think win-win win to win

1. WIN-WIN RELATIONS IN THE SUPPLY
CHAIN OF ZARA
By Rasa Stankeviciute and Kristina Burtiliute (city of Oporto, Jan 2017)

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CONTENTS
1. INTRODUCTION.................................................................................................................. 3
2. SUPPLY CHAIN MANAGEMENT DEFINED.............................................................................. 3
2.1. The Supply Chain........................................................................................................ 4
2.2. Elements of the Supply Chain...................................................................................... 4
3. TYPES OF SUPPLY CHAIN MANAGEMENT SYSTEMS............................................................... 6
4. LEVELS OF ACTIVITIES IN SUPPLY CHAIN .............................................................................. 7
5. BENEFITS OF SUPPLY CHAIN MANAGEMENT........................................................................ 7
6. WIN - WIN RELATIONS DEFINED.......................................................................................... 8
6.1. Customer Relationship with Supplier ........................................................................... 8
6.2. Elements of Victory..................................................................................................... 9
7. EXAMPLE OF SUPPLY CHAIN MANAGEMENT OF ZARA.........................................................10
7.1. Synergy between business and operations strategy.....................................................11
7.2. Just in time production ..............................................................................................11
7.3. Centralized logistics...................................................................................................12
7.4. Solid distribution network..........................................................................................12
7.5. Fast fashion success...................................................................................................13
7.6. How Zara Operates the Most Agile Supply Chain in the World......................................13
8. INDITEX AND ZARA CONNECTIONS.....................................................................................14
9. CONCLUSION....................................................................................................................15
10. BIBLIOGRAPHY..............................................................................................................16

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1. INTRODUCTION
Supply Chain Management is one of the key issues, trends and needs in the current business
environment. The concept of supply chain management emphasises co-operation and collaboration
among the firms within a given supply chain. The essence of this concept is that when the firms in a
supply chain collaborate, it leads to a win-win situation, and all firms will gain that. The objective of
this work is to give a simple quantitative model that shows how and to what extent win-win situations
can occur in a supply chain partnership environment.
Fierce competition in today’s global markets, the introduction of products with shorter life cycles,
and the heightened expectations of customers have forced business enterprises to invest in, and focus
attention on, their supply chains. This, together with continuing advances in communications and
transportation technologies (eg, mobile communication, Internet, and overnight delivery), has
motivated the continuous evolution of the supply chain and of the techniques to manage it effectively.
In this work we will also provide some best case practises and examples of supply chain management
in one of the largest company in the world and how does it control and maintain it‘s supply chain.
2. SUPPLY CHAIN MANAGEMENT DEFINED
The concept of supply chain management is not new but it has become increasingly important for the
last few years. With the shifting of business focus from manufacturing to customer value, companies
are not much concerned about manufacturing costs or producing high-quality products; rather the
major challenge is to deliver the correct product, at the correct location, at the time the customers
need, in the appropriate quantity, and at the lowest possible cost. Meeting this challenge entails the
need of supply chain management.
Supply chain management is a business and technology discipline that refers to the ways of
coordinating the activities involved in purchasing, designing, building and selling a product. It used
information technology to create a cross functional inter-enterprise (involving more than one
organization) system called SCM information systems.
These systems integrate the business processes of suppliers, purchasing firms, distributors, and
custom logistics in order to improve the efficiency and effectiveness of manufacturing and
distribution. They automate the flow of information between a company and its supply chain partners
to optimize the sourcing and procurement, manufacturing, and delivery of products or services.

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2.1.The Supply Chain
In simplest terms, supply chain management is all about managing the supply chain-a network of
organizations and the business processes for acquiring the raw materials, transforming them into
finished goods, and distributing the products to the customers. The supply chain links many business
entities, such as supplier, manufacturer, transporter, distributor, retailer, and the customers
themselves.
Note that the supply chains of different organizations may differ in the number of entities and it is not
always required for a supply chain to have all the entities. Each entity in the supply chain contributes
to the goal of reaching the customers. The supply chain is driven by three main inputs namely
information, materials and funds which flow among the supply chain members.
The raw material sources from suppliers are transformed to intermediate products and finished goods
through manufacturing facilities. The finished products are shipped to distribution centers and from
there to retailers and ultimately to customers. However, the supply chains, especially of large
manufacturers, can have primary, secondary, and tertiary suppliers also.
The ultimate goal of supply chain management systems is to efficiently manage the flow of
information, materials, and funds across the entire supply chain,there by reducing the cost of supply
chain while bringing a firm’s products from concept to market.
2.2.Elements of the Supply Chain
A simple supply chain is made up of severalelements that are linked by the movement of products
along it. The supply chain starts and ends with the customer.
 Customer: The customer starts the chain of events when they decide to purchase a product
that has been offered for sale by a company. The customer contacts the sales department of
the company, which enters the sales order for a specific quantity to be delivered on a specific
date. If the product has to be manufactured, the sales order will include a requirement that
needs to be fulfilled by the production facility.
 Planning: The requirement triggered by the customer’s sales order will be combined with
other orders. The planning department will create a production plan to produce the products
to fulfill the customer’s orders. To manufacture the products the company will then have to
purchase the raw materials needed.

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 Purchasing: The purchasing department receives a list of raw materials and services required
by the production department to complete the customer’s orders. The purchasing department
sends purchase orders to selected suppliers to deliver the necessary raw materials to the
manufacturing site on the required date.
 Inventory: The raw materials are received from the suppliers, checked for quality and
accuracy and moved into the warehouse. The supplier will then send an invoice to the
company for the items they delivered. The raw materials are stored until they are required by
the production department.
 Production: Based on a production plan, the raw materials are moved inventory to the
production area. The finished products ordered by the customer are manufactured using the
rawmaterials purchasedfrom suppliers. Afterthe items have been completed and tested,they
are stored back in the warehouse prior to delivery to the customer.
 Transportation: When the finished product arrives in the warehouse,the shipping department
determines the most efficient method to ship the products so that they are delivered on or
before the date specified by the customer. When the goods are received by the customer, the
company will send an invoice for the delivered products.

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3. TYPES OF SUPPLY CHAIN MANAGEMENT SYSTEMS
Depending on the functions the supply chain management systems perform, they are classified into
two categories, namely supply chain planning systems and supply chain execution systems.
 Supply Chain Planning Systems
These systems provide information that help businesses in the planning of their supply chain. Some
of the important supply chain planning functions are as follows:
 Forecasting demand for specific products and preparing sourcing and manufacturing plan for
those products
 Estimating the quantity of the product to be manufactured in a given time period
 Deciding the location where the finished goods are to be stored
 Identifying the transportation mode to be used for delivering the products
 Setting the inventory levels for raw materials, intermediate products, and finished goods
 Determining the product quantity a business should make in order to meet all its customers’
demands
Supply Chain Execution Systems
 These systems provide information that help businesses in the execution of their supply chain
steps. Some of the major supply chain execution functions are as follows:
 Managing the flow of products from the manufacturers to distributors to retailers and finally
to customers in order to ensure the accurate delivery of products
 Providing information about the status of orders being processed so that the vendors could
provide the exact delivery dates to customers
 Tracking the shipment and accounting for the products that have been returned or are to be
repaired and serviced

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4. LEVELS OF ACTIVITIES IN SUPPLY CHAIN
To ensure that the supply chain is operating as efficient as possible and generating the highest level
of customer satisfaction at the lowest cost, companies have adopted supply chain management
processes and associated technology. Supply chain management has three levels of activities that
different parts of the company will focus on: strategic; tactical; and operational.
 Strategic
At this level, company management will be looking to high level strategic decisions concerning the
whole organization, such as the size and location of manufacturing sites, partnerships with suppliers,
products to be manufactured and sales markets.
Strategic activities include building relationships with suppliers and customers, and integrating
information technology within the supply chain.
 Tactical
Tactical decisions focus on adopting measures that will produce cost benefits such as using industry
best practices, developing a purchasing strategy with favored suppliers, working with logistics
companies to develop cost effect transportation and developing warehouse strategies to reduce the
cost of storing inventory. Studying competitors and making decisions regarding production and
delivery would fall under the tactical category.
 Operational
Decisions at this level are made each day in businesses that affect how the products move along the
supply chain. Operational decisions involve making schedule changes to production, purchasing
agreements with suppliers, taking orders from customers and moving products in the warehouse.
5. BENEFITS OF SUPPLY CHAIN MANAGEMENT
Effective Supply Chain Management (SCM) systems provide the following benefits to optimize the
organization’s performance:
 Improve the customer service by delivering them the right product at the right time and at the
right location, which in tum increases the organization’s sales.

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 Enable the companies to bring the products to the market at a quicker rate. Thus, the
companies get their payment sooner than those who lack an efficient supply chain.
 Lower the total supply chain cost, including procuring materials cost, transportation cost,
inventor, carrying cost,etc. The reduction in supply chain cost helps to increase the firm’s
profitability.
It’s clear that there are many benefits of supply chain management, but what exactly are those
benefits? Effective supply chain management achieves more accurate information, along with the
ability to carry out better sales forecasting. Other benefits include building stronger partnerships and
supplier networks, balancing out supply and demand, improving business plans and working
strategies,predicting transportation requirements, planning daily operations of the company, creating
streamlined inventory management and removing irrelevant elements.
While all organizations have supply chain processes of varying degrees,it is important to understand,
identify and implement each stage with careful consideration. Variables including the size of the
organization and the type of product manufactured affect supply chain management components, so
understanding the most critical business discipline in the world today will greatly benefit you, your
business and your bottom line.
6. WIN - WIN RELATIONS DEFINED
There are many ways to explain The Win – Win relations in business, but the most simple and right
is that it is a relationship between two or more parties that gets the same value and benefits from the
activity they are involved into. The Win – Win relations can be between different parties as: partners,
suppliers, supplier and customer, partner and supplier and etc. The most popular and at the same time
the most important ones are happening between customer and supplier because it causes the activities
and being of any kind of business.
6.1.Customer Relationship with Supplier
For a positive growth of business all customers have to depend, directly or indirectly, on good and
reliable suppliers. Apart from their expectations from the supplier the customers also need to be loyal
to them so as to strengthen their relationship. Therefore, customers should work on building a strong

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and long-lasting supplier relationship asthey do with their own customers. And it is not a complicated
process.
The positive customer-supplier relationship begins with the initiative of the supplier to demonstrate
his sensitivity to the customer’s needs. A customer always vouches for the conditions of his business
deal with the supplier and likes to be honest with them to have a smooth flow of business. But many
non-serious suppliers sabotage the deal in the beginning only by making the customer struggle to
even getting a relationship started.
The lapses and diversions on the part of the suppliers can affect their relationship in many ways as
given below:
 Satisfaction: The customer expects overall attention and convenience in all departments to
ensure smooth fulfillment of his needs. This includes quality, timeliness, ease of access and
commitment of conditions. He wants to believe that the supplier cares for him.
 Competitiveness: Customersassessthe supplier through competition basedon the pricing and
quality of their products, its reliability, its technological background and industry trends.
These factors affect the deal.
 Innovation: It is difficult for the supplier to divert the customer from their quality assessment.
Customer knows and lives the products more than the supplier does, ashe is working on them
and is in a position to suggest innovation and development for the products.
 Finance: Suppliers have to be ready for providing financial advantages as loan, extended
terms on purchases and postponement of debt when demanded by their loyal customers
particularly at their growth stage or when they are into a financial crisis.
On the other hand suppliers also have a right to get their needs met as they are ultimately motivated
by profit. They want to be known as the best in their deals so they count on customer loyalty and
satisfaction at all levels which translate into direct benefit of both of them. Therefore it is only win-
win relationships between them in all stages of the customer-supplier chain to produce total
satisfaction. It should be remembered that a customer assumes his name only in relation to his
supplier.
6.2.Elements of Victory
Also, excellence in win-win negotiations is first based on knowing the “elements of victory” for each
party, and then being committed to manifesting the idea of a win-win.

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Elements of Victory: The most effective means of engaging in a win-win is to be clear, from both
party’s perspectives, what measurable results will represent a “win.” This should be clear to each
party. When negotiating the elements of victory, it’s usually effective to understand that it is nearly
always more than just money that the other party desires. In fact, if it is only money that’s considered
valuable, then the relationship is probably neither strategic nor innovative, and therefore is merely a
tactical, making win-win a minor issue. The multi-dimensional analysis for measuring the win are:
 Market Impact
 Competitive Advantage
 Innovative Capacity
 Performance Effectiveness
 Financial Return
To keep the elements of victory in long-term alignment, a clear customer-focused value proposition
should be the ultimate, over-riding aim of the relationship.
Commitment to Win-Win: A effective win-win is not a chance occurrence,but the result of a carefully
architected process. Because win-win may require a delicate alignment of forces which can be
destabilized by people who do not understand the nature of the relationship, the best win-win
arrangements are managed by people who make it their business to be committed to the win-win.
7. EXAMPLE OF SUPPLY CHAIN MANAGEMENT OF ZARA
Zara was founded and established 1975 by Spanish born Amancio Ortega Gaona. The actual store
dealt with the products of the manufacturing company Zara, was an outlet for cancelled orders of
women’s night wears and lingerie. These have made a strong foundation for realizing the association
between producer and retail trade. Major priority of Zara and its parent group Inditex, is customer
and a demand centric supply management. Though Zara is a global multi-national company, but it is
a subsidiary of Inditex which is world’s biggest apparel retailer. The Inditex group owns more than
100 textile companies. Zara is the flagship brand of Inditex, captivating maximum sales.

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In the following picture some facts about ZARA supply chain can be found. They are defined more
widely in the following paragraphs.
7.1. Synergy between business and operations strategy
Zara’s overarching strategy is achieving growth through diversification with vertical integrations. It
adapts couture designs, manufactures, distributes, and retails clothes within 2 weeks of the original
design first appearing on catwalks.
The company owns its supply chain and competes on its speed to market, literally embodying the idea
of “fast fashion”.
7.2. Just in time production
The retail giant delivers fashionable and trendy numbers catered for different tastes through a
controlled and integrated process – just in time.
Zara keeps a significant amount of its production in-house and makes sure that its own factories
reserve 85 percent of their capacity for in-season adjustments. In-house production allows the
organization to be flexible in the amount, frequency, and variety of new products to be launched.The

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company often relies heavily on sophisticated fabric sourcing, cutting, and sewing facilities nearer to
its design headquarters in Spain.
The wages of these European workers are higher than those of their developing-world counterparts,
but the turnaround time is miraculous.
If a certain style or design becomes the new must-have on the street, Zara gets to work. Designers
churn out the new styles and they're fast-tracked to stores while the trend is still going strong.
Store managers communicate customer feedback on what shoppers like, what they dislike, and what
they’re looking for. That data is instantly funneled back to Zara’s designers who begin sketching on
the spot. Zara also has extra capacity on hand to respond to demand as it develops and changes. For
example, it operates typically 4.5 days per week around the clock on full capacity, leaving some
flexibility for extra shifts and temporary labor to be added when needed.
This then translatesto frequentshipments and higher numbers of customer visits to the stores,creating
an environment of shortage and opportunity.
This strategy allows Zara to sell more items at full price because of the sense of scarcity and
exclusiveness the company exudes.Zara’stotalcost is minimized because merchandise that is marked
down is reduced dramatically as compared to competitors.
7.3.Centralized logistics
Zara sticks to a deep,predictable and fast rhythm, based around order fulfillment to stores. Each Zara
outlet sends in two orders per week on specific days and timing. Trucks leave at specific times and
shipments arrive in stores atspecific times. Garments are already labeled and priced upon destination.
As a result of this clearly defined rhythm, every staff involved (from design to procurement,
production, distribution, and retail) knows the timeline and how their activities pan out with respect
to other functions. That certainly also extends to Zara customers, who know when to visit stores for
fresh new garments.
7.4.Solid distribution network
Zara’sstrong distribution network enables the company to deliver goods to its European storeswithin
24 hours, and to its American and Asian outlets in less than 40 hours.

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7.5.Fast fashion success
This brand’s success story shows the strength of its operations. Its cross-functional operations
strategy, coupled with its vertically integrated supply chain, enables mass production under push
control, leading to well-managed inventories, lower markdowns, higher profitability, and value
creation for shareholders in the short and long term.
Zara is all about staying on top of the hottest trends, and exuding an exclusive feel, but its supply
chain is the realstarof the show. These rockstar- level logistics take it from being just another fashion
retailer to an industry example of fast fashion done right.
7.6.How Zara Operates the Most Agile Supply Chain in the World
There are 5 crucial phases in Zara’s supply chain — Procurement, Supply, Production,
Manufacturing, Distribution. And, in keeping with Zara’s distinctive edge, each of these steps makes
a decisive departure from the industry norm.
Procurement
As mentioned earlier, most fashion retailers commit up to 80% of their inventory at least 6 months
before the beginning of the next season. This industry-wide practiced demands that procurement
managers make advanced forecasts of the number of clothes that would need to be manufactured in
these intervening months. Zara handles procurement differently. It does not forecast the number of
finished goods; rather Zara’s procurement team, operating out The Cube, forecasts the quantity of
fabric that would be needed to manufacture clothes, before placing orders with the company’s
suppliers. This emphasis on fabric over finished goods is rooted in Zara’s Fast Fashion philosophy.
Unlike finished goods, fabric does not go waste — it can always be used to sew new clothes. The
year-long availability of fabric allows Zara to respond to its customer needs and changes in fashion
trends real time, and manufacture new collections accordingly.
Supply
Zara hasoften been given the moniker of “affordable luxury”. And there’sa reasonwhy —consumers
flock to Zara in droves because it sells the same kind of products as the more exclusive fashion brands
— only at cheaper rates. One of the reasons why it’s able to keep its prices low is because Zara does
not seem to place a premium on fabric quality. Whereas older and posher fashion brands do not tire
of emphasizing the quality and provenance of their textiles, Zara prefers buying fabric from suppliers
who sell it inexpensively and abundantly.

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Production
This is where Fast Fashion comes into full effect. After the fabric orders are readied by the suppliers,
the fabric is received at The Cube. The Cube is ground zero for Zara — it’s where its team of market
specialists, design team and production team coordinate with each other with clockwork precision.
All of Zara’s design and production processes operate out of this central location.
The information is then conveyed by the market specialists to the design and production teams. Once
these inputs are obtained, and conclusions are drawn, the design team gets to work on tweaking its
original designs in accordance with the inputs.
Zara’s production process leaves no room for delay either. This is because, unlike other fashion
retailers, Zara colors and dyes its fabric in house. Coloring and dying facilities, located inside The
Cube, are deployed, and the supply chain advances to the next stage.
Manufacturing
Zara uses just in time production process with focus on in-house manufacturing which enables
company to be more responsive to demand changes. Zara uses frequent in-season assortment changes
– company produces 50-60% of clothes in the start of the season. Retailer leaves some capacity for
extra shifts in times of rapid demand changes and typically operates 4.5 days per week on full
capacity.
8. INDITEX AND ZARA CONNECTIONS
Inditex as a head of ZARA has many partners and suppliers with whom they are maintaining the best
relationships. The most important brand ZARA raises benefits and inflows for Inditex year by year.
Coonection for a win – win situation for ZARA is to maintain the recognition by the customers. They
are creating the unique brand to have it. From the customers, ZARA gets not only inflows but also
the ability and space to improve and become even more famous and wanted brand in thw world.

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9. CONCLUSION
All in all, supply chain management is a crucial part of almost every organisation in the world. It
includes many processes that makes company circle spin. All of the variations lead to the conclusion
that SCM is what you make of it; in other words, it can involve anything, depending on the situation.
In that view, it is hardly a new theory, nor is it a new scientific field.
Furthermore, companies are trying to respond to dynamic developments and complexity, striving to
achieve stability and to carry out operations more efficiently. The goal of IT development, to a great
extent, is to create a better (which often means simpler and easier) way to conduct business.
In this dynamic world, we create new theories and new concepts such as supply chain management.
What are the criteria for the new theories, and how are new conceptions related to them? Sometimes
it seems that the degree of popularity—how often it is used, mentioned, or referred to—is the
determining factor.
The biggest companies in the world are having strong and aligned supply chains and it‘s management.
It helps them to improve, follow the processes and do not miss the most important factors in them. If
the supply chain management is understood and implmented correctly, it will help to follow and
evaluate company‘s procceses,activities adnd will help to maintain the best parts of the organisation.
Having strong partnerships and customers‘ feedback helps to create win-win supply chain where all
parts of organisation can get the same value and benefits from the supply chain and activities. These
elements – having the strong supply chain and relationships between suppliers, customers, partners
etc. – is leading to sucess and stability.

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10. BIBLIOGRAPHY
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