Supply Chain Management at Zara
Mariam Peyton is a professional Financial Analyst. She holds a Masters degree in Economics. She specialises in financial analysis and forecasting. Her expertise includes studying the financial performance of companies, markets and entire industries looking for trends, insights and information that can help you glean rich insights for use in academic and market research.
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Zara is one of the biggest international fashion companies in the world. Founded in 1974, Zara is a global fashion retailer that was spearheaded by Rosalia Mera together with her husband Amancio Ortega. The clothing retailer has more than 3000 stores for both kids and home stores operating in 96 countries and is the flagship brand of the Inditex Group. Its biggest market is in Spain with 547 stores, followed by China with 229 stores, France with 145 stores, Russia with 144 stores, and Italy with 134 stores. Zara is one of seven brands of the Inditex Company which is one of the world’s largest fashion retailers according to Inditex.com. The major competitors of the brand include; Asos, Nike, H&M, and Adidas.
Zara's founder, Amancio Ortega Gaona, devised a brilliant manufacturing strategy that earned him widespread praise. He showed that being lean and flexible can be more important than having low labor costs, a concept that challenges the trend of outsourcing manufacturing jobs from the West. His vision paid off, as Zara became a model for business schools from Wharton to Harvard and the IESE in Spain. This paper will explore how Zara leverages technology to enhance its operational responsiveness to customer expectations while reducing costs in certain areas and setting prices based on various factors.
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Supply Chain Management at Zara Case Study
Key Learning Outcomes
By the end of the case, students should be able to:
- Understand what supply chain management is, its primary elements, and how it is significant to organizations
- Understand how Zara implements supply chain management and how it has contributed to its growth and development
- Apply supply chain management to real-life scenarios
1.0 INTRODUCTION
Zara is one of the biggest international fashion companies in the world (Zara Website). Founded in 1974, Zara is a global fashion retailer that was spearheaded by Rosalia Mera together with her husband Amancio Ortega. The clothing retailer has more than 3000 stores for both kids and home stores operating in 96 countries and is the flagship brand of the Inditex Group (Forbes, 2023). Zara is well known for its ability to develop a new product and get to its stores within a fortnight whereas other retailers take six months. Its biggest market is in Spain with 547 stores, followed by China with 229 stores, France with 145 stores, Russia with 144 stores, and Italy with 134 stores. Zara is one of seven brands of the Inditex Company which is one of the world’s largest fashion retailers according to Inditex.com. The major competitors of the brand include; Asos, Nike, H&M, and Adidas.
One of the key factors behind Zara's success is its supply chain management, which enables the company to deliver new products to its stores in a matter of weeks, rather than months. Zara's supply chain management is based on the following principles;
Vertical integration: this means that Zara controls all the aspects of its production process, from design and manufacturing to distribution and retailing. This allows Zara to reduce costs, improve quality, and respond quickly to customer demand.
Fast fashion: Zara launches new collections every two weeks, based on the latest trends and customer feedback. Zara's designers create more than 40,000 items per year, but only about 10,000 are produced and sold. This creates a sense of scarcity and exclusivity among customers, who are encouraged to buy quickly before the products run out.
Lean inventory: Zara keeps its inventory levels low, both in its warehouses and in its stores. Zara's distribution centers are located close to its main markets and use advanced technology to track and ship orders. Zara's stores receive new shipments twice a week, and only order what they need based on sales data. This minimizes waste, reduces markdowns, and increases turnover.
Flexibility: Zara can adapt to changing market conditions and customer preferences by having a flexible and agile supply chain. Zara's production facilities can switch from one product to another in a short time and can adjust the quantity and variety of products according to demand. Zara's stores can also modify their layouts and displays based on local trends and customer feedback.
Zara's supply chain management is a source of competitive advantage that enables the company to offer fashionable products at affordable prices while maintaining high levels of customer satisfaction and loyalty.
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