Zara is one of the successful manufacturers and retailers in fashion industry

 

1. What advantage does Zara gain against the competition by having a very responsive supply chain?

Zara is one of the successful manufacturers and retailers in fashion industry. It business strategy is unique comparing to competitors. As demand for clothing is unpredictable, Zara is flexible in responding to the need and want of consumers. First of it responsive strategy is the “Fast Production Cycle” with “Efficient Distribution System” this allow Zara to introduce new design and distribute to all store by weekly. More frequency product display in stores, with more choices of new design attract most consumers and likely to match consumer preferences. Furthermore, Zara has adopted a strategy of scare production, which encourage consumer to shop more frequency for new design. This strategy allows Zara to attract more consumers, build customer satisfaction and increasing level of their loyalty. Nonetheless, Zara is able to sell most of it products at full prices and at low markdown prices which result in less inventories. Therefore, Zara could gain high profits margins.

2. Why has Inditex chosen to have both in-house manufacturing and outsourced manufacturing? Why has Inditex maintained manufacturing capacity in Europe even though manufacturing in Asia is much cheaper?

Inditex chose to have both in-house manufacturing and outsourced manufacturing because In-house manufacturing allows Zara to be able to respond quickly to the changing trend. Zara will be flexible in producing products with uncertain demand especially the fast move of new product design. Outsourced manufacturing is for the general, common and out season products. This outsource manufacturing also benefits the company as low cost of production, supplier knowledge bases and development and the available of new technologies and innovations.

Zara maintain manufacturing in Europe rather than move everything to Asia because the company and management believe that having a factory in its own country, the company can manage and response to unpredictable quick change of demands. Although the cost of production in Spain is consider to be high comparing to Asia countries but the Zara factories is located in the areas where is known to be a cheap labor in Spain. The factories are also located near to the distribution center so the cost of delivers finished good to the DC is low.

3. Why does a Zara source product with uncertain demand from local manufacturers and products with predictable demand from Asian manufacturers?

Zara sources products with uncertain demand from local manufacturers because local manufacturers can supply quick products to the need of each store in local market. This strategy is to respond to the fickle need and to improve customer satisfactions. Another reason for Zara to produce goods in Europe because it wants to test the demand for new innovative design before it distribute to worldwide market for better customer understanding of that specific goods. On the other hand, products with predicable demand sources from Asia manufacturers because Zara could produce product with low cost. Since it has certain demand with the large volume of productions, Zara chose to manufacture that good with low cost but large amount of goods for greater profit margin.

4. What advantage does Zara gain from replenishing its stores twice a week compared to a less frequent schedule?

Frequent replenishment allows Zara to continue supply new design as consumer desire. This replenishment is one of Zara inventory management strategy where all stores are well managed. This means each store keep update the stocks and replace with high demand for goods base on consumer desire in geographically. With this effective strategy brought greater customer satisfaction and gains more market share globally.

5. Do you think Zara’s responsive infrastructure is better suited for online sales or retail sales?

Zara’s business success has demonstrated from the accuracy of demand forecasting, efficient distribution, flexible and quick response, well managed inventories, lower markdown and less advertisement, which result in high profit margins. The most contribution of this success is it effective supply chain from distribution center that enable Zara to distribute products at efficient time to meet consumer demand. Because Zara has only eight distribution centers from Spain to distribute products to the stores all over the world, it natures of business is suit more on retail business rather than online sell. For online sell, there is a need of more distribution center because of quick and speedy deliver service requirement. Online company should have distribution center at the countries its service provided for fast deliver. The speed delivery is one of the core online business strategies. Therefore, Zara’s responsive infrastructure is better and only for manufacture and retailer.

Executive Summary

This essay demonstrates how a highly flexible and responsive supply chain architecture may be leveraged to obtain a competitive edge in a sector where the most customer needs change regularly (Srinivasan & Swink, 2018). It also discusses critical factors that improve the responsiveness necessary to meet consumer demand in such an industry, such as in-house production, outsource manufacturing, responsive replenishment, and pull and push supply chain strategies (Aftab et al., 2018a). The introduction contains the essential aspects of the field of study. The research is from Case Study I, Zara: appeal manufacturing and retail. An analysis of the case entailed answering specific questions about the retail and manufacturing industries, which are listed in the table of contents. The key results were that Zara employs a highly responsive supply chain infrastructure to better match its products to client needs than its competitors in a sector where customers' tastes very regularly (Kahn, 2021). Furthermore, it improves its total supply chain responsiveness by keeping in-house manufacturing capabilities for uncertain demands and outsourcing production for predictable demands.

Table of content

	Page
Introduction to case I	3
Q1. What advantage does Zara gain against the competition by having a very responsive supply chain?	4
Q2. Why has Inditex chosen to have both in-house manufacturing and outsourced manufacturing? Why has Inditex maintained manufacturing capacity in Europe even though manufacturing in Asia is much cheaper?	5
Q3. Why does Zara source products with uncertain demand from local manufacturers and products with predictable demand from Asian manufacturers?	6
Q4. 4. What advantage does Zara gain from replenishing its stores multiple times a week compared to a less frequent schedule? How does the frequency of replenishment affect the design of its distribution system?	7
Q5. Do you think Zara’s responsive replenishment infrastructure is better suited for online sales or retail sales?	8
Conclusion	8
References	9-10

Introduction

According to the case, Zara is an apparel manufacturing and retail brand owned by the Inditex company. When compared to competitors in a sector where client tastes vary regularly, the business has been successful with a very responsive supply chain approach. By adapting to client preferences, responsiveness keeps customers satisfied and provides value to the supply chain. As a result, the primary goal of this research is to discover how Inditex become Spain's greatest appeal producer and retailer by examining its supply chain management practices (Sitaro, 2020).

Analysis of Case I by Answering Question

Zara's advantages from having a highly responsive supply chain are: 1) Faster reactions by responding to the fickle customer, who constantly changes their minds about what they want or need. This is achieved by faster responses to consumer demands and displaying the most updated designs that fit preferences. 2) The output of responsiveness is identified by the short cycle time (four to six weeks), which is way shorter than the industry average. 3) Zara is more responsive in managing manufacturing locations to keep consumers pleased by offering services for those who desire high quality or low volume items from Europe or those who prefer standard quality in high volume products from Asia. 4) Zara has adapted its supply chain infrastructure to match variations in sales product volumes and trends. 5) The guarantee of what customers want and quick delivery has been a real selling point for Zara, and the business can charge full price with better markdowns in stores than competitors.

Inditex opted to have both in-house and outsourced manufacturing for the following reasons: They enable Inditex to serve customers that want highly specialized, unpredictable, and low volume products manufactured in-house, as well as customers who require standardized, predictable, and low volume outsourced products. Because of the low cost of production in Asia, much outsourcing takes place there. Inditex's in-house production enables it to adapt considerably more quickly to changes in trends and customer demands. This in-house manufacturing is more adaptable and closer to decision-makers, increasing the responsiveness necessary to postpone some production choices until after trends. Outsourcing manufacturing facilities are beneficial when producing large volumes of predictive appeal, often for seasons and holidays.

The following are the reasons why Inditex retained manufacturing capacity in Europe although Asia is cheaper. Inditex caters to a variety of clients, some of whom need their items to be accessible instantly, while others prefer to wait for specific seasons before purchasing. Inditex can respond swiftly to the demands of specialized products by retaining a production capacity in Europe since Europe is close to decision-makers and the target market. When pleased, the market that needs a faster response pays a premium for the quality of services. As a result, the whole price covers the high expenses of production in Europe. This is in contrast to the rivals' plan of shifting all production to Asia. The overarching rationale for keeping 40% of manufacturing in Europe is to stay inventive and responsive to consumer demands for specific goods that would be impossible to manufacture in the proper quality, time, and cost if all production were shifted to Asia (Aftab et al.,2018b).

Zara sources items with uncertain demand from local manufacturers as part of a pull strategy element used to manage a highly responsive supply chain structure (O'Connor et al., 2018). Zara employs the pull technique, acquiring real-time data from customers with unpredictable wants regularly before procuring supplies. & then sourcing the required supplies locally (in Europe) to swiftly produce and send the final item to the customer before they shift their preferences. Zara is capable of charging full price for the products due to the sanctity afforded by this speedy delivery/response mechanism. Furthermore, unpredictable items need particular customization, which is best done near to where decisions are made, which is in Europe. As a result, having local manufacturing allows for faster reactions to demanding for unpredictable items that are mostly of high quality and demand faster delivery mechanisms.

Zara sources goods with predictable demand from Asia because it enables the business to adopt the push supply chain strategy, which is appropriate for products with predictable demand. For example, before the Christmas season (Chen & Lu, 2021). When Zara can schedule production based on accessible customer figures, it employs the push supply chain approach to outsource manufacturing to Asian locales because production is less expensive in Asia. As a result, larger volumes of predictable products may be manufactured on schedule and made accessible to customers before a season starts.

Zara has several advantages over its competitors when it comes to replenishing stores multiple times. It fosters consumer happiness by renewing displays once a week in order to adapt promptly to shifting fashion trends and customer wants. Zara can better balance supply and demand by replenishing them many times. Furthermore, this demonstrates how Zara efficiently maintains its display advertising by keeping all stores up to date in response to local design needs and customer preferences in exchange for a greater fee for the value supplied by catering to desired preferences. Weekly replenishment has increased competitiveness because it provides value to the whole responsive supply chain infrastructure by increasing customer service, rapid orders, lower inventory carrying costs, and just-in-time fulfillment (Stein & Voehl, 2020).

According to Aftab et al. (2018c), frequency of replenishment has the following effects on distribution system design: It enables Zara to precisely match its inventory to changing and often unforeseen client needs (for example, some customers shop every week and frequent replenishing cater for such customers). It has shortened the time necessary to manufacture and deliver items to customers. As a result of having a shorter design-to-market cycle, Zara enjoys a competitive edge over its competitors. Zara has also been able to consolidate its distribution route by having eight distribution centers in Spain that promptly deliver products to fulfill global demand in the shortest amount of time feasible without handling massive volumes in single displays. Zara may exert some control over what is supplied each week by influencing what people order in the store.

Because of the following factors, Zara's responsive replenishment infrastructure is more suited for retail sales than online sales: 1) Zara only has eight distribution facilities in Spain that service all markets worldwide, but online sales need more centers throughout the world to fulfill orders and delivery to all nations (Luz et al., 2021). 2) Zara will be unable to respond fast to customer needs through online sales due to a lack of distribution centers, and speedy fulfillment is one of the prerequisites for online channels. 3) Customers desiring unpredictable, high-end quality products are not limited to Europe; so, Zara's regular replenishment is appropriate just for retail sales in Europe and not for online sales worldwide. 4) When compared to online sales, retail stores are more adaptable in terms of product returns, physical viewing, and high-quality customer service. As a result, with the responsive replenishment infrastructure in place, Zara will be able to satisfy customers that visit the store.

Conclusion

The main discoveries were that Zara's competitive advantage was aided by the responsive supply chain and the pull and push supply chain approaches. Inditex has kept in-house manufacturing to adapt to uncertain demand while outsourcing the manufacturing of items with predictable demand. The techniques have assisted the company in being responsive to client requests and increasing profits in the market.

References

Aftab, M. A., Yuanjian, Q., Kabir, N., & Barua, Z. (2018a). Super responsive supply chain: The case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), 212. https://www.academia.edu/download/61061578/Zara_Case_Study20191029-42781-f73lj1.pdf

Aftab, M. A., Yuanjian, Q., Kabir, N., & Barua, Z. (2018b). Super responsive supply chain: The case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), 212. https://www.academia.edu/download/61061578/Zara_Case_Study20191029-42781-f73lj1.pdf

Aftab, M. A., Yuanjian, Q., Kabir, N., & Barua, Z. (2018c). Super responsive supply chain: The case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), 212. https://www.academia.edu/download/61061578/Zara_Case_Study20191029-42781-f73lj1.pdf

Chen, I. F., & Lu, C. J. (2021). Demand Forecasting for Multichannel Fashion Retailers by Integrating Clustering and Machine Learning Algorithms. Processes, 9(9), 1578. https://www.mdpi.com/1256350

Luz, A. R. C., Wreaves, P., & Paschoalotto, M. A. C. (2021). The reasons behind Zara's success: evaluating the value chain. International Journal of Teaching and Case Studies, 12(1), 1-16. https://www.inderscienceonline.com/doi/abs/10.1504/IJTCS.2021.114994

Kahn, B. E. (2021). The Shopping Revolution, Updated and Expanded Edition: How Retailers Succeed in an Era of Endless Disruption Accelerated by COVID-19. University of Pennsylvania Press. https://books.google.com/books?hl=en&lr=&id=qwI2EAAAQBAJ&oi=fnd&pg=PP9&dq

Sitaro, T. D. (2020). Fast Fashion and Sustainability-The Case of Inditex-Zara. https://research.library.fordham.edu/international_senior/46/

Srinivasan, R., & Swink, M. (2018). An investigation of visibility and flexibility as complements to supply chain analytics: An organizational information processing theory perspective. Production and Operations Management, 27(10), 1849-1867. https://onlinelibrary.wiley.com/doi/abs/10.1111/poms.12746

Stein, M., & Voehl, F. (2020). Just-In-Time (JIT)/JIT II™. In MacrologisticsSM Management (pp. 149-173). CRC Press. https://www.taylorfrancis.com/chapters/edit/10.4324/9781003077121-10/time-jit-jit-ii%E2%84%A2-martin-stein-frank-voehl

O'Connor, N. G., Yang, Z., & Jiang, L. (2018). Challenges in gaining supply chain competitiveness: Supplier response strategies and determinants. Industrial Marketing Management, 72, 138-151. https://www.sciencedirect.com/science/article/pii/S001985011730576X

Executive Summary

The paper discusses online consumer sales channels and how they may be leveraged to reach more consumers, sell more items, save costs, and increase profits (Yan et al., 2020). The primary focus is on Amazon's retail business structure and product categories utilized to become the pioneer of online consumer sales. The analysis was based on data from Case II, Amazon: online sales. Six questions were asked to evaluate the information in the case (found in the table of content). According to the findings, online channels have advantages over retail stores, particularly in terms of reaching more customers, cutting operation costs, and lowering promotion expenditures (Gielens et al., 2021). Furthermore, the ideal products to sell through online channels are typically easy to price, sell, ship, and return, with little to no customer support required (Du et al., 2019).

Table of Content

	Page
Introduction to case II	3
1. Why is Amazon building more warehouses as it grows? How many warehouses should it have and where should they be located?	4
2. What advantages does selling books via the Internet provide over a traditional bookstore? Are there any disadvantages to selling via the Internet?	5
3. Should Amazon stock every product it sells?	6
4. What advantage can bricks-and-mortar players derive from setting up an online channel? How should they use the two channels to gain maximum advantage?	7
5. What advantages/disadvantages does the online channel enjoy in the sale of shoes /diapers relative to a retail store?	8
6. For what products does the online channel offer the greater advantage relative to retail stores? What characterizes these products?	9
Conclusion	9
References	10

Introduction

Amazon is a pioneer of online consumer sales because it built a structure that could be used to sell other consumer items over the internet based on its experience selling books online (Althafairi et al, 2019). As a result, an assessment may be performed by answering case study questions to discover why Amazon built an online channel in addition to its retail store as it expanded, as well as the reasons behind the types of products supplied over the internet. As a result, the goal is to discover the reasons why Amazon chooses to utilize an online store to offer items to consumers, as well as the rationale behind selected categories.

Analysis of Case II by Answering Question

The primary reasons for Amazon's expansion through more warehouses are: 1) to improve its ability to distribute more items and geographical presence, 2) to lower delivery time to more consumers, and 3) to provide customers with a secure and dependable delivery system that is also efficient. As Amazon expands and enters new areas, the gaps between suppliers and consumers rise. As a result, Amazon maintains efficiency by expanding its ability to hold and distribute products by constructing new warehouses (Jain & Sharma, 2017). This, in turn, enables for speedier delivery of products purchased through Amazon's online channel.

The number of warehouses Amazon should have and their locations are determined by various criteria, including the volume of products to be stored and delivered, the number of customers and their locations, and the desired delivery speed (Kostikov et al., 2021). As a result, Amazon should open more warehouses in more areas to be closer to customers who place online orders. The company will then benefit from faster delivery times and lower costs associated with package carriers such as UPS and FedEx.

The advantages of selling books on the internet over traditional bookstores are as follows: 1) The customers are given a platform that can be reached from any location and at any time. 2) The merchant will not require vast storage areas to exhibit all available copies. 3) Customers pay upfront and are ready to wait for their purchases, providing a reliable stream of cash flow for the business. 4) The internet channel allows the merchant to show a few pages of the book so that purchasers may get a feel for it. 5) Customers may purchase digital copies and download them to their devices, avoiding shipping expenses and other fees (Helm et al., 2018).

The disadvantages of selling books on the internet are as follows: 1) It is difficult to provide customer support and improve the consumer experience (Hsu & Chen, 2018). For example, the consumer may like to speak with a sales representative. 2) Expensive to set up, maintain, analyze data, and market (write product descriptions and uploads). 3) Exposure to creative money-laundering hackers and scammers.

Amazon should not stock every product it sells on the internet since it is not economically viable to incur storage costs for all of the unpopular, low-volume, and low-profit-earning products. Amazon should cut warehousing and stocking expenses by stocking more popular/high selling items and fewer unpopular/low selling ones. It should also stock less popular items with lower sales volume. When storage expenses are lowered, the company's profit margin rises. Amazon could instead invest in speedier and more efficient distribution networks for delivering out-of-stock items.

The main advantages of brick-and-mortar players establishing an online channel: 1) It enhances the store's visibility and the number of consumers who can reach it from anywhere in the globe without the need for new building constructions or additional rental expenditures. 2) Enables players to provide more products to customers with greater freedom in terms of selection, price, payment methods, and distribution channels. 3) Retailers may have an endless amount of display space for marketing campaigns on social media sites and search engines, which are less costly than traditional advertising.

To gain the most advantage, the two channels of internet and brick-and-mortar should be utilized in conjunction by establishing Omnichannel commerce, in which all channels are connected via technology so that they function together and give a smooth consumer experience (Hole et al., 2019). With this in place, customers may use their digital devices to search for available goods in the physical store before making the journey. This can also be used by the business to collect relevant data about its consumers to promote more products. This enhances the consumer experience while also adding value to the whole business.

When selling products such as shoes and diapers, the online store has the following advantages over a retail store: 1) Low facility expenses, which allows it to sell shoes or diapers at lower prices than retail stores. 2) According to Peter & Dalla Vecchia (2021),when compared to a traditional store, an online business has more customizable portfolio presentation and advertising choices. Online businesses provide a choice of low-cost designs for advertising shoes/diapers (articles, videos, pictures, influences, and social blogs). 2) Unlike a traditional retail store with working hours, an online store is constantly available for commercial transactions. 3) Unlike retail stores, which only sell to customers who visit, an online store may offer shoes/diapers in locations where there are no physical stores.

When selling things such as shoes or diapers, the disadvantages of an online store over a retail store are as follows: 1) When compared to in-store transactions, online transactions are more vulnerable to fraud and counterfeiting allegations. As a result, they are security, verification, and insurance costs. 2) Because the buyer cannot feel the quality of the shoes before purchasing, online stores are not appropriate for face-to-face interactions between the customer and the merchant to provide a better customer experience. 4) With an online store, the customer must wait for the product to arrive after making the purchase, and if the online store fails to fulfill the response time promised, the customer is unsatisfied.

a) Digital products such as books, music, and video are the products that internet channels offer an advantage over retail stores. When compared to a retail store, these are easier to sell online and transfer to digital devices. b) Shoes, diapers, toys, jewelry, apparel, and electronics. These are more suited for the online channel than retail stores since they demand a lot of display space and are durable and non-perishable.

The attributes that characterize the aforementioned products: 1) According to Voloshyna (2020), they are simple to price, sell, deliver, and return. Shoes, toys, jewelry, apparel, and electronics are examples. 2) They offer a wide range of products and demand additional display space. To show all of the categories, a retail store will require additional space, inventory, and warehouses. 3) Less customer service or hands-on help is required. Digital books and music, for example, do not require customer service. 4) have a well-established market/ a large number of customers prepared to buy at the specified rates 5) sold to international customers all around the world, outside of their native country, because online channels are available in many nations.

Conclusion

The online channel can be used to reach a considerably larger number of customers, conveniently promote products, and operate with lower overhead expenses. Furthermore, digital products, toys, jewelry, apparel, electronics, shoes, and diapers are the finest product categories for an online channel. This is because such goods are simple to price, sell, ship, and return, and need little customer assistance.

References

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Du, S., Wang, L., & Hu, L. (2019). Omnichannel management with consumer disappointment aversion. International Journal of Production Economics, 215, 84-101. https://www.sciencedirect.com/science/article/pii/S0925527318301932

Gielens, K., Ma, Y., Namin, A., Sethuraman, R., Smith, R. J., Bachtel, R. C., & Jervis, S. (2021). The future of private labels: towards a smart private label strategy. Journal of Retailing, 97(1), 99-115.

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Hsu, C. L., & Chen, M. C. (2018). How gamification marketing activities motivate desirable consumer behaviors: Focusing on the role of brand love. Computers in Human Behavior, 88, 121-133. https://www.sciencedirect.com/science/article/pii/S0747563218303200

Hole, Y., Pawar, M. S., & Khedkar, E. B. (2019, November). Omni Channel Retailing: An Opportunity and Challenges in the Indian Market. In Journal of Physics: Conference Series (Vol. 1362, No. 1, p. 012121). IOP Publishing. https://iopscience.iop.org/article/10.1088/1742-6596/1362/1/012121/meta

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Kostikov, E., Jílkova, P., & Kotatkova Stranska, P. (2021). Optimization of E-Commerce Distribution Center Location. https://essuir.sumdu.edu.ua/handle/123456789/84334

Peter, M. K., & Dalla Vecchia, M. (2021). The Digital marketing toolkit: a literature review for the identification of digital marketing channels and platforms. New Trends in Business Information Systems and Technology, 251-265. https://link.springer.com/chapter/10.1007/978-3-030-48332-6_17

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