The wonders of supply chain management

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The operations management at Zara, excelling at rapid customization and yet at an affordable price.

The operations management at Zara, excelling at rapid customization and yet at an affordable price.

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  • 1. Aparna Surendran Harini S Hari Teji Muthuraman P Arkadip Gupta THE WONDERS OF SUPPLY CHAIN MANAGEMENT
  • 2. PRODUCT CATALOGUE Zara stores have men's clothing and women's clothing, each of these subdivided in Lower Garment, Upper Garment, Shoes, Cosmetics and Complements, as well as children's clothing (Zara Kids). 50% of the products Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in Asian and African countries and the rest of the world. Zara can offer considerably more products than similar companies. It produces about 11,000 distinct items annually compared with 2,000 to 4,000
  • 3. WHAT MAKES ZARA STAND OUT  The worlds largest apparel retailer based out of Spain  It is the flagship chainstore of the Inditex group  There are a total of 1770 Zara stores in 41 countries and 166 Kiddy's Class stores  The producer of most variety of clothing range and even in the shortest production cycle
  • 4. ACHIEVABLE SUPPLY CHAIN FEATS OF ZARA  Shortening the product life cycle to four to five weeks.  Zara also promised to make information about its suppliers discharging of toxins publicly available.  Zara relies on sophisticated information technology to monitor customers' fickle fashion changes.  Zara’s most unusual strategy is its policy of zero advertising.  Zara is a vertically integrated retailer.
  • 5. ZARA BUSINESS MODEL
  • 6. DESGIN AND PLANNING  Design starts one year in advance of the season  In-house design team of 200 designers at Zara HQ  Experimenting new designs with a commercial orientation  Hand sketches -> CAD drawings + Feedback from store managers  To successfully react to consumer demands, design decisions are delayed as long as possible  Approximately 40,000 new designs annually, from which 10,000 are selected for production
  • 7. PRODUCTION SOURCING In-house 22 factories in Spain Mid season, stylish apparels Flexible production Quick response to changing demands External Sourcing Europe and Asia Beginning of season, basic apparel Cost or quality advantage Strong relationship with contractors and suppliers
  • 8. PRODUCTION PROCESS Fabric • Raw, uncoloured fabric • External and Internal (Comditel at Barcelona) Cutting • Layout prepared by skilled workers • Using the layout, automated machines cut the fabric • Cut fabrics are marked and bundled Sewing • Sub-contracted to 400 smaller firms in close proximity • Cheap labour advantage • Twice a week delivery
  • 9. DISTRIBUTION  Centralized Distribution Center at Arteixo – 500000 square meter  211 km of tracks from factories to the distribution center  Shipments made twice a week  No inventory held
  • 10. RETAILING  Final Allocations made centrally also considering Store Managers’ request  Fresh assortments – Fashion Forward Merchandise  Average Customer shopped 17 times a year as compared to the industry standard of 3-4  15-20% End of Season Clearance Sale  0.3 % of Sales spent on Advertising
  • 11. THE STORES 1) Zara stores were uniform including as to lighting fixtures and window display, as well as the arrangements of targeted floor space of 1200 square meters. 2) The model store located at Zara head quarters (Arteixo, Spain) was kept up-to-date in terms of current product selection. 3) Store locations were upscale in prime high street areas. 4) The uncluttered arrangement of goods in uncrowded spaces coordinated by color made the experience of shopping more like that in high end luxury stores and quite different from that offered by “value” marketers.
  • 12. PRICING STRATEGY  Zara contrasted its pricing strategy to many others in its business which set price equal to cost plus a target margin.  During its long expansion through 2001 zara printed price tags for multiple jurisdictions showing on the single tag all of its different prices by country. This simplified the tagging procedure and also permitted goods to be moved from store to store with out retagging. And also permitted goods to be transhipped between one country to another with out retagging.  However at the beginning of 2002, zara switched to a system of local price marketing in the stores using a device that read the bar code and printed the appropriate local price.
  • 13. GROWTH STRATEGY  Zara's growth had been outward from its base in Spain, with the locations for new stores chosen selectively to stake out sequentially new territories that could be supported within the Zara model.  Most of the stores were company owned although in some markets Zara had opened a small number of stores through franchises and in some markets Zara had opened stores through alliances.  Zara did not establish local distribution centers and warehouses when it entered a market or engaged in store opening promotions.
  • 14. VIDEO
  • 15. CURRENT ISSUES FACED BY ZARA  Alleged slave like condition of its workers in Aug,2011  Shop staff abuse in March,2012  Toxicity issues as highlighted by Greenpeace in Nov,2012