Logistics and Fundamental Chain Management – Zara Case Study

Question: Discuss about the Case study for Logistics and Fundamental Chain Management of Zara. Answer: Introduction Supply chain management is very fundamental aspect in ensuring business success both in its industry and in the marketin the current business world (XiangLi, 2014, p. 2). Businesses have been able to gain competitive and sustainable competitive advantage by adopting robust and outstanding supply chain management strategies. One of the primary aspects of the supply chain management which has been behind this success is logistics management(Li, et al., 2006). Logistics management is the element of the supply chain that deals with planning, implementing and controlling efficiency. Alternatively, it focuses on the storage of goods and services and any other related information starting from the organization manufacturing point through distribution to the destination of consumption in order to meet the consumer needs satisfactory(Cousins, et al., 2006). Given the potentially conflicting needs of the organization today, it is important for the company to adopt supply chain mechanism to hav e an extensive and comprehensive information on its products compete in the market(Chen, 2009). This will enable the company to align supply chain strategies either similarly or against the strategies of the competitor( Harrison Hoek, 2008, p. 15). To comprehensively and broadly understand the effectiveness of supply logistics management, this report uses the cases study of Zara Company. The paper extensively analyzes and evaluates the company logistics management strategies by comparing and contrasting them with the strategies of Dell, Myer and the United Technologies Corporation. Zara Background Information Zara is the Spanish global retailer fashion company vertically integrated into the company called Inditex. However, the company has majorly limited its operations in the continent of Europe to avoid completion in other continents especially in Asia where the company competitors have taken full advantage. The company design of manufacturing has been miles ahead of the other retailers in the industry. The company takes advantage of the new technology in developing new merchandise in combination with its robust resources to make sure the new ideas are executed as fast as possible. The company major competitors are Benetton, HM, and Gap. Among the company competitors, Zara emerges as the best regarding fashion and lower price. Vision and Mission Statement Zara vision and mission statement focuses on contributing to sustainable development of the society as well as an environment that is friendly. The sustainable society aims at improving the welfare of the general society whereas being environmentally friendly entails at establishing strategies to reduce environmental pollution by the business activities and operations. Zara Strategic Objectives The core company objectives are as follows: To expand its operations globally to increase its international market share. To expand their stores in their countries where the company already exist to increase the company profit margins. To create profit enduring growth both in the short term and in the long run. The increase the company product penetration in the market. Zara Logistics Management The Zara success is attributable to speed and quick responses to the matters that needs the company attention. This can be evidenced by the fact the company started from China 1975 and up to today, it has been able to open stores in more than 86 countries in Europe, Asia, Middle East and the United States. Besides, the company revenue sales have continued to grow annually. The company is majorly known for its ability to provide new fashion of clothes to all its stores quickly and in small batches. For example, within a week a store manager orders for clothes and two times in a week the new fashion arrives. The company has been able to achieve this competitively by efficient and effective logistics management. Reasons behind Zara Logistics Management Success Synergy between Company Operations Strategy The Zara overwhelming growth is linked to vertical integration with Inditex and diversification of the company products. After adopting the new design, the company manufactures the clothes and distributes them to the retail stores within a timeframe of two weeks. Similarly, the computer manufacturing company, Dell, was the major example of the company adopting the robust and efficient logistics management strategies. Dell manufacturing company used the direct model to reduce the cycles which are involved in the distribution of the product from the manufacturer to the final consumer. This allowed strategy allowed the Dell to hold inventory for just a few days instead of weeks. Other plays in the market were able to notice the Dell success, and its logistics management, and thus they followed the suit of shifting their goods using the direct model. From this argument, it is clear that when the company adopts the right supply chain strategies is deemed to succeed, otherwise failure will be inevitable. For example, United Technologies Corporation is widely known for its brilliant, innovative ideas. However, the company poor supply chain management have been lagging the global success of the company behind. This calls for the top company management to overhaul the company supply chain management in order the organization value stream. Just in Time Production Zara retail delivers high-quality fashion clothes which have been designed for different tastes to be able to suit different customers preferences. To ensure the production of high-quality products the company confines its production in the house. Besides, the company again makes sure that its factories have the potential to produce up to eighty-five percent during season adjustments. This ensures the customers' demands are met and addressed appropriately throughout the year. The company in-house production company allows it to be able to offer a range of new fashions as well as ensuring flexibility in in the amount and the frequency of the products manufactured. In the event of the new fashion, the company reacts very fast by designing the new fashion in large quantities(Stevenson, 2012). Some of the newly manufactured designs are distributed to the various retail stores, and the rest is kept to cater for the shortage which may arise in the market because of the uncertain delays. Each employee of the Zara is encouraged to offer feedback about the customer demands. However, most of the times are the store managers who communicate the customer feedback to the company top management as well as production department. This ensures the company designers design the products as the specifications of the customers. To meet all the customer demand effectively and satisfactory the company operates with an extra capacity to be able to address the fluctuations in demands that may arise during the year. This is because sometimes the company engages often in a significant number of shipments as well high demand from customers visiting the stores. This creates a condition of products and thus requiring the company to utilize the extra production capacity. This strategy increases the competitive advantage of the company as it can sell its products at a whole price due to the high demand. Additionally, the overall cost is reduced because marked down inventory is reduced dramat ically unlike the customer competitors. Most companies same as Zara has had efficient and successful logistics management in the segment of production. For, example Dell manufacturing company and Myer are good role models for many companies dealing with packed goods. Same as Zara, Dell, and Myer companies has been able to acquire a relatively good percentage of the market share due to the magnificent and outstanding logistics management techniques. For Dell and Myer to ensure the keep the existing as well as attract the new pool of prospects customers, the two companies adopt innovation in their production. This ensures the company tastes and preferences are kept in alignment with the changing technology. (Blanchard, 2015), acknowledges that to meet customer needs effectively and be able to cater for the dynamics in the field of business Dell needed innovation. However, not all great companies have been able to make it in the field of logistics management( Croom, et al., 2008, p. 77). Highly innovative technological compan ies such as United Technologies Corporation has failed to establish a robust and successful logistics management in its supply chain(Global Logistics Supply Chain Strategies, 2015). The company in time production has to effective as such as of Zara, Dell, and Myer due to slow flow of the company products. Inventory Management Findings indicate that piling up a lot of the inventory in the organization store may have very serious negative impacts on the company supply chain as well as logistics management(John, et al., 2011, p. 245). Either be the raw materials or the finished products the piling up of the stock should be highly avoided(Gayle Harald, 2011, p. 15). Similarly, Zara realized the importance of effective inventory management and established reliable and sustainable inventory management techniques. The company has put in place the inventory optimization models to ascertain the amount of quantity that should be made available to each retail store(Berfield Baigorri, 2015). The inventory shipped is strictly confined to ensure that each store receives only what it can sell. This avoids the building of the stock which may no longer need in the market because it has become outdated. Similarly, Dell and Myer's companies have been able to manage their inventor effectively and successfully. The companies ensure they produce only what they can sell in the market by estimating the size of their market share both locally and globally. Dells supply chain is based on continuous optimization schedule as a way of ensuring that the company supply chain is in line with the customer demands(Blanchard, 2015). On the other side, despite the United Technologies having the weak supply chain the company has been able to manage its inventory effectively. From the analysis of these three companies, it has come out clearly that inventory management is a very critical aspect of logistics management(Huh Janakiraman, 2008., p. 142). Centralized Logistics The secret behind the Zara success is centralization(Lu, 2015). The company has been able to make a decision in a comprehensive and coordinated manner. The company decisions are always made deeply, predictably and with fast rhythm with the goal of ensuring customers orders are fulfilled through the company retail stores. For example, the company sends at least two orders each week. To ensure adequate monitoring trucks departure at a specified time and also the shipments are supposed to the destination at the specified time. Upon arrival to the retail stores, the products are already priced and ready for sale. Ranging from the ordering of raw materials, production, distributing to the company retail stores allows Zara to monitor each activity to ensure everything is on the right roadmap towards the realization of the company objectives. Similarly, Dell and Myer companies have been able to coordinate their business activities using direct model supply chain. This achieved from point wh ereby the company products are shipped directly from the companies manufacturing points to appropriate destinations where the customers can pick them. However, the United Technologies has not been able to achieve this aspect successfully because of the poor supply chain management. Robust Distribution Network Zara is endowed with strong distribution network which enables the company to serve its retail stores in Europe within twenty-four hours(Loeb, 2013). Alternatively, the company manages to deliver the garments in its Asian and American retail stores within the time frame of forty hours. Likewise, Dell and Myer have effectively managed to provide their customers with their company products on time. This has been facilitated by the reliable distribution network that is supplemented with a direct model of supply chain management. On the other side, the United Technologies Corporation has been experiencing poor distribution network the act which has contributed to company poor delivery of products to its customers. Maintaining Sustainable Competitive Advantage The biggest challenge facing the majority of the businesses in the current modern world is not to achieve the competitive advantage either in the market or industry but to maintain a sustainable competitive advantage(He, 2012, p. 45). Alternatively, (Christopher Russell, 2008, p. 88)acknowledged that the sources of competitive advantage are the focal point where the businesses should base their competitive advantage sustainability from. Therefore, managers should always establish strategies that will ensure the company sources of competitive advantage are sustainable both in the short run and in the long run. Similarly, Zara became aware of this ideology and thus established the procedures for maintaining its competitive advantage. The company bases its competitive advantage on the following aspects. Operational Effectiveness: Many businesses suffer from this element by trying to perform better than other competitors in the industry. They fail to understand that each company is applying the same technique(Porter, 1985). However, Zari Company applied a different approach to this strategy. The company demand and supply chain are built on the vertically integrated strategy, unlike the company competitors who depend on outsourcing cheap labor from China. (Cuc Tripa, 2007, p. 2522). Additionally, the company business model is designed to continue providing its customers with new quality fashion styles at an affordable price. Strategic Position: Strategic positioning entails performing different activities from the business competitors or same activities but in different ways(Liqin, et al., 2009, p. 81). To gain the advantage of the strategic positioning techniques, Zara has adopted the use of technology. For example, the company target market is very wide as the company has defined its target market differently unlike the normal definition of the target market. Zara targets, educated and a young generation that understands and appreciates new fashion. With the use of technology through internet devices, the company new fashion gets know across all corners of the world. In addition to these two competitive strategies the company also has the following means of maintaining its leadership both in the market and in the industry. Unique business model unlike the majority of traditional textile designers. Creates value for their customers by provide them with the new fashions at the affordable price The online strategy has helped the company continue dominating in the market. Similarities among Zara, Dell, and Myer There I a big similarity among the three companies. The companies do not depend on the distributors to provide their products in the market but rather they sell them direct to their customers. Zara manufactures garments and offers them to the customers through its worldwide retail stores. Similarly, Dell manufactures computers and sells them direct to the customers through its website. Again, Myer sells its products directly to the customers. From the techniques of success from the three giant retail companies, it is non-arguably that other businesses should copy and adopt the formulas adopted by them. This is because the companies have been able to reduce the complicated and expensive procedures that sometimes ends making the product too expensive for the final consumer to purchase. Again, the traditional processes of availing product to the consumers are long and cumbersome. Conclusion The success of Zara is highly attributable to the vertically business integrated model. In addition to spanning design, outstanding marketing and sales strategies as well as just-in-time production and elaborative inventory management the company has been able to outperform its key competitors both in the market and in the textile industry. The company business model has to meet customer demand effectively and satisfactory within the shortest time possible. Again, the company has considered as an important resource and therefore it ensures the delivery of orders to retail stores is made on time. However, the European textile market where the company has concentrated its activities is becoming saturated. This challenges the company's future market share as well as its revenue profits. Recommendations Following the evaluation and analysis of Zara throughout the report, it has been found out the company is experiencing a very enjoyable business period. However, given the dynamics in the field of business, the company should strategically position itself to meets the future uncertainties. For example, the increasing competition in Europe where the company has greatly concentrated its operations may negatively affect the future success of the company. Therefore, this report recommends that Zara should aim expanding further in other regions of the world in order to gain compensate for its market share which may reduce in Europe. Again, the report recommends the company to adopt marketing strategies adopted by its competitors in order to be to penetrate the Asian market effectively. 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