Zara Supply Chain System

Topics: Inventory, Supply chain management, Retailing Pages: 7 (2138 words) Published: February 16, 2013
3- Zara Vertical integrated Supply Chain
To analyze ZARA supply chain, it is interesting to look closely at the product design, inventory management, evaluation of suppliers and vendors, logistics management, material management, time scheduling, information systems which are the main contributors in allowing Zara to offer cutting edge fashion at affordable prices. It is also interesting to consider other key performance indicators of Zara comparing to other peers in the retail market. 3.1- Design and Production

ZARA has been able to deliver fashionable and trendy cloth addressing all tastes through a controlled design and integrated process. ZARA designs all its products itself. Concurrent method design could be an adjective to the of product design process which involve the whole commercial team , designers, market specialist, procurement team as well as continuous feedback from store managers. Zara international employs a stable of more than 200 designers to help it keep up with the latest fashion. Most designers are young (26 average), they draw the design sketches then discuss it with market specials and planning & procurement staff. Designs inspiration is copied from different sources (trade fairs, catwalks, magazines) from all around the world. It is worth to mention that out of 40,000 designs only 10,000 are approved. This illustrates the flexibility of ideas generation and on the other hand the huge number of designs reflects the ability to meet almost all the fashion requirements by customers of all ages (up to 55). Parent company Inditex Group shortens the time from order to arrival by a complex system of just-in-time production and inventory reporting that keeps Zara ahead. Zara distribution centers can have items in European stores within 24 hours of receiving an order and in America and Asian in under 48 hours.

ZARA business is organized around processes not functions, to close the information loop. All team is involved in all processes. This method minimizes the time as decision is conducted in one room, and in direct proximity to the information. As a result, Zara reduces the inherent uncertainty associated with new designs in this industry that is characterized by long lead times and very high variability of demand e.g M&S could need a whole season to get a new item to stock.

3.2- Procurement
ZARA manufactures 60% of its products. By owning its in-house production ZARA is able to be flexible in the amount, frequency, and variety of new styled products. ZARA has outsourced less manufacturing than its peers. It has 22 factories and runs many of them often only in one shift leaving extra capacity to respond quickly to seasonality and unforeseen demand. Comparing to peers which rely heavily on overseas suppliers/manufactures which don’t provide same flexibility as these suppliers could request orders to be placed few months in advance.

Zara is outsourcing all the labour intensive tasks mainly the sewing, while the cutting is done in-house. This produces of saving labour cost, flexibility of meeting deadlines, keeping the designs/fashions strictly controlled.

3.3- Information Systems
-Zara store managers track sales data with handheld computers, reordering hot items in less than an hour. This lets Zara know what’s hot and what’s not. When a look doesn’t pan out, designers quickly put together new products. According to Dilip Patel, U.K. commercial director for Inditex, new arrivals are rushed to store sales floors still on the black plastic hangers used in shipping. Shoppers who are aware recognize these designs as the newest of the new, soon after, any items left over are rotated to Zara’s standard wood hanger. - Designers send their design suggestions to factory and to distribution department by scanning a design into a computer and electronically transmit to factory computers including computers controlled cutting equipment. - Designers input the designs patterns into CAD systems...
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