Supply Chain Management: Zaras Fast Fashion - Essay Example

? Supply Chain Management: Zara’s Fast Fashion Academic and Number Submitted I. The Global Apparel Industry: A Brief Overview The global apparel industry, where Zara participates in, has been characterized as ‘buyer-driven’ wherein changing lifestyles and technological innovations dictate fashion trends (Ghemawat & Nueno, 2006). For most of the players in this industry, the primary challenge lies in maintaining unique and original fashion styles amidst the radical shifts in shopper preferences—especially when taken into consideration the emerging role of fashion advisers and influencers who can ‘make or break’ a fashion brand. As regards its overall operations, production in a global apparel chain is claimed to be highly fragmented, as large-cross border flows of apparel is used to ensure cheap labor and inputs (Ghemawat & Nueno, 2006). In this regard, about 30% of global apparel production is concentrated in developing countries. Proximity is therefore taken into consideration when determining the firm’s production hubs in order to reduce shipping costs and lags. Playing a crucial role in managing steady production are trading companies that orchestrate the physical flows of apparel from factories in exporting countries to retailers in importing countries. Aside from this, the increasing number of retailers (primarily in the U.S. and E.U.) has increased the demand for cheaper labor in these developing countries. It has also promoted a system called quick response (QR) which is targeted to “improving coordination between retailing and manufacturing as it helps retailers reduce forecast errors and inventory risks by planning assortments closer to the selling season, probing the market, placing smaller initial orders and reordering more frequently” (Ghemawat & Nueno, 2006, p. 2). II. Review of Related Literature At this point, a crucial examination on what supply chain management is and its role in reinforcing the company’s competitive advantage must be done alongside some important management theories and principles. To begin, supply chain management is commonly defined as “a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system-wide costs while satisfying service level requirements” (Rogers, 2001, p. 1). Another definition describes supply chain management as the working together of “inter-connected participating companies that add value to a stream of transformed inputs from their source of origin to the end products or services that are demanded by the designated end-consumers” (Lu, 2011). Some significant conceptual implications can be drawn from these two related definitions. For one, supply chain management takes into consideration every activity that has an impact on production cost and consumer’s product acceptability: from procurement of raw materials to its distribution and sales models. Secondly, supply chain management is aimed at making internal activities efficient and cost-effective (while being able to deliver its intended value to the customers). Lastly, the integrative approach to handling supply chain entails the combination of strategic, tactical, and operational decision-making. In this light, it can be said that the emergence of supply chain management has been brought about by industrial trends and socio-political happenings. As opined by Croxton et. al. (2001) “streamlining cross-company processes is the next great frontier for reducing costs, enhancing quality, and speeding operations. It is where this decade’s productivity wars will be fought. The victors will be those companies that are able to take a new approach to business, working closely with partners to design and manage processes that extend across traditional corporate boundaries. They will be the ones that make the leap from efficiency to super efficiency” (p. 13). From a general perspective, supply chain management is usually comprised of the following disciplines: customer relationship management, customer service management, demand management, order fulfillment, manufacturing flow management, procurement, product development and commercialization, and returns (Croxton et. al.,2001). All of these disciplines are intended to ensure that the costs in making the firm’s products are managed to the minimum without comprising the products’ quality. The proper and effective handling of supply chain activities can help the firm attain its competitive advantage, which is crucial in securing its spot in the industry vis-a-vis its competitors (Li et. al., 2004). In this light, relevant policies in crafting supply chain models usually follow two important principles: (1) supply chain strategies should not be determined in isolation as all activities are interconnected and developmental; and (2) uncertainty and risks are inherent in every supply chain. By recognizing these mindsets, top management is able to appreciate the relevance of cross-functional planning and integration (through the unification of the company’s activities through overarching business objectives) in the attainment of business success. III. Supply Chain Management in Zara Zara, the flagship brand by the Spanish group Inditex, has become a ?2.5billion business (as of 2011) thanks to its strong differentiation and copy-proof competitive advantage (Pearson, n.d.). With over 650 stories in 50 countries worldwide, Zara’s brand positioning that is anchored on fast-fashion has proven to be both profitable and sustainable to the company through the integration of image-driven promotional strategies into its supply chain management. In Zara stores, customers can always find the new but definitely few garments, as they are always in limited supply. This message of exclusivity—with only few items displayed in surprisingly spacious stores of about 1,000 square meters—has creatively and effectively communicated the need to purchase the item before somebody else buys it (Ferdows, Lewis, & Machuca, 2005). The fast-fashion positioning of Zara is primarily driven by the “constant exchange of information throughout every part of Zara's supply chain—from customers to store managers, from store managers to market specialists and designers, from designers to production staff, from buyers to subcontractors, from warehouse managers to distributors, and so on” (Ferdows, Lewis, & Machuca, 2005). As such, Zara’s organizational structure and operational procedures are aligned to making information transfer quicker. Through this unique business strategy, Zara has shortened its supply chain response from 5 to 7 months to only 2 to 3 months (Pearson, n.d.). As Dutta (2002) pointed out, by focusing on shorter response times, Zara is able to ensure that its stores are able to carry clothes that the customers want at a given time since it is able to quickly identify and catch a winning fashion trend. Maintaining consumer-centricity in Zara’s operations is made possible by the design of its supply chain. Unlike other companies that utilize redundant labor to save on costs, Zara ensures to have seperate design, sales, procurement, and production staffs to each clothing line—for men, for women, and for children (Ferdows, Lewis, & Machuca, 2005). While having this set up seems expensive from an operational perspective, it has however made the information flow for each channel fast and direct, as creative teams consisted of designers, sourcing specialists, and product development personnel oversee the production process to make it more responsive to consumer tastes (Pearson, n.d.). The physical and organizational proximity of the three clothing line groups help in increasing the speed and quality of the design process as the creative teams can quickly consult their market specialists on the designs and possible price points (Ferdows, Lewis, & Machuca, 2005). In addition to this, planners in the procurement and production departments make estimates on manufacturing costs and available capacity based on demand planning and industry study. As a result, “the cross-functional teams can examine prototypes in the hall, choose a design, and commit resources for its production and introduction in a few hours, if necessary (Ferdows, Lewis, & Machuca, 2005). Since proper information flow dictates Zara’s business, the company is dedicated to deploying the latest information technology tools to facilitate the exchange of ideas and reports on consumer feedbacks (from store managers to creative teams). IV. Conclusion The primary reason behind Zara’s business success banks on the proper integration of all its supply chain activities to deliver a unique positioning to its target market. Indeed, the consumer-oriented mindset has guided the company to design a supply chain model that could rightfully communicate what the brand is all about—fast-paced fashion at an affordable price. As such, it can be stated that the general alignment of its supply chain activities has been the company’s competitive advantages—one that is original, relevant, and definitely copy-proof. The power of information dissemination and the disregard for multi-level bureaucracy has made the company dynamic and responsive to the demands of its consumers—such technique that only manifests in companies that embrace innovation. In the end, it can be said that the singularity of vision of Zara’s employees (from top management to creative designers) has helped the company maintain its position amidst the radical changes in the fashion industry. Such vision has also molded the company’s daily operations by focusing on the aspects of fashion that it intends to deliver differently to its target consumers. Thus, Zara’s strategic management of its supply chain has not only proven to be profitable, it has also become the company’s top business asset—asset that can surely withstand future shifts in consumer tastes and preferences which are usually brought by technological innovations and global trends. Bibliography Croxton, Keely et. al. 2001. The Supply Chain Management Processes. [online] U.S.: Ohio State University. Available at: < http://ecsocman.hse.ru/data/474/089/1217/article4.pdf>. Dutta, Devangshu. 2002. Retail at the Speed of Fashion. [online] India: Third Eyesight Incorporated. Available at: < http://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf>. [ Mar 2013]. Ferdows, Kasra; Lewis, Michael; & Machuca, Jose. 2005. Zara’s Secret for Fast Fashion. [online] U.S.: Harvard Business Review. Available at: . [3 Mar 2013]. Ghemawat, Pankaj & Nueno, Jose Luis. 2006. Zara: Fast Fashion. [online] U.S.: Harvard Business School. Available at: . [3 Mar 2013]. Li, Suhong. 2004. The impact of supplychain management practices on competitive advantage and organizational performance. [online]. U.S.: Omega International Journal of Management Science. Available at:< http://mcu.edu.tw/~hyu/paper/4.pdf>. [3 Mar 2013]. Lu, Dawei. 2011. Fundamentals of Supply Chain Management. [online] U.S.: Lu and Ventus Publishing. Available at: < http://www.zums.ac.ir/files/research/site/ebooks/management-organisation/fundamentals-of-supply-chain-management.pdf>. [3 Mar 2013]. Pearson, Andrew. n.d. The Story of Zara: The Speeding Bullet. [online] U.S.: Unique Business Strategies. Available at: . [3 Mar 2013]. Rogers, Sam. 2001. Introduction to Supply Chain Management. [online] U.S: Mc-Graw-Hill. Available at: http://highered.mcgraw-hill.com/sites/dl/free/007298239x/450202/Chapter_1.pdf. [ Mar 2013]. Read More