Zara's Supply Chain Success: 8 Distribution Stations Reach 6K Stores Worldwide - Essay Sample

Introduction

Zara's supply chain strategy has been a success since it exercises robust and full control of manufacturing, designing as well as the distribution of its products. The owner of the Zara chain, Inditex is one of the largest Spanish retailer and manufacturer of apparel. In the year 2012, this company distributed its products to over six thousand stores all over the world by use of just eight distribution stations in Spain (Ferdows, Lewis & Machuca, 2004). The company was able to maintain a single delivery window of fewer than forty-eight hours. Through high speed and full control, the company was able to introduce new clothing designs every week and also change out seventy-five per cent of its store merchandise within the shortest time possible of three to four weeks. The factories that manufacture Zara's apparel put into use advanced and sophisticated systems that have enabled it to adjust to its internal processes while still getting benefits from these innovations in the shortest time possible (Ferdows et al. 2004). The company is also involved in a process that is known as postponement, whereby they buy around fifty per cent of their fabrics colourless which allows them to do the necessary colour change throughout the year and seasons.

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Zara's Unique Strategies for Supply Chain Success

Zara defies most of the modern conventional knowledge as well as the wisdom that dictates how supply chains should be operated. Something exciting is that the company's practices sometimes seems questionable, or even crazy when taken individually. However, when these practices are polled together to constitute a complete supply chain, they lead to the development of a very successful process (Lee, 2004). For instance, unlike many other peers in the retail clothing business that usually rush to outsource, Zara defies this rule and tends to keep most of its production in-house. The company also does not push its factories to get the maximum output, but it intentionally leaves extra capacity (Leeman, 2007). The company does not chase the economies of scale but preferably manufactures and distributes their products in only small and manageable batches. The company does not rely on outside partners but manages all its designs, distribution, warehousing and logistics functions by itself.

Day-to-day operations and procedures of Zara significantly differ from the normal as it holds all the retail stores to a very rigid timetable for order placement and receiving of stock. The price tags of Zara's products are put even before they are shipped instead of doing so at each store. The company leaves vast areas of its retail shops empty and also tolerates as well as encourages occasional stock-outs. This closed-loop approach ensures that customers can always get new products which are in limited supply (Ferdows et al. 2004). Therefore, this process is a sense of tantalizing exclusivity as only a few items are on display even though the stores are spacious. A customer then may think, 'These pair of trousers fit me, and there are only one of its kind on the rack. If I do not purchase them now, then I will lose my only chance.' This strategy encourages the purchasing power of the customers, which is an advantage to Zara as compared to her competitors who willfully stock their stores.

Fat Response Communication Loop

Zara's supply chain is organized such a way that it can transfer both anecdotal information and hard data quickly in a straightforward manner from the shoppers to the designers as well as to the production staff which is an added advantage against its competitors. The company also is involved in setting up an information infrastructure aimed at tracking materials and products in real-time for every step of the way which includes the inventory on display in all the stores (Lee, 2004). This information infrastructure for production, distribution and the fast-fashion retail network is aimed at closing the information loop between the customers who are the end-users of the products and the upstream operations that include designing, procurement, production, and distribution most quickly and directly possible.

Frequency of Replenishing Rhythm Across the Entire Chain

Zara ensures paramount rapid timing and synchronicity, which provides frequent replenishing to ensure customers always get the products they seek hence improving customer satisfaction. To be able to accomplish this, the company indulges in a unique approach that is best described as 'penny foolish, pound wise' (Ferdows et al. 2004). Zara spends enormous sums of money on strategies that increase and enforce the speed as well as the responsiveness of the chain as a whole. Therefore, the company has made substantial capital investments in production and distribution facilities that improve the outcomes of the supply chain through an increase in responsiveness to new and also fluctuating demands (Leeman, 2007). The careful selection and management of suppliers lead to the production of complicated products in-house as well as outsourcing simple one hence contributing to the successful supply chain; therefore, the availability of products in all the stores.

Conclusion

Zara has a very successful supply chain which has been enabled by proper information infrastructure for production, distribution as well as fast fashion retail network that works effectively. The company also uses unique techniques that contribute to its success such as frequent replenishing of its stores, rapid supply chain, innovative information infrastructure, controlled production and distribution, and proper selection and management of suppliers.

References

Ferdows, K., Lewis, M. A., & Machuca, J. A. (2004). Rapid-Fire Fulfillment. Harvard Business Review, 82(11), 104-117. Retrieved from: http://mba.teipir.gr/files/Zara_Rapid_fire_fulfillment.pdf

Lee, H. L. (2004). The Triple-A Supply Chain. Harvard business review, 82(10), 102-113. Retrieved from: http://www.scap.pk/article/SupplyChaindd.pdf

Leeman, J. J. (2007). Supply Chain Management: Integrale Ketenaansturing. Pearson Education. Retrieved from: https://books.google.co.ke/books?hl=en&lr=&id=ezG7AkT9IWwC&oi=fnd&pg=PR9&dq=Rapid-Fire+Fulfillment+Kasra+FerdowsMichael+A.+LewisJose+A.D.+Machuca&ots=QFQcg_r-Ir&sig=IYG-F5xsT9NTmIC0tzImiLVmY40&redir_esc=y#v=onepage&q=Rapid-Fire%20Fulfillment%20Kasra%20FerdowsMichael%20A.%20LewisJose%20A.D.%20Machuca&f=false