Discussion

Supply Chain management refers to the relationship of an organisation with its customers and suppliers for delivering the best customer services at lower price (Handfield et al., 2015). It requires effective management of supply chain with an aim of maximising the value that is accorded to the customers and for the attainment of the sustainable edge over the other potential competitors. It is more of a continuous and conscious efforts made by a company for developing and running the supply chains in efficient and effective manner. Zara is one of the organisations whose concept of supply chain management that greatly favours its activity of market excellence (Gupta & Singh, 2015). Its success in Spain has built a very strong system for information exchange with every part of its supply chain. It considers its every part of its supply chain management as important for its overall success in the business environment.

However, this report is going to elaborate on analysing the supply chain management of Zara that is helping it in boosting its customer value in the market of Spain. With the same, it shall assess the issues in the provided case study and identify the logistic management strategies that has enabled the company in succeeding in its business. Furthermore, the fundamental reasons behind its success with an in-depth comparison of it with the other successful and an unsuccessful company would be assessed. The chosen companies are Dell and Myer. Moreover, several recommendation shall also be made for the parts of Zara in order to maintain its competitive advantage.

Zara is one of the well-known retailer, founded in the year 1975 and is based in Spain (Kahn, 2018). It deals with clothing and accessories. Today, the company has developed itself to become the main brand of Inditex group. Formerly, it was a mere outlet for night wears and lingerie’ cancelled orders, which has enabled the company for establishing a powerful foundation in the alliance in between the retail producer and retail trade. At present, it comprise of more than 2000 stores all over 88 different nations. It generally selects suitable and expensive real estate locations for opening a designated flagship stores. Although Zara is regarded to be one of the global multi-national companies, it is a subsidiary of Inditex, world’s biggest apparel retailer (Hurley, 2017). It is also to note that Zara prioritise on its customers and on establishing of a supply chain management that is demand-centric. Notwithstanding this fact, there are many other factors that have contributed to the Zara’s success that it is experiencing at this moment. One of them is of establishing the super-fast turnaround and taking the customer preferences into consideration as well as having a wide range of services and products. Such is logistics is working in favour of the company and is making it appealing to its target customers.

As per the case study, it has been assessed that the main competitors of Zara are H&M, Benetton and Gap. All these companies are battling for taking the highest market stake. In the year 2008, Inditex had paved its way for reaching highest success peak and gradually, it became the biggest fashion retailer in the world. However, the economic condition around the globe has changed drastically. At present, products contain very short lifespan. With the same, the markets are also very unstable and demanding in the contemporary environment. Hence, this in turn is making no company rely on its glories for long term (Caro & Martinez-de-Albeniz, 2015). The delivery speed of Zara along with its vertical integration and its spread of Just-in-Time operations as well as the usage of the process of technologically advanced logistics is the key of success. With the primary things that aid to its competitive advantage are its collaboration of the key tasks and the way it use its core competencies and organisational resources.

Company Background

Both Zara and Dell are well-known organisations all around the globe. They have global presence and are regarded to be among the prosperous corporations in the world. However, unlike Zara, Dell manufactures computers. The supply chain of Dell is very simple and it comprise of three key players- supplier, consumer and Dell. The consumers place the order, Dell procure the supplier and they then immediately assemble and supply the order to the customers.  On the other hand, the supply chain of Zara is completely different from that of Dell.

Moreover, Dell follows a supply chain model that is horizontally integrated (Aitken et al., 2016). On the contrary, Zara has a vertically integrated one. Dell is also isolated from the process of production as it hires third party suppliers for its finished goods and their delivery to the customers. While Zara has the complete control over different production phases of its products. It also control on its trade right from crafting, the manufacturing process to the delivery process. The total control on Zara helps them to respond quickly to rapidly changing customer and fashion preferences of the customers. It allows Zara to issue new designs in lesser time as compared to its other competitors. Moreover, it is also to state that Dell need to harmonize a wide range of small procedures and it control the entire thing and at the same time, make the required changes that is much easier. However, it is to state that both approach is ideal for the respective companies.

It is also to note that Zara follows a make to order strategy. This means they make their products as per the requirements of their customers at very reasonable price. While Dell also provides a wide range of customised products on its company website. It also designs the products that are easily customable. Moreover, Zara is very eager in introducing new products and designs to market. It also seek for launching their products very quickly. It believes that more styles are directly proportional to more choices. The company inaugurate the products in their limited showroom and among them, the stores collects few pieces of it new products. This is making all their products exclusive in the market. Furthermore, Dell has a very low inventory costs that have absolutely no extra charge on the warehouses. Instead of 10 days of inventory, they have 7 hours. On the other hand, Zara has a wide range of warehouse to store their products as well as for circulating them.

Firstly, Myer has made absolutely no efforts for segmenting its market along the psychographic and demographic lines of its customers as well as their products use. On the contrary, Zara has segmented its market along the lifestyle and demographic lines. Secondly, Zara chose for branding itself as the biggest leader of the fashion industry that offers money value to its customers. Its concept of “My Store” is really ambivalent (Cervellon & Vigreux, 2018). It is targeted towards the market. Its target group ranges from 20 to 35 years of age. On the other hand, Myer brands itself as one of the efficient department stores with an exclusive and extensive collection of products. But it have unsatisfactory customer service. With the same, Myer makes use of discounting its sales strategies for inviting more number of customers. However, on the contrary, Zara is motivated for launching its seasonal fashion products with a tempting promotional demonstrations as well as ample of customer services.

Market environment of Zara

a. Inditex has been named as the “International Retailer of the Year” by the World Retail Congress for its best service and practise in the international retailing (Mullins et al., 2009). With the same, it has also received high score in the stock market index for its social responsible investment in the year 2011. All these indicated that Zara has a tendency of continuously expanding its business. Also, Zara’s quest for the innovation and invention is one of the other causes for competitive advantage in contemporary world of customer-driven market.

b. The new innovation and product development of Zara is also appreciated all around the globe. With the same, it is also accredited for its effective leadership in service.  

c. One of the other strength of Zara is that its partnership, collaboration, alliance and the clarity that it has in its supply chain. All these aid to the concept of a learning and developing company. As per Gold, Malhotra and Segars (2013), learning organisation that gives assistance in individual and collaborative learning, alliance and partnership in conjunction to the Top twenty five supply chains.

d. Cooperative ethos, sense of sympathy and continuous training are considered to be the major characteristics of Zara.

e. The company is customer-oriented. It is subjective to the establishment of Zara and is also distinguishing the link in between the retailers and the manufacturers. This depict a receptive and exposed approach of Zara.

f. Fidelity and brand credit of Zara hols very authority in the contemporary global market. It is to note that Brand Value is a major source of competitive advantage for any company. According to the report of Cattaneo, Olivier and Staritz (2014), Zara ranks 219 among the top 500 brand in the global market. Whereas H&M is ranked 89, Gap- 425 and Benetton as failed to hold any place.

g. The company has been positioned at part with the M&S and Dove and also, it move in advance of Hyundai, Sanyo and Colgate as well. There are several methods that it use for calculating its brand value and to calculate this DCF technique has been used.

Conclusions

From the above study it is clear that the competitive advantage of Zara stems from its effectiveness in its Supply Chain Management. This report has entailed a deep assessment of the strategic method of Zara to the Logistic Management, competitive advantage and customer value. It has been concluded from the above analysis that Zara’s lean thinking, agility, the strong distribution of networks and its strategic management ensures the high delivery speed of products and services to its customers. It is also to mention that the supply chain of Zara is very unique and it is evident from its inventive and collaborating capacity as well as its centralised logistics. Moreover, Zara also handles the feedback of its customers with high responsiveness and at the same time, it integrates the same into all its products and services that provide greater advantage over its competitors. The strategy that Zara uses is basically customer centric and is also based on the belief that the competitive advantage is achieved by means of adding value to its customers. Lastly, it is to conclude from the above analysis that it is not necessary that a supply chain that works in favour of a company would also work in favour of the other. Sometime, it might be detrimental to the rest others.

Comparison of logistic management in between Zara and Dell

From the analysis of the above, it is to mention that despite of the success of a lean and nimble supply chain management, there are several weaknesses that Zara possess and that needs much improvements and attention in ensuring sustained competitive advantage that it at present, has. Below are some recommendations made for sustaining its competitive advantages:

1. Zara is performing below average in its use of e-commerce for conducting its business. This contemporary world is highly inclined towards using internet and social media for selling and marketing its products and in this respect, Zara has been left behind. Despite of its highly effective current strategy, it has low online presence. Hence, it should device an effective e-commerce tool for its business by means of which it could reach its target customers in diverse region. With the same, this could also be highly effective in increasing its customer base for covering the regions which are not physically covered by their physical shops and stores. It would also help in maintaining its philosophy of lean inventory because the products would be available on the basis of the customer demands. Therefore, Zara must depend on the current solid distribution network for increasing its online presence by shipping the products right to the customers.

2. Zara should work towards forming alliances with its competitors like H&M, Gap etc. in the supply chain management. This would benefit it in great terms. Forming alliances for the benefit of the organisations is one among the different ideals of the co-opetiton models of logistics. Zara should strive to form a horizontal collaborations with the existing players as well as an extension of the game theory of concept. This would help in minimising the distributions of the supply chain as the threats that are posed by the increasing phenomenon of terrorism is neutralised. With the same, it is also to state that the activities that Zara competes with the other rivals should also be maintained in-house for reducing the risk of being eroded.

References:

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