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Supply Chain Management: A Zara Case Study

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Introduction: Supply Chain Management: A Zara Case Study

The concept of supply chain management can be defined as the administration of the flow of merchandise and administration, as well as the entire set of techniques that change the crude material into end items. SCM also comprises the active rationalisation of business delivery-side works to increase client worth as well as attain a competitive advantage in the market. Thus, it can be clear from the discussion that the context of the study is related to a supply chain improvement proposal wherein a company will be used to assess and evaluate various theories related to supply chain operation for identifying the degree of performance of the company. This will usually consist of measuring the supply chain performance that will be pertinent to the company. Based on identifying the performance, a proper recommendation will be provided for improving the supply chain functions of the selected company. Last but not least, the study will also suggest in what manner the value ought to be created within the supply chain function of the selected company to make sure that it gains the anticipation of its clients. The company that has been selected to conduct the study is Zara.

A brief overview of the company

ZARA is a Spanish global retail apparel chain. It has some expertise in quick style and sells clothing, extras, shoes, magnificence items, and perfumes. The administrative centre is in Arteixo, in A Coruña, in Galicia. It is the biggest constituent organisation of the Inditex Group. In 2020, it was sending off more than twenty new product offerings each year. Zara stores have people's clothing as well as youngsters' clothing (Zara Children). Zara Home plans are situated in European stores. Most of Zara's clients are between the ages of 18 and 35. After items are planned, they require 10 to 15 days to come to the stores. The attire is all handled through the conveyance community in Spain. New things are reviewed, arranged, labelled, and stacked into trucks. Generally speaking, the attire is conveyed in 48 hours or less. Zara produces nearly 450 million things each year. Zara additionally incorporates embellishments, shoes, swimwear, excellence, and aromas. Considering the supply chain of Zara adheres to a profound, unsurprising, and quick cadence, based on fast conveyances to stores,. Each Zara outlet sends in two orders each week on unambiguous days. Trucks depart at explicit times, and shipments show up in stores at explicit times.

Evaluation the current supply chain operations of Zara

The evolution of Zara during its career has been remarkable, the firm established itself as a luxury fashion brand, however with the advent of the neo-luxury feature within the fashion industry, Zara admitted that it was being tougher to sell and gain profits through value. The transformation of Zara to a fast fashion brand has proven itself to be enormously successful for the career portfolio of the brand. There is a wide aspect of reasons that make Zara a striking contender in the market. The firm's low-key public appearance, little investment in marketing as well as public relations, and so on are just some parts of it. Zara has always aimed for a non-conventional form of intervention in the market leading to the awestruck of its competitors(Aftab et al., 2018). The supply chain of Zara is supposed to be one of the strongest points of its portfolio. Marketers argue the agile supply management system of Zara is one of the primary reasons behind its astonishing success. This method has helped the brand maintain its quality as well as perform sustainable growth every year. This section will aim at pointing out the key features of the supply chain Zara and focus on its evaluation through a range of models.

Supply Chain Approach of Zara

Three primary approaches have been analysed for the evaluation of the supply chain of the firm: quality, speed, and supplier performance.

  • Quality: The quality of the firm depends on a number of aspects, this includes the procurement process of the firm, the chain of managers who provide prudent feedback on the quality and sales of the materials, the capacity of the firm to take on extra load and the aspect of demand forecasting that allows them to maintain their quality even in times of extreme rush. There are firms like IKEA that take into consideration the wastage of finished goods in their next manufacturing operation. However, Zara is not a believer in this process. It focuses more on the procurement of raw materials than that on finished goods. The procurement of raw materials is done in a way that produces less wastage and even if there is the fabric can easily be reused in other garments. By this Zara has proven how sustainability and cost reduction can successfully move hand in hand. Stores Zara which is a major element of their distribution has a unique feature. The stores take feedback from the store managers as well as the regular customers. This feedback is then conveyed to the market specialists who in turn convey the message to the design team of the firm. The rapid generation and communication of feedback help the agile mode of the supply chain to function in a better manner(Zhelyazkov 2011). Furthermore, it also helps the firm to generate a clear fist hand idea of the requirements of the customers. According to a survey Zara tends to keep 85 percent of its plantations stagnant and empty. This is because the firm restocks twice every week and in a situation like this it is very vulnerable to sudden market changes. Hence to cope with the market in dire situations like this, the firm keeps an exorbitant amount of its plantations empty. the firm uses a range of inventory management tools to forecast the exact number of raw materials that will be required every quarter. The tools that are used by Zara include economic order quantity (EOQ), inventory production quantity, and ABC analysis. Since the firm restocks twice every week, the quantities being fixed can lead to situations like scarcity, as very few products are left unsold.
  • Supplier performance of Zara: Zara has a very tightly knit network of suppliers, and the firm does not comply with them to be autonomous. However, since Zara requires a revamp of supplies every two weeks, suppliers of the firm hardly have the time to attend to any other clients. This saves Zara a lot of the external costs of affiliating suppliers to the firm. Furthermore, the supplier network of the firm is not stagnant, it means that the firm keeps on changing and adding new members to its network of suppliers so that their dependability does not increase on one element of the network.
  • Speed: Many competitive entities like Zara, H&M, and Forever 21 outsource their production processes to Asian countries so that they can get raw materials and labour at a cheaper rate and this automatically helps the firms to control costs. However, what they tend to forget is that though they are significantly lowering the labor and the production cost, the cost of transportation is increasing four-fold. Zara has localized the manufacturing system of its firm to Galicia where the firm has employed a stagnant team for the manufacturing process. This idea helps in the reduction of dependency on third parties furthermore it also checks the impact of global supply chains on the firm. The reduction in the necessity of transportation also helps in the reduction of the carbon footprint of the firm(Özlen, M.K., and Handukic, I., 2013). Furthermore, this firm also restocks its shelves twice every week, hence the able supply chain that includes processes right from procurement to the producing of the finished goods and the line of system that works in perfect coordination with each other enhance the speed of the firm.

The approaches that have been portrayed above can be explained through stakeholder analysis. The stakeholder analysis will illuminate the potential issues that are associated with the firm(Theories of supply chain management 2022). The stakeholder analysis consists of Mendelow’s Matrix that identifies the present and potential stakeholders of the firm:

Keep Satisfied

Engage Closely

Monitor

Keep Informed

 

  • Keep Satisfied: The customers need to be kept satisfied in this case. They are the primary mode of generation of revenue within the firm and hence they need to be kept satisfied. However, the rapid stocking of Zara has brought the aspect of quality of the firm under the speculation of the customers from time and again. Customers have complained that Zara frequently conducts discounts and offers that help the firm clear out excess stock. These socks are often of very bad quality. Surprisingly, the restoking aspect of Zara does not allow stocks to be more than a week or so old. Hence the quality of the materials made by the manufacturing unit has been brought under stringent speculation(Lopez et al., 2022).
  • Engage Closely: Suppliers are the stakeholders of Zara that needs to be monitored very closely. These people are the ones who supply raw materials for the manufacturing process of the firm. However as mentioned, Zara is always looking for ways to expand its Network of suppliers so that its dependency on one supplier does not increase much. This aspect of not fixing their suppliers at times possesses the ability to create an impact on the quality of materials that are received by the firm. This in turn affects the entire supply chain process. Furthermore, the quality of raw materials has a directly proportional relationship with customer satisfaction. The low quality of raw materials leads to a situation of low-quality items that lead to customer dissatisfaction.
  • Monitor: Employees; by employees, the report does not mean the store workers. By employees that report means the labourers working in the manufacturing unit of Zara. As mentioned, the firm does not engage in an unlocalized manufacturing process and hence plants are set up in the local areas. Reports claim that the laborers are mostly village dwellers and unskilled people who are ready to do menial jobs. These people are severely underpaid and are made to work under very harsh conditions for long hours. Furthermore, Zara does not allow the formation of a labor union. Many social workers have upheld the condition of the laborers that Zara(Alonso et al., 2018)
  • Keep Informed: Market; by market, this report means potential customers. According to a survey conducted for the market reaction regarding Zara, this brand is heavily famous among generation z, but not so much among the millennials. The survey points out that the materials are priced higher in comparison to the other shops in the market. The discount seasons in Zara contain items that are not wearable and do not have a substantial shelf life. Hence, the potential customer base is also somewhat skeptical regarding their choice of buying from Zara.

Recommendations

The previous section saw the supply chain approach of Zara and the evaluation of the same using stakeholder analysis. This section will focus on the clear identification of the issues that are associated with Zara's supply chain. This section will further extend itself to provide recommendations for the identified problems that can be treated as potential solutions of the same. Furthermore, the report will also contain an analysis of the measures that are required for the implementation of the proposed solution and the impact that the solution will have on the firm and how will it help the firm move towards betterment.

Issues

  • Although the aspect of fast fashion has been the point of success for Zara, the attempt of fast fashion has diligently affected the quality control of Zara. Marketers suspect that due to Zara's diligent zeal of keeping up with fast fashion, the firm often ends up compromising the quality of raw materials and finished goods that are made in the plants. Furthermore, many plants are left completely spare for months for emergencies. The machinery kept in the manufacturing units suffers as a result of this, furthermore to that, the laborers appointed for those plants render around to be jobless for months.
  • The supplier network of the firm is very tightly knit. However, the issues that occur from the suppliers have also been mentioned. The changing dynamics of the network do not allow the stagnation of an appropriate quality of the firm. Furthermore, the suppliers are so overworked that they cannot find clients anywhere else. Since they are not affiliated with the firm, they do not get receive the advantages of the same as well. Finally, the inspection of the supplies and the optimum amount that is considered for every batch is done mostly manually, AI is yet to be included within the supply chain system of Zara and is still at the testing stage. This creates potential fears of the entire system error(Yide 2022).
  • The enforcement of code within the 1520 suppliers across 7108 factories across the world of Zara remains to be a stagnant problem for the firm. The bad working conditions of the laborers have been brought under the limelight by the media numerous times for evaluation by the market. The working conditions of Zara are commendable poor and do not allow the laborer's basic rights of clean food and water as well as safety gear and sanitized work conations.
  • Zara does have a tainted image in the market of potential customers. the issue here is that speculations regarding the firm are often spread by word of mouth. This can be used as a positive aspect, however, since Zara is not much into advertising and marketing and it rarely invests in the maintenance of public relations, the taints are often so dark that they refuse to go away. These speculations and accusations of Zara being overpriced and so on might be false, but the lack of an able PR team and proper marketing creates a condition where the firm has little to no to do.

Issue

Recommendation

Measures

Impact

Quality control

About 85 percent of the plants are left for spare. The increase in activity through the increased number of laborers in the firm will enhance the quality of the products. The quality is mostly compromised because of the lesser amount of time that is given to laborers in manufacturing the finished products. If the capacity of the firm is increased by some percentage through the usage of more plants and more laborers. Then the quality of the items has severe chances of improvement.

The measures that will be required to implement this are:

· Increased number of laborers the firm has.

· The increase in the number of manufacturing plants that are used in the manufacturing process of the firm.

The increase in quality of the items manufactured by Zara will automatically help in the spread of the word regarding the same. The enhanced prices of the firm will somewhat be justified due to the optimum quality of the same. This will help the firm gain brand loyalty from customers and will help in the generation of a new customer base and retainment of the existing ones as well.

Supplier management

The constantly mobile supplier network of the firm that continuously incorporates new suppliers to decrease dependency is the major issue in this case. Zara needs to categorize their suppliers very carefully so that optimum support can be attained from each of the suppliers without creating much burden on anyone. Furthermore, careful analysis and strategic categorization of the suppliers will also help them to provide better materials for the firm.

The measure will require;

· A proper analytical survey of the present suppliers of the firm and their pros and cons.

· A strategic categorization of each one of them so that none of them face grounding pressures but still have opportunities of being associated with the firm and provide optimum results.

This will enhance the supplier relationship of the firm, furthermore, it will also impact the quality of the raw materials provided which will directly influence the quality of the end product.

Ill-treatment of laborers

This is a more ethical issue but is deeply intertwined with that of an able-functioning supply chain management of the firm. The ill-treatment of the laborers makes them hostile toward the firm which directly impacts their productivity. This can be managed by treating the laborers better through the introduction of clear codes of conduct. The firm can also allow the laborers to form a union so that their woes and issues can be directly conveyed to the firm.

· Laying down a proper, formal, and documented code of conduct.

· Allowing the formation of a labor union.

This measure will help the laborers be more attentive towards the working of the firm which automatically will lead to better results for the supply chain management. It will also improve the CSR of the firm.

Tainted public image

The firm needs to develop an efficient PR team and take customer relations more seriously. the firm also requires an able and efficient marketing team that will help them to deal with such hostile market situations.

· Development of better customer management strategies.

· Formation of an able PR team.

· Development of efficient marketing strategies.

The measures will help the firm understand the reasons for its tainted image in the public eye. Post the understanding of this the teams proposed for formation and development will aim to rectify this image through promotional campaigns so that this notion can be eradicated (Chen 2022).

How quality should be built into the supply chain operations of Zara to meets the expectations of its customers

General merchandise achievement is contingent on customer loyalty, so it stands to reason that supplier accomplishment is already dependent on satisfied clients. The strength of any distribution network is determined by its weakest point. In quick time, a corporation can transport goods from China to the United States, evident everything through Formalities, transport it to a distribution warehouse, and achieve it (Aftab, and et.al., 2018). However, if the commodity is not delivered to buyers rapidly enough, they are dissatisfied, and the business's supply chain has struggled." Some of the recommendations to Zara for buyer-supplier tactics that will help generate sales by keeping their clients in mind were also discussed below. This recommendation will be helpful for the business to satisfy the customers.

  • Increase on-time delivery of products: Consumers want what they want now, and they want it now. Nothing better exemplifies this than Amazon's latest revelation with one delivering. Customer loyalty is founded on trust. One missed shipment can jeopardize that trust and cost you a client for good. Attracting new clients, on the other hand, is significantly more expensive than retaining existing customers (Xuejie, Chang, and GuangHao, 2019). It is critical to fulfilling Zara's distribution guarantee and the goals they have set for your clients to build and maintain trust and promote customer loyalty. Here are five reasons Zara appears to be able to improve on-time shipping and consistently meet clients' good supply chain management. It will help improve product delivery activities and enhance customer satisfaction.
  1. Changes in options of delivery
  2. Positive management of order and recovery
  3. Volume prediction distribution with transporters
  4. Transporter distribution management
  5. Online selection preparation
  • Make appropriate use of innovative technology for increasing perceptibility and tracking inventory: Technology is crucial for automating logistics operations and, inevitably, meeting today's modern customer requirements. Warehouse management systems focus on providing advantages that go far beyond automated systems. WMS implementation within Zara's distribution chain not only speeds up procedures and reduces the likelihood of mistakes, but also provides better awareness of building services (López, and et.al., 2022). Levels of analysis throughout your distribution chain are also critical to customer experience. Implementing consumer methods like stockpile availability becomes extremely difficult without even a big-picture view of Zara's supply chain. Because once distribution window frames are short, even minor errors and misjudgements can have dire implications for the quality of service.

For many years, the moment between placing an order internet site and having received a transfer was a mystery to customers. Providing accessibility in and out-of-order information has become almost expected (Song, 2021). Order trackers combined with the WMS can increase Zara’s distribution network transparency, satisfy customers, and provide companies with important data. Clients will not only record their customer purchases, but it also gives details about when products were indeed obtained and when they have been transported (Avittathur, and Ghosh, 2020).

Using an inventory management system is also a great way to ensure Zara's stock levels management is as good as or better than average. Zara keeps track of its own sales volumes, instructions, deliveries, and other details using inventory management systems. It would also be more difficult to quantify most of these item’s side by side and recall critical details from memory without the assistance of a virtual system that stores it all (Roederer, and Mayrhofer, 2021). The inventory operating system handles the majority of the work for you, allowing you to focus on growing your business and satisfying your customers.

  • Enhance speed to delivery as per the demand: Winning online store consumers begins with excellent brands and positive user-friendliness, bolstered by the firm's delivery pledge. Often, this signifies quick, reduced shipment, necessitating bringing the goods nearer to one final consumer. Retail stores without equity to build new fulfillment centres are going to turn on gratification to supplement their supplier base and magnitude without incurring expensive prices (Berbiche, Hlyal, and El Alami, 2020). Zara can open new fulfilment centres where and when necessary, allowing the company to drive growth more quickly even without investing heavily. On-demand gratification helps companies add to it and extend their network infrastructure, either for peak times, transitory advertising, a new market, or operational processes. As a result, satisfaction centres are located relatively close to end users, limiting the last mile of mass transit and boosting customer satisfaction through faster shipping moments (Seo, and Suh, 2019). It is essential to increase the level of delivery of products and maximise the customer base for the future.
  • Fulfil the demand of customers with strategies of agile inventory: Inventory control is a never-ending battle, but consumers are increasingly driving a crucial shift in how the asset is managed. To meet the customer requirement quickly, low-cost shipping involves bringing stockpiles nearer to Zara's end consumers, but still, the consequence is a larger system of warehouse management and satisfaction facilities. This necessitates more variance in stock allocation. It was complex before, and now it is even much more (Singh, 2020). However, the solution is not any friendlier. Lost Zara's promises made delivery dates or having and in items does not inspire brand loyalty. "Out-of-stock stockpile slaughters brand loyalty," said Production Process 24/7. Customer retention has been destroyed when you are unable to meet demand speedily. However, possessing a large inventory does not guarantee efficient accomplishment (Zhiyu, 2020). This necessitates a contemporary, adaptable distribution network. Without quickness, retail stores frequently lack the capacity to meet customer requirements or even just do so lucratively (Pornsing, and et.al., 2022).

In addition to this, retailers are always struggling to analyse an appropriate balance between the excess inventories along with the out-of-stock situation. Agility can be termed as the process of allowing the partner of the supply chain to work together in order to produce the handsome amount which is highly required in the process of business which can be quarterly, monthly or it can be yearly. It gives the ability to do business and enhances the chances of promoting business in a positive manner (Ramia Munerati, 2018).

Conclusion

So, it can be concluded from the above done study that managing the supply chain is considered to be as one of the toughest and if it fails in any part that impacts the company in a great manner. From the above study it has been evaluated that being of the toughest contenders among other fast fashion brands Zara still faces a lot of issues in managing their supply chain. With the help of using theory the various heights of performance regarding any measure of supply chain performance have been identified from which it has been seen that there are various loopholes present in the supply chain operation of Zara which they need to considered while making the supply to different location. This has not only impacted the brand image of Zara but also effects the client satisfaction too. So, in order to deal with the issues and improvement in supply chain of Zara few of the important recommendations has been provided that will help Zara in coping up with the issues identified in the study.

References

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Alonso-Cañadas, J., Galán-Valdivieso, F., Saraite-Sariene, L. and Gálvez-Rodríguez, M.D.M., 2018. Using social media to enhance stakeholder engagement in the fashion industry: the case of Inditex. Cuadernos de Administración (Universidad del Valle), 34(61), pp.3-16.

Avittathur, B. and Ghosh, D., 2020. Supply chain management as a competitive advantage. InExcellence in Supply Chain Management(pp. 35-44). Routledge.

Berbiche, N., Hlyal, M. and El Alami, J., 2020, April. Exponential success through integrated supply chain optimization, ecomotional intelligence and reputation-based leadership: Zara model. InIOP Conference Series: Materials Science and Engineering(Vol. 827, No. 1, p. 012058). IOP Publishing.

Chen, Y., 2022. How ZARA Should Improve Guest Satisfaction After the Xinjiang Cotton Incident. Frontiers in Business, Economics and Management, 3(3), pp.137-143.

Gpa@ivalua.com (2021) Zara's Supply Chain Management Model, Ivalua. Available at: https://www.ivalua.com/blog/supply-chain-management-zara/ (Accessed: November 18, 2022).

López, T., Riedler, T., Köhnen, H. and Fütterer, M., 2022. Digital value chain restructuring and labour process transformations in the fast?fashion sector: Evidence from the value chains of Zara & H&M. Global Networks, 22(4), pp.684-700.

Özlen, M.K. and Handukic, I., 2013. Fashion industry supply chain issues: Zara (Azel France). European Researcher, (4-3), pp.999-1008.

Pornsing, C., Sangkhiew, N., Chirachetsadang, N., Tanti-arporn, N., Tonglim, T. and Inthawongse, C., 2022. Fast Fashion Strategies in Logistics and Supply Chain Management.Journal of Logistics and Supply Chain College,8(2), pp.126-139.

Roederer, C. and Mayrhofer, U., 2021.Zara: Managing the global supply chain successfully(No. halshs-03083454).

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Seo, K. and Suh, S., 2019. A study on the characteristics and social values of vegan fashion in H&M and Zara.Journal of Fashion Bu

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Singh, M.S., 2020. A STUDY ON SUPPLY CHAIN AND SOCIAL MEDIA PLATFORMS WITH SPECIAL REFERENCE TO THE CLOTHING BRAND ZARA.Towards Excellence,12(5).

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Xuejie, C., Chang, Q. and GuangHao, Z., 2019, August. Research on Innovation supply chain Management in Fast Fashion Industry——A comparative analysis of ZARA and H&M. In2019 3rd International Conference on Education, Culture and Social Development (ICECSD 2019)(pp. 7-16). Atlantis Press.

Yide, S., Value Creation Strategy Analysis of ZARA since Internationalization. Academic Journal of Business & Management, 3(11), pp.13-19.

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