Zara Case Study

ZaraCase Study

ZaraCase Study

Discussthe role of SCM in Retail Industry

FromZara’s case study, it is evident that effective supply chainmanagement plays a key role in the retail industry. Zara is anintegrated retailer since it controls most of its activities such asdesigning, manufacturing, and distributing its products using thesupply chain system. Thus, the supply strategies have given thecompany an advantage in the market making Zara as a symbol of successin the retail industry (Tiplady,2006).Thus, an efficient supply chain helps reduce the loss of timeensuring that products are readily accessible to customers.Accordingly, Zara provides on-time productions with significantamounts of its productions being kept in-house. It also makes surethat its factories reserve 85 percent of its capacity for adjustmentsbetween seasons (Tiplady,2006).Besides, in-house production ensures that the organization enhancesthe frequency of its output to match the required supply.Subsequently, supply chain management provides good inventorymanagement. Accordingly, Zara avoids stocking the inventory throughan efficient supply chain to all of its stores. For instance, thecompany is fully aware of thequantity that should be supplied to all its retail stores bydelivering shipments twice a week making it strictly limited(Tiplady,2006).Hence, it ensures that each store only receives the amount they need,which helps the company avoid the supply of excess unpopularproducts. Supply chain management helps a company to achieve a strongdistribution network. The robust system enables Zara to distributeits products fast enough to all its stores based on the demand. Forexample, Zara can deliver goods to its European stores within 24hours and to its American stores within 40 hours. Lastly, supplychain management improves the quality of production through feedbacksand customer responses on the company’s services as well as theirreaction to Zara’s products (Tiplady,2006).

IsZara’s competitive strategy aligned with supply chain strategy?

Zarais currently using a unique competitive strategy, which involvesstocking small amounts of their products and updating theircollections often. For instance, other competitor brands update onlyonce a season while Zara restocks with new designs twice a week. Thestrategy is working effectively for the company due to its success inclothing industry (Tiplady,2006).For example, other retailers in this business traditionally havedesign teams that create products they believe will trend throughoutthe year. However, it introduces risks of losses when new designs areintroduced or due to change in consumers’ tastes and preferences.Zara’s business strategy eliminates this risk of unexpected fashionchanges through regular production. Besides, the company’s strategyis aligned supply chain management. Zara stocks few products, but atthe same time ensures consistency in its production and supply.Consequently, it enhances the company’s competitiveness in theclothing retail industry as its competition strategy goes hand inhand with supply chain strategy (Tiplady,2006).

Discussthe role of Zara’s SCM system. Suggest how it can be improved

Zaramainly targets the market in the major cities hence, most of itsstores are located in prime town centers. Then again, with each newstyle, Zara ensures that it creates artificial scarcity thatincreases desirability therefore, each of its stock can sell(Tiplady,2006).However, some improvement is necessary, as the company should improveits supply chain strategy to ensure all of its stock is sold out. Inmost instances, it means customers need to buy the desired productsas soon as they are released since the item may not be availablelater. Then again, most of Zara’s stores are located in primetowns, which may hinder a significant number of people from accessingthe products (Tiplady,2006).

Discussbriefly the supply chain problems faced by The Limited

Amajor problem facing Zara`s supply chain is that the company owns allthe channels of the supply chain. Therefore, it becomes difficult forthe company to expand globally due to the expenses incurred.Supplying to global markets is expensive, and despite Zara’ssuccess, its production is mainly in Spain. Hence, it poses aconsiderable risk to the company since any disruption in Spain wouldadversely affect its worldwide distribution. On the other hand, anydevaluation of the Euros can negatively affect the supply chain ofits products(Tiplady,2006). The clothing and apparel industry is always affected by thefluctuating oil prices due to the political unrest in the MiddleEast, and Zara is not exempted from such effects. Furthermore, thecompany’s global operations are also adversely affected by domesticcompetition from other fashion retailing companies. Thus, it hasslowed down the company’s index growth in some of these nations.For instance, Zara faces stiff competition in the United States ofAmerica from local businesses such as Chico.

Isan integrating brand delivery a correct SCM strategy for The Limited?

Zarais a retail company that makes decisions in a very coordinated way.Every activity is integrated with the supply to the different storesto the garments being already labeled and priced upon arrival to thedifferent stores. Through the integration of supply chain, Zara cancontrol allthe steps of supply chain operations involved. It controls design,sourcing, fabrication, distribution, and sales of their stylishclothing products (Tiplady,2006).The company’s supply chain strategy involves different stakeholdersto facilitate the flow of their products. For example, the employeesand customers are fully aware of the production and supply activitiesand their effect on other functions in the company. The integrationstrategy ensures that the customers know when new products will beavailable in the stores. Consequently, integration of brand deliveryis a brilliantly laid supply chain strategy (Tiplady,2006).However, these achievements have not exempted it from challengesbecause the company is in the retail industry. Nonetheless, thechallenges have given room for more improvement in the company bydevising ways in which to mitigate them.

Reference

Tiplady,R. (2006). Zara: Taking the Lead in Fast-Fashion. BusinessWeek Online.Retrieved fromhttp://www.bloomberg.com/bw/stories/2006-04-04/zara-taking-the-lead-in-fast-fashionbusinessweek-business-news-stock-market-and-financial-advice