Supply Chain Situation Analysis of Zara Fashion and Design Company - Case Study Example

ZARA FASHION DESIGN COMPANY Zara fashion and Design Company was established in 1975 as a small store for retail in Spain specifically at street known as downtown A Coruna. It is one of the companies that started by selling its products with a very low price hence attracting so many customers. The owner Amancio Ortega expanded the business in other places soon after due to the high rate of the company’s growth in terms of profitability and market share. Zara fashion and Design Company’s distribution and supply system aided so much in its growth and expansion. It was in the year 1980 that the company started to expand greatly internationally. Some of the places where it expanded into include Portugal, portal, United States of America, and France. Later in the 90’s, the company also expanded to Mexico, Greece, Sweden and Belgium. Today the company is fully established in more than seventy two countries. The company deals with women and men’s clothing the upper and lower garments, shoes, complements as well as their cosmetics. It is one of the companies whose supply chain is self controlled due to the fact that it is a retailer vertically integrated company. Supply chain situation analysis Zara Fashion Company is usually focused on understanding the needs of the consumers and then it goes ahead and fulfills them. The company does 50% of its productions in Spain while the rest of the manufacturing is done in other parts of the world. The decisions made on the basis of distribution includes channels of distribution, specify on the channels members, reverse logistics, transportation, distribution centers, warehousing, order processing and inventory management (Finlay, 2000). Zara Company has one of the best distribution systems as compared to all of its competitors hence giving it an advantage to the customers. The owner has come up with a very good distribution system that enables him to control all the activities of the company as far s the supply chain is concern in the best way. This is because the control is connected from the designers, to the production and finally to the distributors in the company. There is a very effective communication system linking the entire department together. The designers relies on the information from the store managers whole get the customer needs and then informs the designers as they carry out the production. The company makes more than half of its own its own productions instead of depending on the hodgepodge that are very slow in terms of their supply. This ensures that their customers get their orders in time without any unnecessary delays. The company also does most of its productions locally to ensure it is efficient in terms of time. It also does the entire fabric cutting in it fabric house and then distributes them for sewing in the nearest sewing cooperatives which makes sure there is time management. The ironing work is done and then through a conveyor belt the products are transported to the next port where they are wrapped in plastic and finally taken to the ware house. The existence of the ware house ensure the process of distribution is continuous in that there always enough stock for the customers (Finlay, 2000). These ware houses are also made in such a way that the operation are done by the machine. This ensures that the sorting, labeling and packaging of the products is done very efficiently and effectively. The delivery is also very efficient since it is done through the tracks and the shipment of merchandise through the cargo jets. Advantages and disadvantages of Zara’s “fast-fashion” distribution system Zara “fast-fashion” distribution and supply system like any other business has its advantages and disadvantages. It is one of the global retail businesses that is expanding at a very high rate especially due to the distribution network that it uses. It has been documented for being one of the businesses that is able to outdo all others in form of the profitability as well as the sales it does (Grundy, 2006). It is also very much known because of the speed at which it does its invention in turnover and management. A. Profitability through great control of the wholesale and retail distribution; the company has one of the most advantages in its ways of operation in that it has been operating at great profits. It has been able to maximize its profits through lowering the cost of production. This is whereby the company has ensured also that the prices that it sells to the customers are very affordable and favorable as compared to its competitors. By doing this, it s able to make sales very fact. In the year 2005, the company recorded an increase in its profit by 26% which approximately amounted to $712m which made it top be recorded as one of the most profitable companies. B. Great sales. It is one of the companies with an advantage of producing very great sales. This is due to the fact that the customers are very comfortable with its products. It is one of the companies that have its fashions in use by the royal people like the trouser suit worn by Letizia Ortiz Rocasolano in her engagement party with prince Felipe prince. This made so many people have trust and confidence in the quality of their fashion hence boosting their sales very much (McWilliams et el, 2005). It has had a record of great sales growth annually. The percentage of its sales growth is 26% C. Inventory and turnover management; this is a company that has adopted the idea of dealing with the losses from the revenue and the sales in terms of inventory so as to recover from those losses. It is know to have great inventions in its ways of operation. The company is also very good in retaining its employees (Narayanan & Fahey, 2005). This is because of the best ways it applies of human resource management hence being able to attract and retain employees. The advantage brought by this is that there is not waste of resources in training new employees regularly because the trained ones left. D. Variety of stylish designs. The company has a total number of 300 designers in its headquarters. The kind of products that the company produces are very unique and of different variety. This gives the company an advantage of selling them very fast and getting new stock very frequently. It is also known to have new designs in the market very frequently. By doing this they get so many customers since they are able to address the needs of the customers which other competitor companies like GAP are not addressing. Also the quality of materials used for their designs is very good hence giving their customers confidence in their products. E. Information system. The company has a very recommendable information system. This is because it has been the key connection of the company to the customers, to the distributors, the designers as well as the entire world. This is an added advantage because the company does not strain and incur much extra costs in trying to link up with these key departments as far as its production is concerned which is a very good advantage. Disadvantages of this Distribution Chain A. Cost of production; The Company goes for the best quality material to ensure the quality of work done is the best which is quiet expensive. The use of very professional designers has also made the company incur great costs in its production. Also the fact that it has its own production can at times be expensive; this is because the imported materials can be relatively cheaper as compared to the one they produce for themselves. B. Supply chain: This is whereby most of designs are made locally. As a result, they can easily be copied by other upcoming industries hence their designs ending up flooding in the market. C. Time .the fact that the managers have to consult the digital assistance every evening to find out the new designs in the market is very time consuming. This is because it will mean if there is no feedback information to act on then the process of production may be delayed. D. Technology use; due to the use of technology in the ware houses, the company denies people an opportunity for employment. This is because a machine does work that can be done by ten people who could have earn a living through that. General evaluation and alternative solutions For any company to succeed in it marketing, it has to come up with the best marketing strategies as far as the 4 P’s are concerned (Dennis, 2001). It should be noted that it is under the 4 p’s that all the decisions the company has to do will fall in. The following are the four P’S that entails the market mix, Product, place, promotion and price. The four p’s entails the mixing of advertisement, facts finding, analysis, physical handling, servicing, display, promotion, packaging, personal selling distribution channels, pricing, branding and product panning. Zara like any other company has to add great value to its customers through the improvement of the 4p’s. A. Decisions on products This entails the tangible or the physical products as well as the services the company deals with. The decisions to be made are in terms of warranty, packaging, safety, services and the accessories, support and repair, brand name, styling, functionality and quality. Zara Company is known to make the best decisions as far as the quality of the products is concerned. It also caters the needs of the customer in terms of the variety of designs it produces. It has a variety of products ranging from the clothing conglomerate like the football wear to other clothing (David, 2002). It is very fast in the satisfying the customer fashion trends and needs. It leads in that field and beats the competitor companies like the Hennas, Top shop in Britain, Spain mango and the MI all of which deals with the same products. It is also very quick in introducing new stock in the market made of new designs for the customers. It is also has a computerized system that dos very good and attractive job of packaging sorting and labeling the products to the satisfaction of the customers. B. Decisions on prices This entails decisions that are made by a company pertaining to the strategy of pricing, retail pricing, discounting in terms of the volume purchased, pricing according to the whole sale, early payment discount and cash, bundling, flexibility of the prices, price discrimination and seasonal pricing. Zara Company has taken care of its customers needs in all of these areas. It has bee known in the market to sell its products at a very low price or rather moderate prices that are very favorable to the customers (David, 2002). They actually sell even the latest design trend at a very low price making them very competitive in the market world wide especially the Great Britain a very competitive fashion world. It is able to cater for the customers needs in terms of the prices both that are buying at a retail quantity and wholesale quantity as well as make maximum profit. C. Decisions on promotion Decisions on promotion involve communication issues. This is whereby information is passed to the customers with an aim of letting them to getting a positive response from the customers. The following are the main decisions that are involved in the marketing strategy of promotion; promotional strategy like the pull or the push, advertising, publicity and public relations, budget on marketing communications, sales promotions, sales force and personal selling. Zara Company has greatly employed theses factors to ensure it has catered for the needs of its customers efficiently. It has a personal spokesman who relays the information about the activities of the company to the world and especially the customers who are interested in the products the company deals with (Armstrong & Kotler, 2007). It is able to have its new products in the market before they are published in the magazines. This ensures that as the company goes ahead to advertise its new product in the market people are already desperately looking for the product. This also enables the product to sell very fast. It also promotes its sales by selling their products to the royal people who are highly esteemed. This ensures that people or rather the customers gains full confidence in their products. The company has made it a trend to launch over 11,000 new products every year. This had enabled the customers to automatically expect new products in the market frequently without necessarily being advertised. Once in while the company also carries out sales promotion to its customers. References Armstrong, G. & Kotler, P. (2007). Marketing: an introduction (8th Ed). New Jersey: Pearson Prentice Hall. David, F. (2002). Strategic management: concepts (9th Ed.). New Jersey: Prentice Hall. Dennis, A. (2001). Marketing: principles and practice (4th Ed.). Financial Times, New Jersey: Prentice Hall. Finlay, P. (2000). Strategic management: an introduction to business and corporate strategy. New York: Pearson Education. Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, vol. 15, no. 5, pp. 213-229 McWilliams, A., Siegel, D. & Van Fleet, D. (2005). Scholarly Journals as Producers of Knowledge: Theory and Empirical Evidence Based on Data Envelopment Analysis. Organizational Research Methods, vol. 8, no. 2, pp. 185-201.  Narayanan, V. & Fahey, L. (2005). The Relevance of the Institutional Underpinnings of Porter's Five Forces Framework to Emerging Economies: An Epistemological Analysis. Journal of Management Studies, vol. 42, no. 1, pp. 207-223. Read More