1. ZARA : Apparel Manufacturing & Retail
1. Whatadvantage doeszara gainagainst itscompetitorsby havinga responsive supplychain?
It allowszaratomatch demandforfickle trendsmoreaccurately.Thisinturnmeansthattheycansell
products at full price and thus secure their margins and make a profit.
It also increases customer loyalty to the brand as zara builds a reputation for being up to date on
trends which increases demand products.
It also allows zara to reduce inventories and forecast error.
2. Why has Inditex chosen to have both in-house and outsourced manufacturing? Why has
Inditexmaintainedmanufacturing capacity in Europe eventhough manufacturing in Asia is
much cheaper?
In-house manufacturingisusedaspart of a responsive pull supplychainstrategyandalsoas the final
leg of its manufacturing process. After the sales season has started Inditex beginsto use in-house
manufacturing as a way of quickly responding to trends. It either makes new products or turns
incomplete productsmade fromitsoutsourcedmanufacturersand turnsthem intospecificfinished-
goods in response to market demands. Outsourced manufacturing is used to create non-specialised
products that can be produced in bulk. Zara maintain manufacturing in Europe rather than move
everything to Asia because the company and management believe that having a factory in its own
country,the companycanmanage andresponseto unpredictable quickchangeof demands. Although
the costof productioninSpainisconsidertobe highcomparingtoAsiacountriesbutthe Zarafactories
islocatedinthe areaswhere isknowntobe acheaplaborinSpain.The factoriesare alsolocatednear
to the distribution center so the cost of delivers finished good to the DC is low.
3. Why does zara source products within uncertain demand from local manufacturers and
products with predictable demand from Asian manufacturers?
Products with uncertain demand will most likely be produced at a lower volume to products with a
certaindemandand therefore sourcingfromlocal manufacturersprovideszarathe speeditneedsto
test and deliver these products before theybecome obsolete and have to be soldat a discount. It is
part of a responsive pull strategy.
Predictable demand products are made in Asiadue to low labour costs and high volume of products
needed. It is more cost effective to manufacture in bulk due to the fact that predictable demand
products have a larger window with which to deliver products without becoming obsolete. It also
means that they can be made before the season starts as part of a push strategy
4. What advantage does Zara gain from replenishing its stores multiple times a week
compared to a less frequent schedule?
This makes sure that store inventory is always up to date and that new designs can be introduced
often to meet trends. It also means that products can be replenished if demand is high and can be
takenaway if demandislow.Furthermore,itisresponsive to the fickle nature of the fashionmarket
if a newtrendcomesintofashionzaraneedtobe able toadapttheirquicklyandchange theirinstore
merchandise to meet customer demand.
2. 5. Do you thinkZara’s responsive replenishmentinfrastructure isbettersuitedforonline sales
or retail sales?
Whilst its quick distribution system allows zara to respond to trends very quickly its lack of
decentralized distribution meansthat it is better suited to retail as online sales tendto have more a
diverse productdemandandcustomersexpectquickerdeliverytimes.Companiessuchas amazonare
able to respondquickerto online salesdue tothe fact that they have distribution center's all around
the world and can offer same day delivery. Zaras 24 hour delivery times from Spain to outlets
all around the world may not be as efficient with online sales as it is with retail sales.
AMAZON : ONLINE SALES
1. Whyis Amazon buildingmore warehousesas it grows? How many warehousesshould it
have and where shouldthey be located?
As itgrew,the companyaddedwarehouses,allowingittoreact more quicklytoconsumerorders.
• It isclearthat whenthe no of warehousesincrease the responsetime decrease,andwhenthe no
of warehousesdecrease the response timeincrease.Sobyincreasingthe noof warehousesand
locate themnearthe customerwill improveresponse time.
• Amazonhasabout 50 warehouses,20inU.S and rest 30 inCanada, France, Germany, Italy, United
Kingdom, China, andJapan.
2. ShouldAmazon stock everyproduct it sells?
No …. It shouldstockthose productswhichare inhigherdemand.
3. What advantages can bricks-and-mortar playersderive from settingup an online channel?
How should theyuse the two channelsto gain maximum advantage?
The performance of traditional bookstoresupplychaincanbe improvedsignificantlybycombining
the strengthof the retail andonline channels.Itisimportanttorealize thatthe benefitsof
aggregationare mostsignificantforlow- demandbookswhosedemandishardtoforecast.
• The booksupplychainsshouldbe structuredsothat retail outletscarrymanycopiesof
bestsellersforcustomerpurchase andone copyof low demandbooksto encourage customersto
browse andmake impulse purchase.Terminalsorinternetkiosksshouldbe providedsothat
customerswantingtoorderlowdemandbooksthatthe bookstore canoffer.
• Thisapproachallows the supplychaintoreduce inventoriesbyaggregatinglow demand
bookssoldonline while keepingtransportationcostslow forbestsellerssoldatretail store.
4. What advantages/disadvantagesdoes the online channel enjoyin sale of shoes/ diapers
relative to a retail store?
Advantages:
A. Time tomarket
B. Flexible pricing,portfolio,promotions
C. Low facilitycost
3. Disadvantages:
A. Transportationcost
B. Response time
C. IT cost
5. For what products doesthe online channel offerthe greateradvantage relative to retail
stores?What characterizes these products?
• Online channelofferthe greateradvantage forthose productshavinglarge
Productvarieties.
• For example;Netflix offersamuchlarge selectionof moviesthananyvideorental store, offering
the same selectionata store wouldrequire ahuge locationwithcorrespondinglylarge amountof
inventory.
