Question and discussion As complete as possible, sketch the supply chain for Zara from raw materials to consumer purchase. Raw material – High tech automated cutting facilities – Small workshops – Ware houses – Stores – customers – Stores – Commercial managers Raw material Zara makes 40 percent of its own fabrics and produces more than half of its own clothes (maximize time efficiency) Cuts fabric in-house As it completes designs, Zara cuts fabric in-house. The cutting is done in Zara’s own high-tech automated cutting facilities. Local co-operatives
The cut pieces are distributed for assembly to a network of small workshops (350 workshops, 11,000 workers). Workshops are provided with a set of easy to follow instructions, which enable them to quick sew up the pieces and provide a constant stream to Zara’s garment finishing and packing facilities. Thus, what takes months for other companies, takes no more than a few days for Zara. Clothing items are wrapped in plastic and transported on conveyor belts to a group of giant warehouses. Ware houses Zara’s warehouses are a vision of modern automation as swift and efficient as any automotive or customer electronics plant.
The computerized system sorts, packs, labels, and allocate clothing items to every one of Zara’s 1,495 stores. Stores For stores within a 24-hours drive, Zara delivers goods by truck, whereas it ships merchandise via cargo jet to stores farther away. Each stores receives deliveries twice a week, so after being produced the merchandise does not spend more than a week at most in transit. Commercial managers Everyday store managers report hot fads to headquarters. Thus, store managers help shape design by ensuring that the creative teams have real-time information based on the observed tastes of actual customers. What the garment will look like?
What fabric it will be made out of? What it will cost? What price it will sell? Discuss the concepts of horizontal and vertical conflict as they related to Zara. Vertical marketing systems provide channel leadership and consist of procedures, wholesalers, and retailers acting as a unified system. Horizontal marketing systems are when two or more companies at one level join together to follow a new marketing opportunity. Zara’s parent company owns the manufacturing plants, warehouse facilities, retail outlets, and design studios, it can dictate the priorities and objectives of that supply chain and thus conflict is lessened.
And each of these levels are leaded by Zara headquarter, so all the process in each level can be flexible. Which type of vertical marketing system does Zara employ? List all the benefits that Zara receives by having adopted this system. The portion of its supply chain that Zara owns and controls is called a corporate vertical marketing system. A corporate VMS integrates successive stages of production and distribution under single ownership. Benefits from corporate VMS for Zara: Time saving Keeping inventories low More flexible
More efficient Low cost Small risk High revenue Honor (good name) Process controlling 4. Does Zara experience disadvantages from its “fast-fashion” distribution system? Are these disadvantages offset by the advantages? Disadvantage: Collections are small and often sell out. Advantage: Creating an air of exclusivity and leading the customers to very high levels of repeat patronage. Disadvantage: The company designs and cuts its fabric in-house and it acquires fabrics in only four colors. Advantage: But it helps to keep costs low.
Zara postpones dyeing and printing designs until close to manufacture, thereby reducing waste and minimizing the need to clear unsold inventories. Disadvantage: Doesn’t use Asian cheap outsourcing. Zara’s competitors, through outsourcing to Asian countries such as China, sacrifice the benefits of proximity for low labor and production costs. Zara use 17-20% more expensive European (Spain) manufactures. Advantage: However, Zara has disadvantage in its cost, there is a lack of flexibility in changing orders based on current trends hinders their operational efficiencies in its competitors.
Zara does have a competitive advantage over its competitors in regards to operations. How does Zara add value for the customer through major logistics functions? Such a retail concept depends on the regular creation and rapid replenishment of small batches of new goods. Zara’s designers create approximately 40,000 new designs annually, from which 10,000 are selected for production Customers who are wearing Zara, undoubtedly sure itself to wear hot and brand new fashion based upon their request.