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Zara's supply chain (sadiq shariff10@hotmail.com)

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Zara's Supply Chain

Zara's Supply Chain

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  • 1. In 1963, Amancio Ortega started a small company in Spain that manufactured women’s pajamas and lingerie products for garment wholesalers. In 1975, after a German customer cancelled a sizable order, the firm opened its forts Zara retail shop. The original intent was simply to have an outlet for cancelled orders but the experience taught the firm the importance of a marriage between manufacturing and retailing a lesson that guided the evolution of the company ever since.
  • 2. Since then Zara chains have grown into retailing giants with almost 1751 stores worldwide and an impressive sales record, it has presence in 100 countries around the globe. The success of Zara is partly to do with the appeal of its men and women and children’s fashions and accessories that display unique style but at real world prices. But it is also partly as a result of their collaborative, digital networks that link Zara with its suppliers and customers.
  • 3. It is claimed that Zara needs just two weeks to develop a new product and get it to stores, and launches around 10,000 new designs each year. Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead. This has increased the idea of Zara as a "fashion imitator" company and low cost products. Lack of advertisement is also in contrast to direct competitors such as Uniqlo and United Colours of Benetton.
  • 4. PRODUCTS:
  • 5. ZARA SUPPLY CHAIN MANAGEMENT: Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls most of the steps on the supply-chain, designing, manufacturing, and distributing its products. Zara set up its own factory in La Coruña in 1980, and upgraded to reverse milk-run-type production and distribution facilities in 1990. This approach, designed by Toyota Motor Corp., was called the just-in-time (JIT) system. It enabled the company to establish a business model that allows self-containment throughout the stages of materials, manufacture, product completion and distribution to stores worldwide within just a few days.
  • 6.  SUPPLY CHAIN COMPONENTS: For Zara stores to be able to offer cutting edge fashion at affordable prices requires the firm to exert a strong influence over almost the entire garment supply chain: Design, Production, Distribution and Retailing.
  • 7. 1) Design and Order Administration: • The design and order administration at Zara is very effective and efficient. The company ensure product quality by designing its own products. Zara has almost 300 people working in its headquarters in Spain. These talented people include designers and specialists. Together they produce designs for approximately 40,000 items per year from which 10,000 are selected for production.  Designers  Market Specialists
  • 8. 2) Production: 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 makes its most fashionable items half of all its merchandise at a dozen company owned factories in Spain and Portugal, particularly in Galicia and northern Portugal where labour is somewhat cheaper than in most of Western Europe.  Suppliers  Procurement and Production Planners  Subcontractors
  • 9. 3) Distribution: Distribution Centre – all products pass through Zara’s major distribution center in La Coruña. The 5-storey, 50,000 square meter distribution center employs some of the most sophisticated and up-to-date automated systems. Logistics (Contractors) – In 2012, the distribution center shipped 130 million pieces. 75 percent of these shipments were to stores in Europe. Fashion garments represent around 80 percent of Zara’s products and the rest are more basic items.
  • 10. 4) Retailing : • Store/Customer Stores usually place their orders and receive shipments twice per week. Orders have to be placed at pre-designated times. The overall experience of the customer in the store in considered. Apart form the fashion supply, the interior design of the store, coordination of collections, maximum care over window displays and customer care are some of the elements that guarantee this experience.
  • 11. Effectiveness of Scheduling Techniques: • Scheduling refers to the time or date on which activities are to be undertaken. Such fixing determines the manner in which resources will flow in an operating system, the effectiveness of which has an important impact on production and thus supply chain performance. The scheduling techniques of Zara is very efficient. Centrally Managed Inventory – controlled and timely delivery of clothing to all stores across the world. Reduced Design Cycle Time – timely response to items that sell well and ability to quickly alter or enter new designs. Strong IT System – allows almost immediate communication of sales and inventory information across enterprise. Logistics and Distribution – clothes move within hours to their destination, efficient scheduling of shipments.
  • 12. Conclusion: Zara is an example of how a firm can design and manage its supply chain to gain competitive advantage. The retailing success of Zara can be partly attributed to its excellent supply chain management. Zara makes sure that each element of the supply chain network adds value to the entire operation. Zara makes sure that it streamline its supply chain, removing steps that does not contribute to the achievement of the company’s goals and developing those elements that add value.