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Zara stays in Europe while other brands outsource to offshore manufacturers - Essay Example

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Supply change management (SCM) in simple words can be defined as the process of transformation of goods from the raw materials state to the final product and finally handing it over to the end customer. …
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Zara stays in Europe while other brands outsource to offshore manufacturers
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Download file to see previous pages Supply change management (SCM) in simple words can be defined as the process of transformation of goods from the raw materials state to the final product and finally handing it over to the end customer. Different companies have different SCM strategies which vary depending upon the short and long term objectives and goals the company wants to achieve.Also factors effecting SCM strategy depends upon the structure of the company i.e. either it’s a manufacturing company , a distribution company, a retailing company or a mixture of these companies. Zara is one of the five apparel retailing chains owned by Inditex group. Although Inditex manages designing, manufacturing and retailing of its goods but it enjoys major presence globally in the market through its chain of retail stores. The key to Zara’s success was the implementation of a unique SCM strategy. While other retailers in the business were focusing on completely outsourcing there manufacturing to offshore; mostly countries like China, India, Bangladesh etc. saving costs by utilizing cheap labor, Inditex decided to digress from this convention being followed and managed to succeed in its approach. MAKE-BUY DECISION : With all the firms entangled between the decision of manufacturing the products in-house or outsource it to off-shore suppliers majorly because of cost saving which involves availability of labor at much cheaper cost i.e. margins 18 to 20 times less for hiring of what you get locally in Europe or America or more expertise available across borders and other reasons. Similarly these factors have influenced the decisions in the Apparel industry aswell with the entire thought process working behind the reason that cost saving in the manufacturing will yield much more profit in comparison to opting to an in-house or nearer manufacturing options. The giants of the fashion apparel industry like GAP, H&M and many other smaller brands choose to outsource their manufacturing completely offshore. Although one benefit they yielded through this that their manufacturing process saved heavily by employing cheap labor but on the other hand they became open to many risk factors including Global trade policies. International treaties. The social responsibility of providing employment to local labor. The harmful manufacturing process to the environments as a result of mass production which recently gained awareness of population and started to effect the sales and the image of companies and brands. Longer lead times i.e. the replenishment time for the inventory were quite high and could affect sales quite heavily in case the company and stores fell victim to inventory stock-outs. Unexpected weather risking the timely delivery of product. While on the other hand Inditex choose to be different from the trend of outsourcing manufacturing offshore and made the most of this opportunity. Zara being an emergence of Spain opted to the unique strategy of opening manufacturing plants near to where the retail stores were located. Apart from that Zara dost not entirely own the manufacturing process but in Spain and Portugal it own a series of workshops which are bonded in contract with the firm. In doing so Zara was affording labor cost 18 to 20 times higher than its major competitors but still managed to yield profits on the same scale and competitive advantage on the competitors by Quicker replenishments. Continuous and innovative designs. The Entire process of SCM was interlinked. Environmental friendly projects. Proving itself more socially responsible by hiring local employees. While all the major competitors of Inditex specifically to ZARA like The American GAP and the Swedish H&M SOURCING STRATEGIES AND SUPPLY CHAIN CONFIGURATIONS The sourcing strategies in the apparel industry were majorly divided between two major chunks. One was relying on cheaper product sourcing by outsourcing offshore which lead to few designs being in limelight for longer periods throughout the seasons. The other chunk selected to keep ...Download file to see next pagesRead More
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