Zara is a Spanish-based retail chain owned by the group Inditex who has taken a new approach in the industry and has completely changed the fashion world. Zara specializes in inexpensive fashions for women and men between the ages of 16 and 35. Zara has created a competitive advantage: they own their in-house production and they have an impressive logistic strategy. By owning its in-house production, Zara is able to be flexible in the variety, amount, and frequency of the new styles they produce. Although Zara has a successful business model that differs from that of traditional retailers, it also has problems that can affect its sustainable growth. The purpose of this paper is to analyze Zara’s business model and to identify their strengths and weaknesses especially in the logistics area which is, in our opinion, one of the main sources of its competitive advantage. To better understand its competitive advantage, it’s important to analyze its supply chain processes and how they add a good value to its customers, suppliers and stakeholders in general. Theoretical Analysis
In this project the company analyzed, Zara, is going to be focused in the logistics and supply chain management area. To begin with, we have to define the area of interest, but to define logistics we have to define a supply chain management first. Since the term "supply chain" contains the word "supply", many people naturally assume that supply chain must have something to do with suppliers like purchasing or procurement. While it is true that supply chain management does encompass the purchasing and procurement functions, supply chain management actually extends well beyond those areas. Supply chain management is the practice of manufacturing and distributing physical goods as efficiently as possible. Supply chain management encompasses the entire process of manufacturing and distributing physical goods, from supplier's supplier to customer's customer. Business functions that are within the realm of supply chain management include: forecasting and planning, procurement and purchasing, manufacturing and assembly, warehousing and distribution, shipping and transportation, returns and refurbishment, inventory management and order management. Or, stated more simply, supply chain management includes the functions: plan, buy, make, store, move, sell and return.
Now, establishing the environment we can focus on our area. Logistics is the portion of supply chain management that encompasses distribution, transportation and inventory management. To put it in context with the simplified description given above regarding the supply chain management functions of plan, buy, make, store, move, sell and return, logistics is the "store" and "move" functions. In some industries it is not unusual for transportation costs alone to be more than 10% of revenue. For many companies, transportation is the single largest cost element on their financial statements. Transportation costs are often double the expense of warehousing and inventory carrying costs, which means that warehousing and inventory costs can be 5% of revenue. So, the bottom line is, why don't corporations focus more attention on streamlining logistics to reduce costs? Inditex Organization
Strengths-They own their in-house production. -Logistics and supply chain: Just in Time Strategy-Rapid response to new trends.-Flexibility in the customer service.-Small stocks-Prices perceived as low by the consumer.-Concept of “exclusivity” in the store.-Huge variety-200 young talented designers at the base of their operation.-International Standardization-Zara’s CEO (Amancio Ortega) image as “Fashion Guru”.-Huge international presence with 1,100 stores in 68 countries.-“European Image”-Current use of technology innovation.-They don’t need to have an expensive advertising campaign to sell their products.-Their margin is 15% superior to that...