Analyzing Zara’s Success Factors Through Effective Logistics Management Strategies

Discussion

It has been found that the supply chain management is not only a process that serves to generate a reduction in the costs or budget in order to create business and operational efficiencies in an organization (Christopher 2016). The modern supply chain management consists of an alignment with the business process and suitable strategies so that the market and economic values are realized. A well –structured supply chain management also provides a competitive advantage to the companies over the industry rivals.  In recent times, the digital age has brought a complete transformation in the world of commerce.

Around twenty-two years ago, the entire process of supply chain was arduous and labor intensive. It used to consume a huge amount of time along with being mostly disorganized.  The age has changed and the delivery time has reduced from 2 weeks to just 2 hours.  The high speed communication and automated systems have leveraged the supply chain management and increased its demand in the market (Fahimnia, Sarkis and Davarzani 2015).  The present report will deal with the ideal strategies of supply chain management. It will proceed by analyzing the success factors of Zara’s brilliant supply chain management. It will further compare the failure or success of another company with that of Zara. The report will conclude by giving an outline of the entire report and recommend a better way.

It is well known worldwide that supply chain management is an essential part of most of the business organizations.  A well –maintained supply chain increases the customer satisfaction and company success. First of all, it boots the customer service. Since customers expect the correct quantity and product assortment to be delivered, it is facilitated by the supply chain management (Hazen et al. 2014). The customers also expect right time delivery of the product. Hence, the supply chain management is highly necessary for every organization. The supply chain reduces the purchasing cost. The retailers rely on the supply chains so that they quickly deliver the expensive products after avoiding the costly inventories in various stores. Taken for example, the 60” flat –panel plasma HDTV is required to be delivered fast to the electronic stores so that inventory costs could be reduced.  The production costs can also be decreased by the help of supply chain management. The manufactures are much dependent on the supply chains so that the materials are delivered fast avoiding the shortage of materials that could cause production shutdown issues.

Importance of Supply Chain Management

 Taken for example, delay in the shipment parts might cause an auto assembly plant shutdown and loss of wages upto $ 20,000 dollars per hour. The entire supply chain costs can also be reduced by the supply chain management or organized logistics. It is among one of the goals of the retailers and manufactures to fulfill the customer expectations and service goals with minimum costs. The firms are supported with competitive advantage in the industry by efficient supply chains. The profit lines of the organizations are heightened. For instance, the annual rate of cereal consumption of the U.S consumers is 2.7 billion packages. In the last five year periods, an amazing improvement in the supply chain has saved an amount of 13 minion dollars that can buy extra 13 billion boxes of cereals for the population.  The use of large fixed assets which includes the warehouses, plants and transportation vehicles can be decreased by proper supply chains.  The firms experience an increased cash flow because the product flows to the customers can be sped up by supply chains.

 The supply chains are also important because they serve some of the critical roles in the society. The supply chain capabilities and knowledge can be used for supporting the medical missions, other types of emergencies and conduction of disaster relief works. The supply chain workers are supposed to diagnose the problems in an unexpected disaster, collaboratively work for the disruptions in order to figure out the main issues.  Apart from the main functions it serves, the supply chain management helps to sustain the human lives, improve the healthcare of the human lives and protects from the climate extremes. It improves the quality of life and maximum times, serves as a determinant of the success of a particular firm.  It serves as a foundation for the economic growth of the society also creates jobs for the jobless.

In the year 1977, an article was published by the supply chain management Review named as “The Seven Principles of Supply Chain Management “. The article was written by David Anderson, Frank Britt and Donavon Favre.  At that time when the article was published, supply chain management wax a new term and the article explained the term properly and also analyzed the principles of supply chain management (Fredendall and Hill 2016). The article is now considered as a classic article. First of all, the article asks to segment the customers based on their different needs of distinct groups and adapt the supply chain to serve these segments. Next, it asks to customize the logistics network according to the service requirements and profitability of the customer segments. It further says to listen to the market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation (Monczka et al. 2015).

The Principles of Supply Chain Management

 It suggests to differentiate product closer to the customer and speed conversion across the supply chain.  Next, it asks to manage the sources of supply in order to reduce the cost of owning the materials and services strategically. It suggests to develop a supply chain which is technology oriented and supports various levels of decision making giving a clear overview of the products, information and services (Pagell  and Shevchenko 2014).  It supports to adopt the channel wise spanning performance methods in order to gauge the collective success in reaching the customers efficiently and effectively.

Zara is a Spain based fast fashion retailer that deals with the clothing and accessories. It is primarily based in Galicia. In the year 1975, the company was founded by Rosalia Mera and Amancio Ortega. Through the past years, the company has earned the position of world ‘s largest apparel retailer. The company is highly innovative and manages upto 20 clothing collection in a year. There are so many brand associated with Zara such as Massimo Dutti, Oyosho , Uterque , Pull& Bear and many others.  The stores of Zara consist of both men’s and women’s clothing along with the kids’ wear (Successstory.com 2018). The products of Zara are mainly based on the consumer trends. It is apparent that Zara has a highly responsive of the supply chain which carries the new products twice a week. The clothing is processed through the distribution spots of Spain. The clothing is delivered within 48 hours and the company produces more than 450 million items each year.

• It has been found that Zara’s well –structured supply chain is the key factor behind its fast success. In terms of speed the company is among the best. The business operations are not hindered by any kind of obsolescence in the products.
• The designers of Zara stay close to the fashion trends in the market and following that manufacture new designer products as fast as possible. The entire process is done with maximum consultation with the colleagues and ensuring that the product is delivered to the end-users within the promised time.
• The customers become satisfied because of the fast innovation from Zara.  The final product is shipped to various retail stores of the company aligned with the fixed distribution schedules.
• There are efficient store managers who control the electronic devices to manage the real –time orders. There are twice- weekly deliveries of the products.   They always follow the plan B when one line does not sell, they simply move on to redistributing t to another store. All the decision making is done fast and without wasting time so that the products reach respected stores and reach the end –users as soon as possible.
• The company has the full visibility of its operations.  In terms of truck, production and warehousing, the efficient members of Zara’s supply chain facilitate fast response to when necessary. Hence, Zara is referred to as ‘fast fire fulfilment’.
• Hence, after the analysis of Zara’s supply chain that stars with the follow up of the customer needs, market trends, manufacturing of the desired product with extra and fast innovation, distributing the products to the 700 ~ stores around the globe and reaching to the hands of the end –users, it can be said that it is really a key factor for the success. The supply chain of Zara follows all the important principles of the supply chain management and facilitates its smooth and successful ongoing.

The lack of proper administration and maintenance of supply chain might cause so many disasters that contributes to the downfall of the company reputations and profits. The fatal supply chain mistakes have caused a good range of disasters in the firms’ operations.  However, it is also true that with disasters come new opportunities and lessons from which other organizations can learn and get valuable insights. For instance, in the year 1999, the famous Hershey’s chocolate company had suffered from a doomsday. The company failed in delivering over $100 million of Hershey’s Jolly Ranchers and Kisses to their retail stores in time on the occasion of Halloween (Pemeco.com 2018). The consequence was frightening enough. They lost more than 8% stock in a single day. The only failure of the company was to launch its products in given time and in the new distribution system too. The orders taken in Halloween could not get fulfilled. It can be said that when there is a hurry in launching new systems, such disasters can take place. However, Zara is a much organized firm that uses technologies but in a more disciplined manner and meets the customer demands. The Hershey’s chocolate company would not have to face such failures, if there had been proper supply chain management systems following the principles to the core.

Overview of Zara

Hence, after examining the importance of supply chain management and the issues which might arise due to the lack of proper maintenance of the systems and time management factors, it is recommended to the Zara company must be always ready for the unexpected disasters.  They must always operate with a comprehensive perspective throughout the steps they follow in their supply chain. They should always be prepared for the disruptions in their supply chain and avoid launching new products unless they have sufficient suppliers and resources.  The disconnection between the planning and the delivering stage has to be fulfilled because there is always huge difference between thinking and accomplishing.  The right kind of outside help has to be brought in when necessary. In this was the company can retain its position and continue the smooth flow of work. In this way the company can maintain its competitive advantage over the rivals and sustain successfully in future.

Conclusion: 

Therefore, it can be concluded that the above report well documented the importance of a proper supply chain management system and Zara’s supply chain management as its key success factors. The report further demonstrated the way a lack of proper management can result in a disaster as displayed by the example of Hershey’s failure in maintaining the distribution of products.  It has been further demonstrated that the lack of maintenance and observation can push the company towards loss in profitability and reputation too. It is lastly recommended that in order to retain the competitive advantage of Zara over the rivals in the industry and continue to sustain with roaring success, they must be prepared for all kinds of unpredicted disruptions in their systems. There should be sufficient resources while taking up new orders and at the time of implementing new systems or technologies, they must ensure that the new implementation is going to stand up in their expectations avoiding any kind of internal and external failures.

Reference: 

Christopher, M., 2016. Logistics & supply chain management. Pearson UK.

Fahimnia, B., Sarkis, J. and Davarzani, H., 2015. Green supply chain management: A review and bibliometric analysis. International Journal of Production Economics, 162, pp.101-114.

Fredendall, L.D. and Hill, E., 2016. Basics of supply chain management. CRC Press.

Hazen, B.T., Boone, C.A., Ezell, J.D. and Jones-Farmer, L.A., 2014. Data quality for data science, predictive analytics, and big data in supply chain management: An introduction to the problem and suggestions for research and applications. International Journal of Production Economics, 154, pp.72-80.

Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.

Pagell, M. and Shevchenko, A., 2014. Why research in sustainable supply chain management should have no future. Journal of supply chain management, 50(1), pp.44-55.

Pemeco.com 2018. A Case Study on Hershey’s ERP Implementation Failure. [online] Pemeco Consulting. Available at: https://www.pemeco.com/a-case-study-on-hersheys-erp-implementation-failure-the-importance-of-testing-and-scheduling/ [Accessed 10 Dec. 2018].

Successstory.com 2018. Zara Story – Profile, History, Founder, Products, Stores, Locations, Founded, CEO | Clothing Companies | SuccessStory. [online] Successstory.com. Available at: https://successstory.com/companies/zara [Accessed 10 Dec. 2018].