Zara (Clothing): Zara buys large quantities of only a few types of fabric, and does the garment design

and related
cutting and dyeing in-house. This way fabric manufacturers can make quick deliveries of bulk quantities of fabric
directly to the Zara DC – the Cube. The company purchases raw fabric from suppliers in Italy, Spain, Portugal and
Greece. And those suppliers deliver within 5 days of orders being placed. Inbound logistics from suppliers are mostly
by truck.

The Cube is 464,500 square meters (5 million square feet), and highly automated with underground monorail links to
11 Zara-owned clothing factories within a 16 km (10 mile) radius of the Cube. All raw materials pass through the Cube
on their way to the clothing factories, and all finished goods also pass through on their way out to the stores.

Zara’s factories can quickly increase and decrease production rates, so there is less inventory in the supply chain and
less need to finance that inventory with working capital. They do only 50 – 60 percent of their manufacturing in
advance versus the 80 – 90 percent done by competitors. Zara does not need to place big bets on yearly fashion trends.
They can make many smaller bets on short term trends that are easier to call correctly.

The Zara factories are connected to the Cube by underground tunnels with high-speed monorails to move cut fabric
to these factories for dyeing and assembly into clothing items. The monorail system then returns finished products to
the Cube for shipment to stores.

Zara can deliver garments to stores worldwide in just a few days: China – 48 hrs; Europe – 24 hrs; Japan – 72 hrs;
United States – 48 hrs. It uses trucks to deliver to stores in Europe and uses air freight to ship clothes to other markets.
Zara can afford this increased shipping cost because it does not need to do much discounting of clothes and it also
does not spend much money on advertising.

Amazon: (Warehouse) Amazon has 175 fulfilment centers (warehouses) worldwide with the majority located across
North America and Europe.

Within these fulfilment centers, Amazon stores inventory so that there are always products ready to meet demand
anywhere in the world. This wide network of warehouses enables Amazon to ship orders to customers efficiently and
quickly, and of course, at minimum expense.

Workers and pick-and-pack robots (roughly 100,000 robots are in use) can find products immediately and start getting
them ready for dispatch.

In addition to these warehouses, Amazon also has a network of partner distribution centers and wholesalers. If an
order cannot be fulfilled from its own distribution centers, Amazon can easily depend on its partners to fulfil instead.
Golden Rules in Supply Chain Management:

1. Know how you create Value - The starting point has to be the thing your customers’ values. From there, you form a value
proposition. You need to find a way to communicate the value to the market. Next, you scout the market for insights that
might help you thrive on it. Finally, you should then start planning the delivery. That whole chain is the value creation
process, and you should be familiar with every step along the way — regardless of the size of your business.

2. Understand your Capabilities - Its premise is that a business, any business, should have a good understanding of
everything that it does and the context that it works in.

An example would be a brewery that’s capable of having alcoholic beverages. They can take an ingredient, and through
a series of processes turn it into spirits. Then, they’re capable of packaging those spirits and getting them in front of a
paying customer.

That business could, then, have the agility to apply its capabilities in different ways. They can stop making spirits, for
example, and reorient towards beverages with no alcohol content. Or they can, as many have during the current
pandemic, decide to focus on producing 70% alcohol, an in-demand commodity. That’s the sort of thing a business can
do if it knows what technologies it uses for which processes.

3. Time, Transparency, and Trust - Every single trait of a business, every process, every outcome – all could be put against
time to see how quickly it happens or how many of them you can squeeze in a timeframe.

Time has an interesting relationship with transparency. People will often be untransparent with their demands to meet
their time demands, which is the exact thing that happens when someone orders something weeks before they need it
just so that they can be sure it gets there on time.

When processes are transparent, people will start to trust and become a more eager part of the business or supply chain
process. Without trust, every process becomes more difficult, less efficient, and eventually more time-consuming. And
time is, after all, a finite and scarce resource.

4. Collaborate Better - It’s a process of building and development that will, in the end, yield a collaborative relationship we
should strive to keep afloat. Being better at collaboration means knowing which relationships you don’t need. And the
way you could do it, especially coming from a supply chain world that’s all about metrics, is by understanding the
processes behind the relationships.

5. Understand your Cost-to-Serve - When you’re looking to understand the cost-to-serve of your business model, you pay
attention to three things. The first is the customer. The second is the stock-keeping unit with its attributes. The third is
the service level.

These three things will help you understand what you can offer and at which price to whom so that your margins still are
profitable. For example, you can’t offer free delivery on all sales if it eats too much into the profits you get from an
average sale.

You will want to improve your service, and we’ve seen how important it is in tough times like this pandemic. But you
can’t increase the cost-to-serve to the point where it bankrupts your business, no matter how much you want to serve
your customers. You can serve no one if you’re out of business.
Five ways to better manage supply chain disruption:

1. Don’t focus on cost alone - Malcolm Harrison, group chief executive of the Chartered Institute of Procurement and Supply, agrees that
many had seemingly dialed-up risk in the hunt for greater financial rewards. “Ensuring resilience and achieving value have always been
the overarching objectives for procurement and supply professionals,” he says. “Focusing on cost alone is a risky strategy for any
organization. We’ve had decades of strong, lean and sometimes single-sourced supply chains working so efficiently that we hardly
noticed them.”

The pandemic, he says, has encouraged supply chain managers to renew their focus on multi-supply strategies, local sourcing and best
value in the supply chain, including working with competitors.

2. Invest in Technology - “The real-time visibility along our supply chain, which is a result of deploying Industry 4.0 technologies, allowed
us to focus on the right challenges and to make the best decisions,” Dirk Holbach, chief supply chain officer of laundry and home care
at Henkel says.

Van Hull points out that companies invested in digital transformation pre-pandemic were financially outperforming industry averages
and surged further ahead of rivals over the past 18 months. “These types of results present a significant opportunity for supply chains,
which historically have struggled with translating operational capabilities and digital transformation into financial success,”
he says. (Investment in technology is vital to increase supply chain resilience)

3. Develop supplier relationship - Developing and nurturing supplier relationships accumulate mutual trust that can be cashed in when
required, whether that buys favorable prices, shorter lead times or extra stock.

And, as the idiom suggests, a problem shared is a problem halved. “Embrace collaborative supply chain risk management,” urges Dr
Alireza Shokri, associate professor in operations and supply chain management at North Umbria University. “Invest time in a
collaborative culture, build trust and use these relationships to strengthen prevention and mitigation strategies.”

Shelley Harris, commercial director of IPP, which pools and provides pallets and boxes across Europe, agrees. “Our partner relationships
are key, helping us to face new challenges as well as to work as efficiently and productively as possible,” she says.

The strength of its supplier relationships has allowed IPP to continue to fulfil its customer deliveries, despite the challenges the wider
industry is facing, notably driver shortages. “We’re stronger because of long-standing relationships – we’ve seen a minimal impact on
our

4. Improve Transparency - The number-one way to manage disruption, according to Harrison, is a deep understanding of your supply
chain and a focus on transparency. While this requires the right technology, as businesses have had to operate more efficiently in the
digital space with more automation, it starts with understanding the different tiers of the supply chain.

“Transparency across all tiers of the supply chain is a challenge,” he acknowledges, “but that visibility contributes to value in that it
[helps to] remove fraud and corrupt practices and [helps businesses] look for signs of modern slavery among their suppliers.”

Harrison stresses it is important to understand the robustness of different suppliers – and their suppliers. Transparency allows a
business to identify potential problems, for example if a component is sourced from a single country or location and to track shipments.

This chimes with Van Hull’s thoughts. “Increased transparency is highly desirable for supply chains to sense disruptions as they are
happening and respond immediately,” he says. “That is even more useful when it can be tied to financial outcomes, such as reduced
inventory and cash buffers, improved capacity utilization and lower cost resolution of demand-supply mismatches.”

5. Get the Training Right - Holbach believes training is imperative to maximize the potential of technology solutions. Empowering local
teams and using their expert knowledge will strengthen the supply chain. They will flag potential issues early, giving the network a
better idea of where to go for help with routing or stock if required.

“We’ve had to react with agility during the pandemic and that was only possible by trusting our teams worldwide,” says Holbach. “It
created the freedom to act fast, find the best solutions and keep our customers and consumers supplied with essential products.”

He believes a progressive approach to training starts from the top of an organization. “As leaders, you should never stop learning,” he
says. “To prepare for the unknown, you have to have the right mindset when confronted with new and difficult situations.”

Harrison echoes this insight, saying that supply chain professionals need to be equipped with the right skills and commercial judgement,
which can only be achieved through training and development. This means being up to date, qualified, informed and skilled.

“What this pandemic has shown is that you need to invest in both technology and people to ensure supply chains are resilient, then
we will manage better through the next global shock,” he says.