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Kevin Chan n9216120QUT Gary Mortimer
Case Study
“Rapid Fire Fulfilment”
Assessment 3Word Count: 1070
Executive summary
This case study aims to examine the logistics of Zara as a fast fashion chain and
their owners Inditex as a whole. Being one of the most successful retailers in the
world, their procurement strategies, production cycle and global distribution is
explained throughout. The study shows that the company has a unique vertical
integrated system in place which makes the flow of production faster through short
lead times and high flexibility for adjustments. The successful implementation of
Zaras’ supply chain management means that fewer garments are sold at reduced
prices, leading to maximized profits because of the exclusivity of the small frequent
batches. However, being one of the largest players in the fast fashion market, Zara
must consider to continue strengthening its channels. Especially in avoiding “chain
liability” which seems to be one of the company’s largest criticisms for providing poor
labor resources. All in all, Zara still has areas to improve within the supply chain,
long term sustainable growth for the future will rely on positive social innovation.
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Table of Contents
1.0 Introduction ......................................................................................................................4
2.0 Supply Chain Management ..............................................................................................5
2.1 Procurement Strategy.......................................................................................................5
2.2 Production Cycle................................................................................................................6
2.3 Global Distribution............................................................................................................7
3.0 Summary............................................................................................................................8
4.0 Reference List....................................................................................................................9
5.0 Appendices...................................................................................................................... 12
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1.0 Introduction Zara is internationally known for its cutting edge in-trend apparel, with a staggering
sales network across 88 countries. The Spanish label is run by the biggest fashion
group in the world Inditex, who has played a large part in the enhancement of the
apparel industry in recent years (Cortez, Ng, Tu, Van Anh, Vegafria, 2014). Being
the powerhouse of fast fashion, the company requires solid structuring in its logistics
channels. Through displaying a responsive yet flexible design, production and
distribution processes allow Zara to capitalize on demand trends as they are
detected (Gallien, Garro, Martín, Mersereau, 2015). This paper aims to outline the
differentiation in Zaras’ logistic channels that makes the firm successful. This will be
done by specifically taking a look into procurement, production and distribution
channels, before summarizing how the firm will be able to maximize resource usage
for the future.
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2.0 Supply Chain Management 2.1 Procurement StrategyZara broke the traditional two campaign paradigm commonly used in the clothing
industry which was Spring-Summer and Fall-Winter collections, they developed a
super responsive and quick supply chain also known in the industry as ‘Pronto Moda’
or ‘Rapid-Fire Fulfilment’ (Errasti, Martinez, Rudberg, 2015). Causing many retailers
to also rethink their supply chain strategy. Procurement is the initial phase of
success for Zaras’ supply chain, through small yet frequent batches right in the
middle of the season, the company is able to deliver the latest consumer trends in
fashion (Sardar, Young, 2015). Although there is a loss in economies of scale, this
strategy is able to lead directly to reduced overstock. Furthermore, to accommodate
these fast fashion product complexities raw materials are purchased from low cost
countries from all around the world such as Turkey and Mexico, or far east Asia as a
trade-off. Purchasing materials for large initial shipments reduces lost sales in the
critical first days of the product life cycle, and by maintaining stock at the warehouse
allows restocking flexibility once initial sales are observed (Gallien, et al., 2015).
Inditex aims to continue in operating in its large number of stores worldwide, so that
through the information infrastructure they can connect consumer demand through
the upstream of design, aiding procurement decisions (Moreno, Carrasco, 2015).
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2.2 Production Cycle Zara produces each particular design only once; its production concept and designs
have to be flexible so that it can switch from producing one product to the next
without incurring significant set-up time or set-up costs, this can also be referred to
as a job shop process (Fan, Lopez, 2009). The company therefore displays a lean
and agile production system through a vertical integrated design. Zaras’ logistic
channels emphasize on delivery and sales, low inventory, quick response policies
and advanced information technology which enable a flexible structure to adapt to
customer's changing demands (Robinson, 2015). Zara breaks the fashion supply
chain rules by holding low stock and updating its collections continuously.
Furthermore, product categories are manufactured locally through medium-cost
countries, where an office would be located close to the production site; Zaras designers, textile manufacturers and laborers are all combined at one location
(Errasti, et al., 2014). Having closer network relations within the companies own
supply chain enables collaboration between different departments. Therefore, lead
times are shortened whilst offering a wide range of quality products to the market.
Results show that 85 per cent of stock achieves to sell at full ticket price, against an
industry norm of around 60-70 per cent (Strategic Direction, 2015). With vertical
integration, combined with the balance of using both low-cost procurement and
medium-cost manufacturing allows higher flexible adjustments closer to the market
with shorter replenishment times, therefore reducing the bullwhip effect (Jiang, Lin,
Lui, Wang, 2013).
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2.3 Global Distribution
Zara has developed a long term competitive advantage through a unique distribution
channel with vertically integrated sell points and stores, possessing a tightly
coordinated supply chain (Filieri, 2014). As seen in appendix A, the company is able
to distribute new products into shop floors within 10-15 days from the initial designing
process (Moreno, Carrasco, 2015). To distribute at such incredible speed Fan &
Lopez (2009) states that it requires rapid feedback about what customers actually
buy, Inditex owns all their shops and uses a unified information system to track
global sales to allow this information to be processed, they are also able to locate
manufacturing for fashion lines closer to the market. As mentioned in section 2.1, to
avoid excess inventory only a small number of items of each garment is distributed.
Implying that new designs will not be available for long, this cycle often creates an
attitude of “buy now” within stores that encourage customers to come back more
often (Moreno, Carrasco, 2015). Evidently, Google search trends have also shown
that Zara hold more searches than main competitors H&M and GAP respectively
(See appendix B).
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3.0 Summary With 2015 sales and profits both up by 15% over 2014, these figures show that
Inditexs’ Zara convention is going towards the right strategic direction (O’Marah,
2016). Using a vertically integrated system allows the company ability to cut out
costs of outsourcing to third parties, whilst improving organisational efficiency. Zara
was designed from day-one to be responsive and agile. Rather than outsourcing
completely to Asia, Zara uses a network of automated factories in Spain and over
300 small finishing factories across the world to constantly create unfinished
products. Dr. Warren Hausman of Stanford University says that this innovative way
of working allows Zara to reduce unwanted markdowns and lost sales (Denning,
2015).
However, for further maximization of sustainable growth the company must consider
strengthening its logistics approach. Especially in avoiding “chain liability” which
seems to have caught the media’s attention in recent years (Hartmann, Moeller,
2014). According to Catalan (2014), Zaras’ factories in South America, with the likes
of Brazil and Chile, have been associated with abuse of labor resources. These
actions do not support Zaras’ corporate social image nor does it align with modern
day supply chain practices. Additionally, Zara was also blamed for toxic chemicals
usage to dye apparel (Hartmann, Moeller, 2014). These irresponsible acts represent
unsustainable behavior as they lead to severe negative consequences for the
environment and local inhabitants. By minimizing these actions from the supply
chain, this will not only reduce bottle necks but add to the long term success as
social innovation continues to prove of great importance in society and businesses to
improving economic growth (Dohndt, Korver, Oeij, 2011).
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4.0 Reference List
Catalan, B. (2014, April 10). The exploitation of Zara workers in Chile. Retrieved
October 25, 2016, from https://www.equaltimes.org/the-exploitation-of-zara-
workers-in-chile?lang=en#.WBH5kbflh-V
Cortez, M. A., Tu, N. T., Van Anh, D., Ng, B. Z., & Vegafria, E. (2014). FAST
FASHION QUADRANGLE: AN ANALYSIS. Academy of Marketing Studies
Journal, 18(1), 1-18. Retrieved from http://gateway.library.qut.edu.au/login?
url=http://search.proquest.com.ezp01.library.qut.edu.au/docview/
1645849518?accountid=13380
Denning, S. (2015, March 13). Forbes. Retrieved October 27, 2016, from
http://www.forbes.com/sites/stevedenning/2015/03/13/how-agile-and-zara-
are-transforming-the-us-fashion-industry/
Errasti, A., Martinez, S., & Rudberg, M. (2015). Adapting Zara’s ‘Pronto Moda’ to a
value brand retailer. Production Planning and Control, 26, 723-737.
http://dx.doi.org.ezp01.library.qut.edu.au/10.1080/09537287.2014.971526
Filieri, R. (2014). From market-driving to market-driven. Marketing Intelligence &
Planning, 33(3), 238-257. doi:10.1108/mip-02-2014-0037
Gallien, J., Garro, A., Mora, A. D., Vidal, M. N., & Mersereau, A. (2015, February 20).
Initial Shipment Decisions for New Products at Zara. Operations Research,
63(2), 269-283. doi:10.2139/ssrn.2378859
Google trends. (2016). Compare Trends. Retrieved October 27, 2016, from
https://www.google.com.au/trends/explore?q=Gap,Zara,H&M
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Hartmann, J., & Moeller, S. (2014). Chain liability in multitier supply chains?
Responsibility attributions for unsustainable supplier behavior. Journal of
Operations Management, 32(5), 281-294. doi:10.1016/j.jom.2014.01.005
Jiang, Z., Lin, W., Liu, R., & Wang, L. (2014). The bullwhip effect in hybrid supply
chain. International Journal of Production Research, 52(1), 2062-2084.
http://dx.doi.org.ezp01.library.qut.edu.au/10.1080/00207543.2013.849013
Lopez, C., & Fan, Y. (2009). Internationalisation of the Spanish fashion brand Zara.
Journal of Fashion Marketing and Management: An International Journal,
13(2), 279-296.
http://dx.doi.org.ezp01.library.qut.edu.au/10.1108/13612020910957770
Moreno, J. D., & Carrasco, O. R. (2015). Efficiency, internationalization and market
positioning in textiles fast fashion. International Journal of Retail & Distribution
Management, 44(4), 397-425. doi:10.1108/ijrdm-04-2015-0064
Dhondt, S., Oeij, P., & Korver, T. (2011). Workplace innovation, social innovation,
and social quality. The International Journal of Social Quality, 1(2), 31-49. doi:
10.3167/IJSQ.2011.010204
O'Marah, K. (2016). Zara Uses Supply Chain To Win Again. Retrieved October 27,
2016, from http://www.forbes.com/sites/kevinomarah/2016/03/09/zara-uses-
supply-chain-to-win-again/
Robinson, N. (2015). How Zara used Lean to Become the Largest Fashion Retailer.
Retrieved October 25, 2016, from
https://theleadershipnetwork.com/article/lean-manufacturing/zara-lean-
fashion-retail
Sardar, S., & Young, H. L. (2015). Analysis of product complexity considering
disruption cost in fast fashion supply chain. Mathematical Problems in
Engineering,
doi:http://dx.doi.org.ezp01.library.qut.edu.au/10.1155/2015/670831
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Strategic Direction. (2015). Fast fashion goes global: Benetton’s changing strategy.
Strategic Direction, 31(11), 17-20. Retrieved from
http://www.emeraldinsight.com.ezp01.library.qut.edu.au/doi/full/10.1108/SD-
09-2015-0131
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