products are transferred to the retail stores. This firm is able to
make 40 percent of its own fabrics and they purchase their dyes from their own subsidiary. Zara
has approx 565 stores in 33 countries, however; their main concentration is on Spain (Dedhia
2017). From the extensive market research, it has been found that Zara has a good target market
with sufficient size.

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Zara aims to establish their stores in the prestigious locations and high traffic location.
These retail locations are very expensive and most of the selling places of Zara are seemed to be
empty in order to make a good selling environment for the customers. Hence, the customers can
walk and browse in such locations. People find something new in Zara's store and this firm offers
products with a unique design with low cost. Hence, this low inventory policy is followed by
Zara, as a result, their stocks become empty at the end of the day and they are able to gather new
products in their inventory (Lu 2014).
Case study of UNIQLO
UNIQLO is casual wear designer, established in Japan and operates in the global fashion
market (Usui et al. 2017). This organization is popular for the manufacturing and retailing of the
clothing products. UNIQLO has 300 stores in Japan. In the UK Uniqlo has 23 stores and the first
store is opened in London. Providing high-quality products at a reasonable price for a vast target
audience is the prime motto of Uniqlo. The Yanai the founder of Uniqlo has considered Uniqlo
as the technology company rather than the fashion organization. This organization aims to bring
innovation in their product design and manufacturing process to fulfill the customers need.
Uniqlo follows three stages for their product innovation. One is HEATTECH stage that focuses
the manufacturing of the inner wears with hollow fibers inside the cloth that allow the air to pass
inside the clothes. The second stage is flagship products with AIRism line and associated with
the manufacturing of the undergarments. This design keeps the body cool by releasing the
moisture. Therefore, the dry stretch pant is the third stage of their innovation (Fetcher.tufts.edu
2017).
Low pricing strategy is a vital part of the supply chain management of Uniqlo. The
authority of this organization thinks that price and the quality of the product are the two basic

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elements that influence the purchasing behavior of the customers. It is important for the fashion
industry to identify the factors properly that is associated with the needs of the current market to
maximize their business performance (Christopher 2000). This is the first company of Japan that
has adopted Specialty store retailer of private label apparel or SPA model. Stages regarding the
pre and post productions can be controlled by this model. However, this model allows the
organization to make a flexible production structure and cost saving process. Uniqlo adopted the
production process that is reduced the production cost.
Rising price of the raw materials increases the production cost in the business that brings
a big threat for the fashion retailers (Usui et al. 2017). For this reason, Uniqlo has developed
three major ways to minimize their production. Inventory control, production and quality control
and research and design are the vital three ways that keep the sustainable production in the
context of Uniqlo. In the year 2005 Uniqlo entered into the US market and started to differentiate
products to gain the concentration of the target market. They established flagship stores at the
high profile streets of US to enhance their sale. Their main goal is to become number one apparel
in the international fashion market by 2020. Uniqlo has been facing challenges to achieve their
future goal, however, the performance of such organization in North American market and US
market is crucial to meet their objectives. Such markets will bring major challenges for such
organization with which this organization has to deal in near future (Chen and Fan 2017).
Analysis of the critical success factors in context of Zara
Zara is one of the popular retailers that is crushing sales in the challenging retail
environment in the global market. This fashion retailer is known as the giant retailer in the global
world. Implementation of the Omni channel experience and vertically integrated strategy enable

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such organization to alter their products (Sziva 2017). However, unique product design and low
inventory strategy are one of the vital factors of Zara that lead them to achieve the success in
their supply chain management. Zara focuses on the manufacturing of the products in their
company owned factories. This factor enables Zara to gain competitive advantages in their
supply chain management. This also allows Zara to supply the specific items to the consumers
that they want. However, by providing seasonal clothing Zara is able to increase their
consumers’ numbers (Kim 2013).
Development of the Omni channel business is another success factor of Zara. This
channel highlights on utilizing the supply chain of Zara to distribute a great customer experience.
A comparison can be made between the Omni channel business strategy and multi channel
supply chain management strategy, which focuses on the ways through the customers pay for a
product. Zara aims to adopt the latest trend in the fashion market for this reason they focus on the
elements associated with new trend rather than the cost. Implementation of the Omni channel
Zara will be able to introduce their new products at the right place and right time. This Omni
channel allows Zara to develop a synergy between the operation and business strategy
(Yamaguchi and Yoshida 2011). On the other hand, based on the nature and size of the business
Zara uses omni-channel supply chain strategy.
Integration of the operation and business strategy allows Zara to take control over their
supply chain management (Gomes et al. 2017). Their supply chain is vertically integrated that
ensure their ownership of the supply chain. However, through the application of vertically
integrated strategy, Zara is able to reduce their cost as minimizing the outsourcing to various
suppliers. Zara opens location in the central business districts that mitigate the issue regarding
their delivery of clothes to different stores. Manufacturing and distribution of the products in

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small batches enable Zara to get full control over the wear housing, logistic function, and
distribution.
Zara innovates new features in their product continues to meet the demand of the target market
as well as the success in their supply chain management. They deploy new design rapidly in the
global market to attract the customers and to fulfill their demand. Zara launches 12000 new
designs in every year that focus on their success in the business (Viardot and Nylund 2017).
Analysis of the critical success factors in context of Uniqlo
Production capacity is one of the most important factors of Uniqlo to lead them towards
the success. However, Uniqlo reduces speculative production capacity and maximizes the
reactive production capacity. However, reactive production capacity lowers the operation cost
and need little maintenance in the manufacturing. Uniqlo gives value to their customers and offer
products that are associated with the daily life of the customers (Park and Kim 2017). Reactive
production strategy of Uniqlo made them fast in the international market.
Technology is another vital factor of Uniqlo that lead them to achieve success in their
business. Use of modern technology in the product development opens a new door for the Uniqlo
to expand their sales as well as the number of customers. However, by utilizing the new
technology in the product manufacturing makes Uniqlo one of the growing fashion retailers in
the international market (Anwar 2017). The product innovation technique of Uniqlo is unique as
they follow three steps to complete their innovation. HEATTECH line is one of the greatest
strategies of their innovation that produce jeans, leggings and inner wear with curated hollow
fiber that allows the air to pass through this cloth. Hence, the second step highlights on the
flagship product that is AIRism line includes undergarments. The third step focuses that this

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organization uses an advanced type of fabric, which is known as Cupro. Use of this fabric in the
clothes reduces the moisture and makes the customer comfortable while using these clothes.
However, such innovation by utilizing the technology is a big factor that allows Uniqlo to
achieve success in their supply chain management (Paik et al. 2017).
Uniqlo conducts a regular meeting to their merchandise regarding the development of the
marketing and materials. They developed a new design before 1 year of their product launching
this enables them to get sufficient time to source the materials cheaply and manufacture their
clothes in a low-cost manner. They give the large order to the vendors to achieve the low cost per
unit. This provides assurance about the high-quality product at low price. Therefore, the expert
engineers of Uniqlo give assurance about their product quality and show a quick response to the
operational process (Huang et al. 2017).
Analysis of the performance of the two firms
Three decision phases in the supply chain management of Zara
Supply chain strategy, supply chain planning, and supply chain operation are the three
decision phases of the supply chain management. In the supply chain strategy phase, the decision
is taken by the management (Ren et al. 2016). In the context of Zara, they consider the quality of
the product while developing any strategy. Low inventory strategy is taken by Zara to increase
the sale as retention of the old product in an inventory for a long time affects the business
growth. Planning of the supply chain is done based on the demand. Hence, Zara gives their
concern to the design which includes the evidence of customer demand rather that catwalk
fashion show. This enables such organization to make a connection between the customer’s
expectation and the goods that are sold. Therefore, from the manufacturing house, entire

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products of Zara are shipped back to Spain that is the central location of this business. From
there products are distributed to different countries and stores based on the individual’s demand.
Zara establishes their stores at the high traffic areas to gain customer attention as this is the part
of supply chain operation. Therefore, the inventory optimization model is used by Zara to
identify which items in which size are delivered in a store in every week.
Three decision phases of supply chain management in context of Uniqlo
Uniqlo uses low pricing strategy to enhance their sale. However, offering a high-quality
product with low price is a good supply chain strategy to enhance the profitability in the global
market (Truong 2016). Uniqlo mainly operates in the inexpensive market to meet the demand of
their target customers. In order to establish a good supply chain planning, Uniqlo has started
negotiation with the manufacturer. This enables them to produce top quality products in a high
volume and low cost. Uniqlo has adopted new technologies to improve their innovation process.
In order to carry out the supply chain management operation, Uniqlo uses advanced dying
technology to improve their product manufacturing.
Push or pull view in the supply chain management
Zara follows small batch production in order to cut the cost of transportation and finished
goods. Hence, a high cost of the raw material, transportation, and finished products act as the
push factor in the context of Zara that leads them to adopt low inventory strategy. This push
factor allows Zara to explore the new design and to identify the acceptance rate of the new
products in the market (Khurana and Ricchetti 2016). Risk regarding the production of large
quantities products that are not preferred by the consumers can be reduced by this push factor.
Zara follows a pull model to manage their supply chain and inventory. By following such model

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Zara evaluates the customer spending in their store and identify the current demand based on
which they develop their design.
High demand of the consumers leads Uniqlo to produce a large number of products.
Hence, consumer demand is the main push factor of Uniqlo to manage large inventory and offer
a high-quality product at low price. They developed earlier supply chain planning in order to buy
raw materials with low cost. Hence, to get high-quality raw materials with low cost from the
supplier is another push factor of Uniqlo that enable them to manage the supply chain properly
(Sorescu 2017).
Supply chain capabilities, scope of strategic fit and implied demand uncertainty in context
of Zara and Uniqlo
Zara controls its supply chain properly, however, 50% of its total production comes from
Spain that is the central business area of Zara and 25% comes from Europe. Then the whole
production is warehoused in Spain and distribution is started from there to various stores. New
models come into the inventory twice in a week and European stores receive their deliveries
within 24 hours while American stores receive within 40 hours. Vertical integration strategy of
Zara allows them to establish the strong merchandising strategy. Through this strategy, Zara can
develop an environment of opportunity. The high rate of innovation and the product variety often
lead Zara to face implied demand uncertainty (Sorescu 2017).
Uniqlo manages a large inventory hence, 50% of the total production comes from Japan.
Then the entire products warehoused. However, the third party is involved in the transpiration
process of the product of Uniqlo. Uniqlo focuses on producing a high quality product that is
affordable to all. They produce high volume product with low cost while dealing with the