Logistics Management strategies of Zara (Fundamental Reasons of Zara’s Success)

Logistics management is an important part of supply chain management which plans, applies and controls the effective and efficient forwards and reverse flows and storage of products, services and relevant data between origin point and consumption point so that they can meet the needs of customers (Ayers and Odegaard, 2017). The major objective of this report is to analyze the given case study about Zara which states that Zara is using effective logistics and supply chain management processes and techniques. Looking at the case study, this report includes the insights about the logistics and supply chain management system of one of the most popular fashion retailers i.e. Zara Company.Zara is a Spanish fashion retailer that is based in Arteixo in Galicia. It was established in the year 1975 by RosaliaMera and AmancioOrtega (Zara, 2018). It is the chief brand of Inditexgroup which is operating its business as largest apparel retailer in the world. This report compares the logistics strategies of Zara with a successful company i.e. Dell and an unsuccessful company i.e. United Technologies.Moreover, it discusses about different sources which can assist Zara Company in maintaining competitive advantage.

Logistics management strategies are the ways of analyzing the most cost effective method of distributing the products to market while attaining the service level goals. When formulating an impactful supply chain and logistics strategy, the company needs to understand to what extent logistics effect its customer and business operations.As the supply chainand logistics are changing and developing, the organizations are focused on developing different logistics strategies for specific customers and specific product categories (Sindi and Roe, 2017).

Nowadays, companies are making additional efforts so that they can manage theirbusiness and manufacturing operations effectively. Zara is one of the companies that have made various efforts to make its logistics and supply chain management effective and efficient. By holding a top rank in fast fashion and apparel industry, Zara is the organization that is engaged in creating different strategies in under its supply chain management
(Zara, 2018). As per the given case, the components of Zara’s logistics strategies are working as major factors behind its growth and success in today’s competitive business environment. Zara utilizes following principles to enhance their net income and manage an image of being a brand which is affordable and fashion forward. The major reasons behind Zara’s growth and success are defined below:

Fast Product Development Potential and Quick Response to Demands

By looking at the case study and Zara’s supply chain processes, it can be stated that Zara is using the processes and techniques which offer it the potential to introduce new products quickly. It has the capacity of distributing new products in its retail outlets in the duration of 4-6 weeks. It clearly shows that Zara’s lead time is less than its other competing firms. This manufacturing speed is one of the major aspects that assistZara’s strategies. Moreover, the company has the capacity to give quick response to the needs and demands of customers in the market. It practices a pull model in its supply chain and inventory management. It manufactures up to 1000 patterns and designs each month looking at the current fashion trends and store sales. The management at Zara monitors the spending of customers in the stores so that they can analyze and understand what types of patterns are being used and then repeat on their next patterns.

Fast Product Development Potential and Quick Response to Demands

Agility and Lean Thinking

At Zara, agility and lean thinking are seen in the use of just-in-time strategy of company. It is using just-in-time approach to provide the fashionable and trendy clothe which are served for different preferences and tastes. In this relation, manufacturing is done slightly to minimize the wastages in a controlled and effectively integrated system. Zara has capitalized on this approach in putting its stock in check. Firstly, the company is making efforts in maintaining a comparatively larger volume of manufacturing in-house ensuring that its manufacturing premises reserve approximately 85% of their production for seasonal modifications.This modification is significantin making sure that Zara is maintaining higher level of flexibility in amount, variety and frequency of products manufactured. Apart from having flexible production processes, Zara also heavily depends on sophisticated process of designing cloths from facilities which are near its designing premises’ location in Spain (Gorrepati, 2016).

Vertically Integrated Supply Chain

Zara is engaged in following the vertically integrated supply chain process so it practices control over its suppliers. This is the major reason behind the growth and success of Zara Company as it is vertically integrated with its parenting firm i.e. Inditex. It has involved various intermediarieslike distributors, producers, retailers and warehouses. In its factory premises, the cloths are manufactured and they are distributed to Zara’s retail outlets. Customers can purchase their desired products from company’s stores (Tomlinson and Fai, 2016). Vertical integration works as one of the most powerful factors of Zara’s success that lead it towards introduction of new and creative products rapidly. Zara’s production facilities are situated in Spain and these premises are vertically integrated.

Extensive Distribution Network

In addition to above logistics and supply chain practices, Zara Company has developed a strong and extensive distribution network so that they can fulfill the supply chain needs effectively (Ballou, 2007). This network manages the deliveries and shipments of Zara’s products to all of its stores throughout 88 nations where it has presence.Delivery of products to the outlets in Europe is completed within 24 hours by the use of shipments and trucks.Moreover, deliveries in Asian and American stores are done within 40 hours. The effectiveness in its distribution of good makes sure that its stores refill their shelves continuously with the new and enhanced designs according to the changing needs and demands of customers. This distribution network offers Zara a competitive advantage in fashion and apparel industry (Zara, 2018).

Thus, these are the major reasons behind the growth and success of Zara Company in textile and fast fashion industry.

As mentioned above, foremost reasons behind Zara’s success are like agility, lean thinking, quick product placement, vertical integration etc.Dell is an American multinational company that is engaged in offering computer technology, laptops and computers etc. This firm is operating its business successfully in international market (Dell, 2018). There are various differences and similarities in the logistics practices ofDell and Zara Companies. It can be stated that one of the biggest differences of both companies is that Zara is operating its business by using vertical integration in supply chain whereas Dell uses horizontal integration in its logistics and supply chainprocesses. Apart from this major difference, there are some other factors which can be used to comparethe practices of both the firms. Below are the bases which can be considered:

Agility and Lean Thinking

Manufacturing Philosophy

The major reason behind Dell’s success is its make-to-order strategy under which this organization produces the laptops and computers in very short timeperiod as per the needs of customers.In general, it can be stated that it manufactures the products considering the needs and demands ofits targeted customers. Additionally, it offers all the product information on its official and e-commerce sites. Thus, due to increasing use of internet and technology advancement, Dell is able to provide the product information about its product range. It also manufactures easily modified products (Dell, 2018). In comparison to this, Zara is focused on new patterns and designs every time. It has implemented the business strategy to sell out new cloths as quick as possible. It keeps its customers updated about its upcoming designs and apparels. Basically, the major objective of Zara is to offer best products in fashion industry and provide complete satisfaction to its customers. Thus, it can be stated that manufacturing philosophy of Zara serves the expectations and preferences of customers while Dell emphasizes on the make-in-products in its manufacturing philosophy (Wu and Tso, 2018).

Storage of Raw Materials and Products

It is also the major reason behind the revenue and profit generation capacity of Dell because it experiences lower inventory cost and it does not have any additional costs of warehouses and storage. Dell just has 7 hours of inventory and that helps the organization to reduce the costs via other costs like supplier storage, warehouses, retail storage and direct delivery. Additionally, Dell has not created any policy for its inventory management. On the other side, Zara has a large number of warehouses which assist it to store the apparels and distribute them efficiently (Martino, et al, 2017).

Channels of Distribution

At Dell, there are various channels of distribution like retailers, distributors, assimilators, suppliers and consumersis organization is operating its business by following the business to business modelunder which 90% of its computers and laptops can be ordered online. In this way, it directly sells its laptops and personal computers via e-commerce sites. By including more costs and time, this firm is linked to its clients. It reduces the transportation costs of this company. On the other side, Zara’s finished products are not warehoused and delivered to its outlets two times in a week. Its stores are graded on the basis of orders and sales (Carbonara and Pellegrino, 2017).

Apart from this, United Technologies is selected as unsuccessful company which is operating its business in American technologies industry. United Technologies is an American multinational company that researches and manufactures the products in different areas like aerospace systems, aircraft engines, building systems, fire and security, elevators, escalators and others.It is analyzed that this company gained success by using creative, excellent ideas and effective business approaches but still it is failed to manage its logistics and supply chain management practices. It is the major reason that company is not able to attain sustainable growth and success in perspective industry. The company is using poor supply chain system but still it is able to manage its inventory levels efficiently (Kjelgaard, 2018).

Vertically Integrated Supply Chain

Distribution network of Zara is very powerful and extensive whereas United Technologies is unable to establish a strong distribution network. It has affected the delivery and distribution of products to final customers. United Technologies is facing the issues due to shortage of skilled manufacturing personnel. The company had the worries about the potential of aerospace suppliers to enhance the production rapidly to fulfill the needs of Boeing and Airbus. This is the major difference between Zara and United Technologies’ supply chain is that Zara has enough workers and raw materials whereas United Technologies has faced the biggest shortage of workers not of materials. Moreover, there are the differences between production philosophies of both the companies. At United Technologies, the cost of switching the suppliers is very high and the effect of missed deliveries can be financially crippling and it may have adverse impact on the national security (Supply Chain Brain, 2016). As mentioned above, Zara is very much updated with the new trends and demands in the market while United Technologies is failed to meet the changing expectations and needs of customers and businesses. Thus, these are the major reasons that United Technologies is failed to get significant growth and success in the international market.

In today’s competitive business environment, each and every company is making efforts to attain significant and sustainable competitive advantage over other players in the industry. Zara is among the companies that are working effectively so that it can attain effective competitive advantage against other players in international textile and fashion retailing industry (Cowe, 2011). As mentioned above, Zara is a chief brand of its parenting company i.e. Inditex. Inditex has attained maximum score in the stock exchange market index for its making investment in socially responsible activities. In addition to this, it was known as International Retailer of the Year for its effective business practices. These are the aspects which indicate that Zara is achieving competitive edge by constantly expanding its business operations
(Yu, et al, 2017).

Behind its competitive advantage, one of the major factors is its effective strategies for invention and innovation. Innovation and quick new product development of Zara are very famous in the market (Cutcher and Achtel, 2017). In its supply chain, the company has entered into different partnerships and alliances that is the biggest strength of Zara. From the beginning of its operations, Zara has operated its business with the customer oriented approach that differentiates this company from other competing brands in fashion market.

Apart from above reasons, there are some other reasons due to which Zara is able to gain sustainable competitive advantage in its operations. This organization is successful in utilizing self concept of customers for their own benefits. The major reasons of Zara Company have attained competitive edge are given discussed below:

• One of the major reasons is that Zara has adopted an exclusive approach for boosting its operational effectiveness and efficiency. It has assisted the organization to attain the sustainable comparative edge (Grant, Wong and Trautrims, 2017).
• The chief competitive advantage of this company is having the benefits of customers’ self concept. Under this, Zara emphasizes on the self opinions of people and makes efforts to produce the designs and patterns of apparels according to the customers’ data.
• Moreover, this is one of the biggest competitive advantages of Zara that it’s manufacturing and production processes are completed very fast.
• This company has used effective strategic positioning approach to place its products in the market. It has adopted updated technologies to take the advantages of positioning strategies. By using social networking sites and e-commerce sites, the company is able to approach its targeted population and younger generations.
• Shorter lead time and delivery time are also the major reasons behind the competitive advantage of Zara in international market. Looking at the demands and trends among customers, the firm has new styles and designs and their product is completed in very short time duration (Delery and Roumpi, 2017).
• It keeps the customers updates about its upcoming products so customers always wait for Zara’s new cloth arrivals in the market.

In this way, these are the major aspects which are supporting Zara to gain sustainable competitive advantage. These aspects have assisted the company to attain significant growth and revenues in global fashion retail market.

Conclusion

Extensive Distribution Network

In limelight of above discussion, it can be concluded that logistics and supply chain processes contribute significantly to the growth and success of a manufacturing firm. Thus, it is very important to develop effective coordination among different parties such as suppliers, distributors, manufacturers, retailers and wholesalers etc. Above report indicates that the major reasons behind the growth and success of Zara are its supply chain processes and techniques. The given case shows that Zara is using effective supply chain principles so that they can deliver their products to end customers. Vertically integrated supply chain of Zara is the major component that differentiates it from other players. Furthermore, the report provides a comparison among the supply chain processes of Zara, Dell and United Technologies.

Thus, it is hereby recommended that the company should expand its business in more nations so that it can enhance its brand presence. Currently, the company is not using e-commerce sites for selling its fashion products as it thinks people should visit its retail stores. It should focus on enhancing its brand reputation among different segments of market and introduce the products for every age group and income level.

References 

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