Selina Ortiz firstname.lastname@example.org BUS3022 – Fundamentals of Supply Chain Management
Section 02 | Jul 13 2015 - Aug 14 2015
July 13, 2015
Zara’s SCM Success
With over 650 stores worldwide, Zara is the retail chain seller for Inditex – one of the largest growing clothing company’s in today’s world of fashion retail. The Supply Chain Management (SCM) strategy employed by Zara is both innovative and unique, and most conventional thinking would say that it verges on insane in regards to normal SCM practices within the industry, but it works, it has worked and it will work because the strategy used by Zara fits the way they manufacture, market, and sell their products. As stated in the Harvard Business Review “Zara has developed a super responsive supply chain. They can design, produce, and deliver a new garment and put in on display in its stores worldwide in a mere 15 days” (Ferdows, Lewis & Machuca, pg.106, 2004). With such a quick turnaround from design to shelf, Zara is able to react to changes in design and color demands so quickly that they don’t miss a beat, and they are able to meet demands placed by its customers. No other company in the industry can meet these same time parameters, thus giving Zara a huge advantage in design and market adaptation. Zara’s SCM model is based on the production and distribution of “small batches” of its products (Ferdows, Lewis & Machuca, pg.106, 2004).
Advantage over the Competition
Keeping shipments to retail outlets small, allows for the sell-out of most items and or with respectively little product remaining between shipments, Zara is able to reduce its loss on old stock items that would generally sell at discounted prices. Rather than outsourcing to 3rd party designing, warehousing and distribution etc., Zara handles all facets from the product development to distribution and logistics itself. They have a very rigid and time sensitive ordering procedure that involves a constant flow of communication between store managers to market specialists and designers. Orders are placed twice a week and are received within 24 hours anywhere in Europe and within 48 hours anywhere else in the world. All design and production is handled at a single centralized facility, from where all its products are shipped to its outlets throughout the world. With such a quick responsive supply chain; based on its adaptability to market and shipping changes and responding to consumer trends in fashion, Zara is able to cycle through several shipments of the newest fashion line before any of its competitors get any of that line on their shelves.
Zara is capable of changing the style and color of any of its items at a moment’s notice, this being reliant on the intercommunication of the different levels of the supply chain. Retail managers receive direct input from the consumer and market trends. They can directly convey this information to the design and market level specialist that can create the designed products extremely fast.
Rapid Replenishment In certain cases, Zara sees empty racks as a good thing. By only producing and distributing small batches of their product, it is quite often that products sell out. These limited supplies of specific items create an aura of rarity and consumers are likely to grab what they can when they can. Zara creates thousands of designs annually and the quick turnover of these styles is a reflection of Zara “Closing the Loop of Communication” between customer and production (Ferdows, Lewis & Machuca, 2004). In theory: though a consumer’s input, an alteration to style or color of a product can result in that product being on the shelf in roughly 15 days. That is an amazingly efficient supply chain. When one realizes that in the fashion industry,