Bus202 International Business Operations | Assessment Answers

Question 1

Evaluate Zara’s ability to implement the four activities of planning and control, that is scheduling, loading, sequencing and monitoring their full supply chain. How does this contribute to the success of the Zara group.

Question 2

Analyse Zara’s effectiveness in managing their capacity constraints and levels of demand throughout the supply chain. Is their evidence of bottlenecks, with the use of drum-buffer-rope of constraints management to overcome bottlenecks?

Question 3

Describe Zara’s inventory control methods at its various stages of the supply chain. Explain how this inventory control gives Zara a competitive advantage.

Question 4

Analyse Zara’s supply chain, determining the level of vertical integration and outsourcing of their global operations. Provide a diagram of the Zara’s current supply chain, indicating which stages they own or outsource, using data to support your claims. How does this compare to their major global competitors?

Question 1 Activities of Planning and Control 

Zara is Spanish fashion retail brand based in Arteixo, Galicia. This brand is a part of Inditex group and various other popular brands such as Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe are also part of Inditex group. Zara was first founded in 1975 by Amancio Ortega. From the total revenues of the Inditex group, two third is being contributed by Zara only (Gorrepati, 2016). They are known for manufacturing and distributing unique types of fashion wears and along with the different styles, they are also known for delivering new styles consistently and this is the reason they managed to introduce 20 new styles in 2017. After getting the success in Arteixo, Inditex group started expanding Zara across the globe as per the demand of the Zara’s fashion products (Jones & Robinson, 2012).

 Scheduling: This is the step under which all the activities are scheduled in the manner of their importance. Taking right decisions at the right time, planning to introduce new range of products in the target market, delivery of the products, distribution of newly launched products, etc. Apart from this, designers of Zara are so talented that they have the ability to produce those fashion materials which will be liked by the audience. This is the reason they are expanding their business activities continuously across the global market and today they have made their presence in approximately 68 countries (Gattorna, 2012).

Loading: This is the step under which the work is being allocated to the appropriate person for extracting the adequate results. As per the case study given, Zara has performed this activity in the most adequate manner which has become the major reason for organization’s success in the global market. Supply chain activities of the organization are done in the manner through which all the stores can get the same types of products at the same time. For instance, the range of the products introduced in the Spanish store, the same collection will also be launched at the same time in the other stores also (Ferdows, 2003).

Sequencing: This step describes the sequence of the activity which is required to be performed in relation with the supply chain management. Under the term, sequencing, appropriate measures are being used in order to manage all the activities of the organization. Being an iconic brand of fashion wear, Zara has reached to the place where all the activities with regards to the supply chain are managed in order to attain the organizational goals (Donald & Stephen, 2014).

Monitoring: This is the last step of planning and controlling activity in the Zara’s functionalities. All the activities are reviewed in order to analyse the errors present in the above activities. After determination, appropriate measures are being taken in order to remove them so that functionalities of the organization do not get affected (Deogratias & Harorimana, 2009).

Question 2 Drum-buffer-rope

As referring to the case study, Zara has managed its activities in an effective manner which is quite impressive in terms of fulfilment of its consumer’s demand across the globe. Effective supply chain management helps the company to gain the adequate competitive advantage in the dynamic business environment. Apart from the competitive advantage, it is also capable enough to fulfil its consumers’ demand in an appropriate manner. Efficient supply chain management helps the organization to organization the activities in an effective manner through which all the tasks related to the organizational activities are performed in order to manage the control over the activities of the organization.

The process of distributing fashionable and trendy cloths across the global market through considering its consumer’s preferences with an integrated process is included in the drum buffer rope technique. This technique is linked with the integrated management of the inventory in an appropriate manner. Bottleneck is the terms used to describe the slowest step which reduces the efficiency of the process. In other words, the team’s performance will be affected through the performance of the slowest person in the team. While evaluating the crux of drum-buffer-rope, it is observed that as referring to the case study that rope is medium through which organization could raise the demand of its products. Marketing techniques will act as the rope in terms of enhancing the demand of the products in the overseas market. While buffer is the term which describes the organization’s targets set up by the management to attain for reaching to the desired destination of growth and success. Buffer could be termed as the strategies adopted by the Zara to attain its desired goals and the objectives. Apart from these two techniques, drum is another major factor which describes the strategy to enhance the performance of the bottlenecks of the team (Dalton, 2010).

Question 3 Inventory Control Methods

Zara has various inventory control measures in relation with the various stages of supply chain. Zara uses optimisation model for controlling its inventory. Following are some of the methods used by Zara for controlling its inventory in terms of various stages of supply chain:

Stage 1 Plan: Under this stage, planning is done in relevance with the manufacturing the certain products as per the domestic and international market’s demand. While analysing the demand of the various markets, determination of the suppliers is another crucial aspect of inventory management in respect of the supply chain. Selection of the supplier is also done in this step only (Cowe, 2011).

Stage 2 Source: This stage defines the process of the delivering the procurement of goods available at Zara and delivering them at the right time from the right place. If the products will not be delivered to the consumers at the right time, product’s value will be decreased (Christopher & Towill, 2000).

Stage 3 Make: Under this stage of supply chain management, the manufactured goods are released, packed and tested in order to avoid mistakes in the products. This will help the consumers to get the fresh and adequate products. If the products will be manufactured as per the demand of consumers and delivered them at the right time, this will develop the positive image of the organization in the consumers’ as well as in supplier’s mind (Romano, 2009).

Stage 4 Deliver: The manufactured products will be delivered from the authorised stores of the organization in order to save the consumer’s interest. The new varieties introduced in the market in order to satisfy the consumers will be managed in the warehouses of the organization so that consumer’s requirements could be fulfilled in an adequate manner (O'Marah, 2016).

Stage 5 Return: Providing return facility to the consumers is another major factor of managing the inventory in terms of supply chain. As return is also included in the supply chain activities, Zara has developed appropriate provisions for this policy. Customer can return the defective products with the certain timeline (LU, 2014).

Apart from this, their inventory controlling measures are effective enough through which within regular intervals, customers can avail the benefit of new designs. This is the reason, in 2017 only; Zara has launched more than 20 collections (Charles & Gareth, 2012).

Question 4 Zara’s Current Supply Chain

Vertical integration is the process under which Zara controls its various activities and procedures in relevance with the production as well as distribution processes in order to maintain and develop the strong market share in the competitive business environment. Zara’s production activities are managed and controlled within the house only i.e. all the production activities are performed within the authorised factories across the globe and the fabrics and supporting materials used in the production of apparels are designed and imported from the headquarter only. While distribution activities’ functionalities are performed in such a manner that overnights trucks are being used in order to supply the apparels within the whole Europe and for other places, airfreight is used. As per the case study, vertical integration is a major advantage for the firm whereas it has various limitations also. This integration leads to inability to acquire appropriate economies of scale which defines that organization is unable to produce huge quantity of apparels at reduced rates. In order to expand the Zara’s business in the various parts of the globe, Inditex has made big capital investments to make the organization strong in terms of technology and skills (Gorrepati, 2016).

As per the case study, Zara produces only 60% of its own products while rest are outsourced from the global market. Zara has approximately 22 factories and all are operated at one shift and perform its functions on the basis of seasons and demand from the consumers. From the all functionalities of Zara, they do cutting functions within the house whereas sewing activities are majorly outsourced. This helps the organization to control its cost of the production as well as it also provides adequate flexibility to the organization in terms of meeting the deadlines and controlling the designs of the organization (Gallaughar, 2008).

As per the diagram of supply chain management of Zara, there are four stages involved in this function i.e. purchasing raw materials, suppliers, manufacturing and distribution. Amongst these activities, majorly functions i.e. 60% activities are being performed by the organization while remaining 40% are being outsourced. The first stage i.e. purchasing raw materials includes designing, cutting and sewing works. Amongst these activities, sewing activity is being outsourced while other activities are being performed within the house. The second stage is suppliers, all of them are chosen on the basis of their locations i.e. only nearby suppliers are being given contracts to collect the materials and the products easily and conveniently. Moving further, the third stage is manufacturing and this activity is also being performed within the house only and the style of packaging of the organization is quite unique which cannot be copied and outsourced. This helps the organization to maintain the uniqueness of the organization’s products. The last stage is distribution and in this, partial is done within the house while rest is outsourced. In the whole Europe, distribution of products is performed by the organizational sources within the European countries and in the rest countries, organization is suing outsourcing platforms for the distributing the Zara’s products (Mihm, 2010).

References

Charles, & Gareth, J., (2012), Strategic Management: An Integrated Approach, Cengage Learning, Pg 94- 109

Christopher and Towill, (2000), Supply Chain Migration from Lean and Functional to Agile and Customized, Supply Chain Management: An International Journal, Vol 5(4), pp206-213

Cowe, (2011) Sources of Competitive Advantage, (3^rd), Essex, Pearson Education Ltd

Dalton, (2010), Leadership and Management Development, UK: Pearson Education Ltd

Deogratias, & Harorimana, (2009), Cultural Implications of Knowledge Sharing, Management and Transfer: Identifying Competitive Advantage: Identifying Competitive Advantage, IGI Global, Pg 144

Donald, W., & Stephen, R., (2014), Global Logistics: New Directions in Supply Chain Management, Kogan Page Publishers

Ferdows, (2003), Zara Case study. Supplier Chain Forum: an International Journal, 4 (2), pp 62-67.

Gallaughar, (2008), Zara case: Fast Fashion from Savvy Systems, PhD Case, accessed on 12^th  October 2016 from https://www.flatworldknowledge.com/node/440129#web-621509

Gattorna, J., (2012), Challenges of global fast fashion supply chains, accessed on 12^th October 2017 from https://www.supplychainmovement.com/challenges-of-global-fast-fashion-supply-chains-part-i/

Gorrepati, K., (2016), Zara's Agile Supply Chain Is The Source Of Its Competitive Advantage, accessed on 12^th October 2016 from https://www.digitalistmag.com/digital-supply-networks/2016/03/30/zaras-agile-supply-chain-is-source-of-competitive-advantage-04083335

Jones, P. & Robinson, P., (2012), Operations Management, Oxford: Oxford University Press.

LU, C., (2014), Zara supply chain analysis - the secret behind Zara's retail success, accessed on 8^th December 2016 from https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success

Mihm, (2010), Fast Fashion in a Flat World: Global Sourcing Strategies. International Business & Economics Research Journal, 9 (6) pp 55-63.

O'Marah, K., (2016), Zara Uses Supply Chain To Win Again, accessed on 12^th October 2016 from https://www.forbes.com/sites/kevinomarah/2016/03/09/zara-uses-supply-chain-to-win-again/#3032002b63ae

Romano, (2009), How can fluid dynamics help supply chain management? International Journal of Production Economics, 118, 467.