Question

Zara: Apparel Manufacturing and Retail Zara is a chain of fashion stores owned by Inditex, Spain’s largest apparel manufacturer and retailer. In 2012, Inditex reported sales of about 16 billion euros from more than 6,000 retail outlets in about 86 countries. In an industry in which customer demand is fickle, Zara has grown rapidly with a strategy to be highly responsive to changing trends with affordable prices. Whereas design-to-sales cycle times in the apparel industry have traditionally averaged more than six months, Zara has achieved cycle times of four to six weeks. This speed allows Zara to introduce new designs every week and to change 75 percent of its merchandise display every three to four weeks. Thus, Zara’s products on display match customer preferences much more closely than do those of the competition. The result is that Zara sells most of its products at full price and has about half the markdowns in its stores compared with the competition. Zara manufactures its apparel using a combination of flexible and quick sources in Europe (mostly Portugal and Spain) and low-cost sources in Asia. This contrasts with most apparel manufacturers, who have moved most of their manufacturing to Asia. About 40 percent of the manufacturing capacity is owned by Inditex, with the rest outsourced. Products with highly uncertain demand are sourced out of Europe, whereas products that are more predictable are sourced from its Asian locations. More than 40 percent of its finished-goods purchases and most of its in-house production occur after the sales season starts. This compares with less than 20 percent production after the start of a sales season for a typical retailer. This responsiveness, along with the postponement of decisions until after trends are known, allow Zara to reduce inventories and forecast error. Zara has also invested heavily in information technology to ensure that the latest sales data are available to drive replenishment and production decisions. In 2012, Inditex distributed to stores all over the world from eight distribution centers located in Spain. The group claimed an average delivery time of 24 to 36 hours for European stores and up to a maximum of 48 hours for stores in America or Asia from the time the order was received in the distribution center (DC) to the time it was delivered to the stores. Shipments from the DCs to stores were made several times a week. This allowed store inventory to closely match customer demand. Please upload your answer word file, which should list each question separately and also give your answer separately for each question.

a) Define logistics for Zara.

b) Define supply chain for Zara.

c) Explain the role of logistics in Zara’s supply chain.

Answer 1

a. Logistics of Zara includes include delivering to retail stores of Zara. Zara makes sure that it gets all its products delivered to the common DC point and then are delivered to the stores multiple times of the week.

b. Supply chain for Zara starts from the production place. After the products are produced, they are sent to the common DC. From the common DC in each area, the products are delivered to the each retail outlet from where Zara ensures that the products are sent and distributed to retail outlets. The production is made basis the latest trends in the society.

c. The logistics play key role in the supply chain management. The entire process is tracked and the inventory is monitored accordingly. It is done to ensure that the inventory is constantly replenished in all the retail outlets. Post that, production feedbacks are also taken from the stores.