Introduction
The largest chain of fashion stores, Zara, which is owned by Inditex, is among the companies that deal in fast fashion (Suzy 2012). With over 6000 stores all over the world and up to 13 billion Euros of revenue, the business is employing strong logistic focus that works as an advantage over the competitors. Zara knows how important it is to ensure that the order placed by customers is fulfilled, as a result, the company has laid down a well-calculated strategic decisions on logistic networks. The performance of the supply chain by the company is ensured by the design and operations of the network. Strategic decisions that are made on distribution centers and which transportation mode need to be used. The transportation modes used by the company is more convenient compared to the one being used by other competing firms. Products are delivered to the warehouse in time without stock out issues unlike with other competitors that occasionally have stock out issues.
- What advantages does Zara gain against the competition by strongly focusing on logistics at the strategic, tactical and operational layers across the enterprise?
Strategically, Zara has identified why they are in business, which makes the activities of the firm be organized to reduce duplications and irrelevant purchases and supplies. Zara has accurately identified the vision of the company and communicated the same to the employees directing the activities towards a given goal. This ensures that the activities of Zara stands out compared to most competitors due to lack of clear vision. Senior management has clearly defined strategic path in deciding the product of the company where the decision is informed by the overall objective of the company (Hansen 2012). The company is more advantaged than the competitor is as it has identified its customers leading to the production of services that match the customer’s interest. This has seen the company attracting more customer time-by-time leading to high revenue to the company. In the strategic level, the company has been able to come up with a more relevant and cost effective manufacturing infrastructure.
In the tactical layer, the company the company has managed to gain a number of advantages. The messages created in the strategic layer are carried in the tactical supply chain decision, and they are used them to create benefits out of the decisions. It is in the tactical decision level where the manufacturing decisions are made on whether to use Kanban or Just-in-time depending on the customers to be served. Zara is able to reduce material wastage by creating technologies that can be used to manufacture products that cannot be transported to other plants (Kelkoo 2012). The company accurately decides on when to use third party logistics which seem to be a great challenge to most competing firms. At the operational level, so many decisions are made in a day to ensure that accurate procedures are followed to achieve. Zara has introduced products that are unique with a cheaper price compared to most competitors.
- Why has Inditex chosen to have both in-house manufacturing and outsourced manufacturing? Why has Inditex maintained manufacturing capacity in Europe even though manufacturing in Asia is much cheaper?
Manufacturing can be done in two main ways; outsourced and in-house manufacturing. Most business may decide to use either of the two or even both. Outsourcing involves carrying out manufacturing with other firm that does not belong to Inditex while in-house manufacturing is the manufacturing that is done by the company within the same business (Stores around the world 2013). Inditex has decided to use both in-house and outsourcing manufacturing due to a number of reasons. One reason for going for Outsourcing is the need for less capital to be invested. The cost of outsourcing is normally cheap as the company will not have to buy manufacturing plants, which are normally very expensive. Those products whose plants are very expensive are outsourced as that will be cheaper than when such plants are bought. Since Inditex focuses on the core competency, outsourcing is one area that is given emphasis by the company. The management believes that through outsourcing, the business is able to maintain its core competence. Even with the beauty of outsourcing, the company also finds it very important to practice in-house manufacturing to ensure that the company produces a high quality product (Stores around the world 2013). This is possible because the company understands the quality of the products that are demanded its customers. For reasons of increasing the rate of information exchange, the business finds it more appropriate to use in-house manufacturing together with the outsourcing one. The other reason for using in-house alongside outsourcing is to speed up marketing time, which is easily achieved by the use of in-house. The firm, due to the use of two manufacturing methods also enhances the flexibility of the firm. Even though manufacturing is much expensive compared to manufacturing in Asia, Inditex still finds it important to maintain capacity there. The business finds it necessary to do this to ensure that there is complete diversification of its manufacturing methods. By continuing to keep manufacturing capacity in Europe, the business continues to maintain its marketing strategy and keep their esteem clients served, which is imperative to the performance of the business (Stores around the world 2013). Manufacturing in Europe besides being expensive, it is very flexible and relatively quicker compared to manufacturing in Asia. In the long run, maintaining manufacturing capacity in Europe becomes cheaper, the reason that has informed Inditex decision.
- Why does Zara source products with uncertain demand from local manufacturers and products with predictable demand from Asian manufacturers?
Zara uses a strategy of sourcing products that are of certain demand from the locals while those products that the firm considers to be having predictable demand is sourced from Asia. The choice of where to source a product with uncertainty is very important; when Zara sources the uncertain product from the locals, the business is sure of satisfying the demands of the customer more than when the products are sourced from Asia (Alvan 2011). When the product is locally sourced, there is certainty of finishing the production within three weeks. The production of the product from the beginning to the last stage can be monitored by Zara and ensure that the rate of production is increased as per the desired rate of the business. Local manufactures normally have their products produced in more relatively faster rate compared to the rate of outsourcing. Besides being fast, the process of local manufacturing is more flexible and the company can have a quicker, which is better than incurring greater lead-time by sourcing in Asia. Because the demand can be detected, the business is able to accurately budget for the manufacturing of the product in an earlier date from Asia, which is not possible with the uncertain demand. It is less risky and cheaper to source for products that are predictable from Asia and the expensive cost of manufacturing locally can be avoided by going for a cheap ones Asia (Alvan 2011). The demand is predicted and when the duration is found to be long enough, Zara places an order with Asian manufacturing companies to deliver finished product within the time that will not inconvenience customers at a much cheaper price. The business normally has the confidence of meeting the customer’s order request time as quickly as possible because normally there is adequate time to finish the product (Edmund 2010). Customers have never complained of delays on the on the products that are manufactured in Asia because accurate data is used to make a precise prediction of demand pattern. The business is, therefore, confident that predictable demands products can be sourced from the Asia without any default. By way of using locals and going to Asia for manufacturing products of deferent uncertainty levels, the business achieves a higher level of competitive advantage by ensuring that manufacturing pattern is diversified (Alvan 2011). The company is able to carry out promotion locally and outside through the double sourcing in manufacturing which many companies do not exploit.
- What advantages does Zara gain from replenishing its stores multiple times a week compared to a less frequent schedule? How does the frequency of replenishment affect the design of its logistics systems?
Unlike most competitors, Zara ensures that stores are replenished number of times in one week. It is valuable in many ways to the business in many ways. This frequent replenishing of the store has enabled the business to ensure that there are new designs after every one week. The company is able to change up to 75 percent of the merchandise in a span of three or even four weeks through this method (Suzy 2012). Most customers find have their preferences highly matched by the company as compared to the other competitors. Zara has experienced high turn out from the customers who have decided to make continuous visit to the business as they find their desires fully satisfied. When products are replaced after a short while, variety of merchandise is continuously brought into the store, which gives customers the opportunity to choose (Kerry 2008). Zara rarely has the problem of out of stock as the company keeps on stocking products. This practice is very advantageous as the Zara finds it easier to control inventory. Inadequate stock will be available to ensure that as others are being sold so are others being purchased. Because of this, the company can bring in new products on a continual basis and the result of that is always higher profit (Hansen 2012). Management is able to take the information by the customers on the product design that they want; pass that communication to designers who shall produce the proposed design. With the rhythmic way of replenishing the store, the orders are normally filled in a timely manner by management. Logistic system in Zara firm is changed by the frequency of replenishing of stock. Managers of the stores are required to prepare a list of the available product as early as 7 o’clock in the morning of every Monday. Commercial department is then required to allocate inventory various stores. After that, Warehouse Management System (WMS) sends a command to robots that ensure that the allocated stock is placed on the conveyors. Most of the process are automated to ensure a very efficient process in the store and to reduce the operational duration. The automated warehouse is routine to divide the replenishing time into four half-day batches. Not all these are designed to ensure that the logistics on the supply of the stock is organized and designed to meet the demand of the customers.
- What logistics information, communication and technologies infrastructure does Zara need in order to operate its manufacturing, forecasting, replenishment, distribution, and retail operations effectively?
Conclusion
Zara has been reviewed to be a retail business that gains a number of advantages by having strong focus on the three important layers of decision which include strategic, tactical, and operational level. Inditex chooses both in-house and outsourcing manufacturing to be able to diversify manufacturing activities to reduce potential uncertainties. Since the locals are flexible, Zara decides to source uncertain products locally while the predictable products are sourced from Asia as they are as it is relatively cheap. Replenishing of stock is done more frequently to ensure that the store is updated with the new stock and to offer a variety to the customers. A number of logistics in various areas has been suggested to see manufacturing, distribution, and retail operations more efficient.
References
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Stores around the world. 2013. Retrieved from www.Inditex.com
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Edmund, T 2010. “Zara will open first store at Westfield's Pitt Street Mall Centre in Sydney.” News.com.au, Business. Retrieved from: http://web.archive.org/20100812040908/www.news.com.au/business/zara-will-open-first-store-at-westfields-pitt-street-mall-centre-in-sydney/story-e6frfm1i-1225902428887. web. 28 March 2014.
