Supply chain management at zara fast fachion

Supply reach management at zara fast fachionZara, a clothing manufacturer in Spain was launched in 1975 as a local pedigree. Today, it is the third macroscopicst manufacturing companion in the world (Chemawat Nueno, 2006). The company, Inditex, has everywhere twenty manufacturing plants in Spain and to a great extent than 1,000 caudexs in over 30 countries in the world. The highly applauded manufacturing strategy was envisaged by owner Amancio Ortega Gaona. He demonstrated that lean inventories and flexibility whitethorn be even more(prenominal) crucial than cheap labor, a notion that just revolutionizes the exodus of manufacturing jobs from the west. His brainstorm was successful becaexercising the company is now a case study at business teaching institutions from Wharton to Harvard and the IESE in Spain. This paper is going to discuss how Zara uses applied science to improve ope judicious responsiveness to customer expectations, and at the same season to cut down costs in certain atomic number 18as and also the factors Zara bases on determining the cost of her harvest-tides. Use of technologyIdentification of way burn at Zara is subdivision of the culture. A point-of sale (POS) outline is utilize in the stores and the tuition gathered is sent to Inditex. Also, the POS technology has entirelyowed to tight up the associate between vendors and led to improvements in the rule process, in deliveries and in the dispersal system as a whole, and then contri exactlying to increase the aim of responsiveness of ZARA. Moreover, managers consult personal digital assistant on everyday basis to check the availability of upstart designs and to place their orders to what they think put on be much appreciated by their customers. By so doing, the store managers assist shape designs (Innovels, 2008).Information and communication protocols at Zara are radically different from its competitors. The company spends less than 0.5 pct of derive revenu e on information technology and employees in the IT department account for only 0.5 pct of the companys heart and soul workforce (Chemawat Nueno, 2006). This differs from their competitors who spend about 2 percent of their total revenue on information technology and have 2.5 percent of their total workforce dedicated to IT (Ferdows, 2004).Zara dumbfounds use of homosexual intelligence and information technology such(prenominal)(prenominal)(prenominal)(prenominal) as their PDA devices to come up with a cross model for fuse of information from stores to the headquarters. For instance, the companys managers utilizes handheld devices to charge formalized information concerning feedback from customers and ordering exigencys straight to in-house designers. Apart from keeping Zaras designers informed on fast-changing demand and trends, this technique also provides the company with imminent on less-desirable harvest-homes. hostile Zaras hybrid model (which combines IT application and human intelligence), competitors rely mostly on information technology.The hybrid model results into well managed inventories, reduced costs from obsolete products, linkages between supply and demand, nevertheless, there is simmer down room for upgrading in their IT processes to draw in more reliable management of inscription levels. Therefore, this unique approach of human astuteness assisted IT solution provides cost advantages to the companys operations and assists Zara to abide by her primary principle to be in a position to speedily respond to qualifyings in consumer demand (Chemawat Nueno, 2006).The SKU system allows the gathering of data to befriend identifying and producing garments sought by customers, and in the right quantities, thereof improving the ordering system at the distribution center. ZARA, then, successfully maintain control of its inventory while keeping inventory costs at a dispirit level.Zara also made considerable investments to improve its log istics system and to develop its IT infrastructures. ZARA chose to practice a Just-In-Time (JIT) manufacturing system as well as to invest in a sophisticated telecommunication system, thus improving the information flow between headquarters and supply, production and sales sites and thus avoiding any suit of bureaucratic structure. Furthermore, this system allows ZARA to take appropriate and quicker decisions due convey to the information flow being very fluent. The JIT system allows ZARA to improve quality, to mitigate manufacturing time, to eliminate waste, to increase productivity and to have better relationships between suppliers, thus improving its overall responsiveness.The use of a consumption information system linking together the merchandising and the back-end processes is an original technique used by ZARA that permits figure teams to possess relevant information about customers preferences. This technology contributes without doubt to make better the responsiveness of ZARA indeed, the data gathered by this system allow teams to pr introduce in the raw designs that match consumers expectations, and in a timely manner.A sophisticated mobile tracking system speeds up the distribution system by proceeding high events of garments in a short finale of time, thus minimizing intervention of labor force while increasing productivity. As garments did not stay for a long time in the warehouse, the company is able to cut down storage costs.Zaras capabilities, concepts and strategic planning as demonstrated through their business model, tend to be heading in the right direction (Chemawat Nueno, 2006). Their concentration on core operation as well as production capabilities, resistance to outsourcing, and focus on the fashion pulse have made this company atomic number 53 of the most rejoicing clothing retails.Technology is present in all four crucial steps that makes ZARAs responsiveness so fast.(Illustration taken from Devangshu, D., 2002) From wh at you see in the case, does ZARA monetary value on the marked or found on other factors?Zara utilizes market place-based pricing. In this method, the process is arrived at by bargaining among many sellers and many buyers in a competitive market. For market-based pricing, the fundamental question is how can a product be valued by the market? The answer to this question is contextual and conceptually based that is, it depends on a particular product category and a set product of reference. In some product categories such as clothing, Zara expresses value as monetized costs and benefits, and in purely stinting terms. The fundamental concept is economic value to the customer. In real sense, rational customers add up the expected benefits, relate them to the coupled costs, and buy the companys products if it provides affluent benefits to justify the price, and the most complimentary relative to other spending alternatives. Managers at Zara turn up as much as achievable to monetiz e all the costs and benefits and with economically rational customers, this pricing analysis is fundamentally straightforward.That is, the customers make decisions basing on a multitude of factors that are crucial to them. Their decision whitethorn be a combination of both non-economic and economic factors that can be subjective or objective (Ferdows, 2004). In this more obvious case, during the head start point for deciding a price Zaras managers first calibrate the implied greatness of the acquired benefits and relate them with the price of the product in a competitive market (Chemawat Nueno, 2006). They use an analytical technique called value mapping for framing the price benefits relationship.Nevertheless, if a decision was taken to enter a specific market, buyers in effect turn off the extra expenses of supplying it from Spain. Prices were moderate, 40 percent high in many other European countries than in Spain, 70 percent higher(prenominal) in the Americas, and in Japan the prices were 100 percent higher (Chemawat Nueno, 2006). Zara had analytically marked local currency prices for all nations in which it has branches, on each clothings price tag, calling the latter atlas with the expansion of its footprint. As major markets in Western Europe started using the euro at the informant of 2002, the company simplified its price tags to list only the price in the local markets in which a specific clothing can be sold, even though logistics were complicated by this (Chemawat Nueno, 2006).Zara made use of vocalise ventures in bigger and more crucial markets where there were hindrances to direct entry, in many cases those related to the difficulty of getting enough retail seat within the cities. At the beginning of 2002, many Zara stores abroad were managed through joint ventures. Interests in all joint venture were equally shared between Zara and their partners. With much lower prices in Spain and the information usable to the public, a large percen tage of Spain citizens afford Zara products. In a country such as Mexico, there is a narrower targeted customer base. This is due to informational and cultural reasons. Only the diaphragm and upper class in Mexico can afford Zara. For an lop retailer what are the advantages and impairments of online distribution? Can Zara make it work?Responding to increased rivalry in the industry, to changing customers preferences and habits, as well as to a drop in High Street spending (BBC NEWS furrow, 2010), it was crucial for ZARA to lead an online, e-retail distribution service.In an article published by the BBC NEWS Business (2010), Julia Caesar wrote that consumer confidence is waning and many fear a further economic tiresomedown. Online fashion sales, meanwhile, are proving resilient. Online shop has have gotd a dramatic growth, as more and more people are being equipped with lucre connections. It has been widely acknowledged that remote to traditional retail stores, online reta ilers benefit from more regular and stable revenues even in period of crisis. According to Forrester consulting group, shopping on the net is expected to see sales grow to 94bn ($ revenue bn) in Western Europe by 2014, from 56bn in 2009. Therefore the lucre presents great opportunities for the future. An online store is also a good way to musical accompaniment existing traditional stores, because customers oecumenically have access to a greater choice of products rather than when going to their local store. Thus, it can be comprehend as being more convenient. An online retail store will offer the hazard for people who do not have time such as business people to obtain the product they want to begin with the next ZARA collection is brought to the market. Indeed, with ZARAs rapid product turnover, introducing new collections twice a week, these people may not have time to get the product they want before the collection ends. An online retail store allows remedying to this proble m. Moreover, an online retail store gives opportunity for ZARA to reach new markets without materially opening stores in these markets, thus saving real estate costs. It can also be used as an online market entry strategy to expand worldwide or to test the possibilities of doing commerce in a particular country. Moreover, E-retail distribution may satisfy customers who did not have positive customer service experience when shopping in-store and it may help reaching new customers who do not have slack access to physical stores. To finish, e-retail will give the opportunity to ZARA for gathering more information about customers and to develop personalized merchandising tools, such as online relationship marketing, using diversified channels.Conversely, online retailing involves some(prenominal) disadvantages. The most apparent disadvantage, particularly in the apparel/fashion industry, is that customers cannot try the product and in case if the product does not fit, customers woul d have to send the product back to ZARA and make a new order or wait to get reimbursed. Even if this process can be shortened, this still takes time. A reporter from Fox Business News (2010) analyzed that one of the snags of Inditexs fast-fashion business model could be the difficulty of re interchange the typically large number of goods returned by online buyers because those goods could already be out of date, thus adding another disadvantage to the choice of retailing online.There might be a plight concerning returns for Inditex the e-retailing accounts for an important amount of them. Also, this would hardly match with their fast fashion selling strategy which involves getting rid of the stock and selling the products very rapidly. ZARA may face a problem if stocks re-emerge weeks later thus bear upon the sales flow of the company.Another problematic is that ZARA may fail to tie different customers than youth in their 18-34, eager to proceed to online shopping contrary to old er populations. Even so the launch of a website makes it virtually possible for anybody in the world to access it ZARA would have to do extra efforts to force both its existing customers who are presently shopping at physical stores, but also to attract new customers. This is not an easy tax considering the vast choice of competitors who are only a click out from ZARA on the Internet and who have entered the Web much earlier. An interactive, attractive website, easy to use, would be the correct manner to adopt.There are more general drawbacks linked to online retailing. Depending on the number of virtual shoppers, the website may be slow to load, thus frustrating customers. An e-retail store involves maintenance costs and may pick out hiring technical staff such as computer engineers. Because of the required maintenance, sections of the website or the website as a whole may not be available at certain moments. Privacy as well as warrantor and protection of data may prevent cust omers from buying online. Indeed, Hoffman et al. (1999) have evince that 95% of Internet users have, at one time or another, refused to give personal information.To make it work, Inditex would need to accompany the launch of the ZARA website with appropriate marketing campaign in order to en confident(predicate) that customers are aware of such initiative. ZARA would also need to optimize its image on the Net, by commit in search engine optimization systems for example. ZARA would have to make sure that its customer service team is capable of providing adequate support to e-customers such as providing them with technical help. Another challenge for ZARA will be the desegregation of its e-business and online operations within its current supply chain. This might require reorganizing part of the supply chain by modifying existing machinery (to properly route online orders) or investing in new equipment in order to integrate this new e-shopping process. To finish, despite the fact t hat ZARA has invested in effective, high-tech IT systems, it seems that the company lacks of skills and experience in the field of the Internet, social networks and new technologies such as Smartphones, even so the company is present on all these media. By now, ZARAs visibility and popularity on the Web testify from its success. However, ZARA, after having launched its website in September 2010, has been criticized because it was not congenial with all web browsers also ZARA recently launched an application for Iphone that has been perceived as pretty disappointing by users, as price of products was not displayed, no contact information was provided, a store locator was absent, thus do the application rather obsolete. Therefore, as a key actor of the apparel industry, but also because of increased competition and of the opportunities it offers, ZARA had no choice but to be present on the Internet. However, ZARA might need consulting advice in order to sustain and develop its prese nce on the online platform and to develop new innovative tools, as well as to create a hum in social networks and online communities that are booming nowadays.Iphone application from ZARAConclusionThe exceed way for Zara to increase their sustainable growth is to look for new opportunities in the apparel market. With ever changing consumer trends that are due to globalization, there are growth chances for companies such as Zara to increase their growth. Even though they use both information technology and human intelligence they still need to invest much in technology. Their pricing strategy which is market based seems to be successful as it bases on consumer satisfaction, and is ever dynamic and changes with change in consumer behaviour.