Logistics Management of Zara - Case Study Example

Logistics Management Case Study: Zara Name: Institution: Executive Summary Zara is a clothing company located in Coruna in North West Spain. The company was recently rated among the world’s fastest growing companies. Zara owes this reputation to the nature of the company’s supply chain. For instance, the company has a successfully chain designed in such a manner that it guarantees lower inventory levels hence totally eradicating product obsolescence; a major difficult strategy to implement by Zara’s major competitors. The clothing and fashion industry is one of the competitive ventures in Spain hence innovation and creativity are major and mandatory attributes of survival. Zara chose to channel such innovation and creativity in the design and development of a sound and viable supply chain. The management at Zara opted not to implement the ancient supply chains often characterized by flaws and setbacks and rather chose to implement a customer centered supply chain. The low inventory levels, continuous pace with recent fashion trends, efficient manufacturing team as well as incorporation of information technology are the major characteristics of the supply chain at Zara. This has enhanced minimal operation costs, strengthened consumer relations and positively improved the overall reputation of the company hence the rating. While there may be other strategies to sustain competition, policy development and implementation plays a major role as evident at Zara. The success story of the company in the clothing and fashion industry virtually rotates around the supply chain of the company as well as the subsequent maintenance of the same chain. Table of Contents Executive Summary 2 Introduction 4 Objectives 4 Problem Statement 5 Competition Sustainability 5 Low Inventory Levels 5 Continuous Update on Current Trends 6 Efficient Manufacturing Department 6 Incorporation of Information and Technology 6 Concept of Spare Capacity 7 Comparison with Dell and Dyer 7 Comparison with Dell 7 Comparison with Dyer 8 Recommendation 8 Conclusion 9 References 9 Introduction Supply chain management is often defined as the management of the movement of goods. It involves adequate design, planning, control, supervision and monitoring of interlinked chain of activities with the aim of synchronizing demand with supply. In its context, t incorporates the flow and storage of input units as finished outputs from point of production to the consumption point. Supply chain management involves interconnections and channels required in order to provide goods and services at the consumer end. Ranked among the fastest growing companies, Zara has got the best designed, implemented and managed supply chain. This makes it one of the best suited companies for a logistic management case study. Objectives This case study on supply chain management as implemented at Zara is meant to: I. Establish the application of the principles of chain management as practiced at Zara II. Discuss the competitive advantage of Zara’s supply chain against the company’s competitors III. Compare the supply chain as implemented at Zara with supply chains implemented at Dell and Dyer IV. Make recommendations on how Zara can sustain its competitive advantage through its supply chain system. Problem Statement Zara has been rated among the fastest growing companies in the whole world. The competitive advantage and survival strategy of the company are all catered for by the nature of the supply chain system implemented at the company. The overall success and continued operation of the firm wholly lie in the hands of the designers, store managers and warehouse managers and all other stakeholders which constitute the firm’s supply chain. The company thus wishes to establish recommendations as well as modifications if any on its current supply chain that can help it maintain or even further improve its competitive advantages. This makes the rationale of the case study. Competition Sustainability Zara has sustained the industrial and market completion virtually through the nature of the company’s supply chain. The innovative design of its supply chain has several features that guarantee precise and swift movement of products from the point of production to the consumer end with generally reduced inventory levels than most of its competitors. Low Inventory Levels Zara has inculcated within its supply chain, a culture of operating on extremely low inventory levels both in terms of raw materials and finished products. The company uses the demand patterns from consumers to balance between the current and near-term demand, hence no excess production or storage. Operating on low inventory levels has several advantages. For instance, the overall holding costs incurred by the company are greatly reduced. Such low inventory levels are also easy to manage in terms of organizing and retrieving the inventory whenever required especially in the case of Zara where the turnover rates are extremely high and the company is constantly changing fashions. Low inventories also ensure constant availability of space for the new fashions a demanded by the customers. Continuous Update on Current Trends Zara is a fashion and clothing company. In order to efficiently sustain competition from other clothing ad design lines, the company has since maintained a continuous update on the and latest trends in clothing for women, men and kids. This ensures that the company produces the most recent fashions and designs in order to meet the customer demands. The marketing research department constantly updates the design and manufacturing team on the latest designs as well as probable expected fashions. Such a constant update is intentionally made to ensure that the customers’ demands and orders are always available for delivery whenever required hence eradicating delays in the entire supply chain. Efficient Manufacturing Department An effective supply chain is often characterized by the timeliness with which products are delivered to the consumer once orders are made. The design and production team has greatly enhanced efficiency of the supply chain at Zara by completely eradicating manufacturing delays that would otherwise keep such customers waiting for delivery of their orders. The constantly updated manufacturing team takes the minimums possible time to produce customer orders as well as future expected fashions; often done alongside the market research team. This further increases the efficiency of the whole supply chain. Incorporation of Information and Technology Store managers at Zara have handheld electronic devices with which they are capable of posting real time orders from the distribution center. This is also further coupled with the online portal through which customers can place their orders without necessarily visiting Zara premises or outlets. The incorporation of information technology serves both the customers convenience as well as efficient communication within Zara. Both time and resources are saved through incorporation of modern technology communication devices as at Zara. Concept of Spare Capacity The concept of spare capacity is a key characteristic and a major competitive advantage of the supply chain as implemented at Zara. At any given instance in time, Zara has on standby, transportation trucks, warehousing facilities and raw materials as well as extra staff. Whenever an extra need, an inconvenience or such related scenarios come up, the company readily engages the reserve capacity to cover up for any effects that could arise from such a situation. In this case, the company is able to maintain continuous operation at all times. Miss-occurrences within the supply chain often go unnoticed due to the availability of back up facilities and the reserve capacity. Comparison with Dell and Dyer There are several observable differences between the supply chain as implemented at Zara and the same chain that exists at both Dell and Dyer. These differences also serve to give Zara a further competitive advantage over its competitors on the clothing and fashion industry. Comparison with Dell While the supply chain at Zara is customer centered, the supply chain at Dell is more of market oriented and pays little attention to individual customer tastes and preferences. At Dell, the initial beginning of the supply chain involves analysis of operational costs I terms of geographical location, product, the level of service required as well as potential means of transport. The company management then evaluates the actual market viability and probable opportunities visa vi the operational costs before entering a new market or embarking on new product. This is contrary to the case at Zara where descriptions are often taken directly from the consumers to the manufacturing team for implementation and delivery. Comparison with Dyer There is contrast between Zara’s supply chain and that of Dyer. The difference in the two systems arises in the overall time required for deliveries to be made. While orders are almost immediately delivered at Zara, it takes between two to three months to deliver an order made at Dyer. Customer at Dyer have to begin by making their order, then verify the same order before it is finally processed and later delivered. This is unlike at Zara where orders are acted upon immediately they are received from the various clients. Hence the supply system at Zara has been considered more convenient compared to its competitors due to the short overall response time and order execution. Recommendation The supply chain as at Zara is still effective and convenient both to the customers and the company as a business entity. However, it is recommended that the company should establish more rapport with its chief consumers. Once stronger customer relations are established, product and brand loyalty will automatically follow suit. This will pave way for consultative forums to establish the highest delivery frequencies. The company will thus be in position to design delivery schedules that are both convenient to the consumer and Zara. This will collectively result into extremely lowered inventory levels hence realization of more profit margins by the company. Conclusion Organizational structure and policy implementation greatly determine the overall performance and subsequent development of any firm. Supply chain management is one of the fundamental policies that count towards overall rating of any organization in terms of service delivery. Zara has positioned itself among the fastest t growing companies in the world due to the nature of its supply chain. Organizations should thus take time, allocate enough resources and avail all effort necessary in establishing and developing efficient supply chains. This does not only increase the profitability of the firm but also strengthens customer relations. References Graham, G. (2005). Exploring supply chain management in the creative industries. Bradford, England, Emerald Group Pub. Hugos, M. H. (2011). Essentials of supply chain management. Hoboken, N.J., Wiley. Wolf, J. (2008). The nature of supply chain management research insights from a content analysis of international supply chain management literature from 1990 to 2006. Wiesbaden, Gabler. Read More