Alejandro Bueno López

Zara case study

Retailing management

1. As completely as possible, sketch the supply chain for Zara from raw materials to
consumer purchase.

As the case points out, finding the starting point of a product concept is hard to nail down
with Zara. But the following is an attempt to do this: Design: The starting point is a
collaborative phase that includes teams of creative professionals who carry out the
design process and store managers who spot trends and feed data to corporate.
Materials: Zara makes 40 percent of its own fabric. It is not clear from the case where
the other 60 percent comes from, but given the information on the rest of the process, it
is likely purchased more on a local basis than on a global basis. Cutting: Zara produces
more than half of its own clothing. It cuts all fabric in-house at its complex in Spain.
Sewing: Cut fabric and designs are sent to one of several hundred local co-operatives.
Ironing: Ironing is performed in-house by workers trained for a specific task (lapels,
shoulders, etc.). Final preparation: Clothing is wrapped in plastic and transported on
conveyors to local Zara- owned warehouses. The automated warehouses sort, pack,
label, and allocate clothing items to specific regions and stores. Delivery: Stores within a
24-hour drive receive deliveries by truck. All other stores receive their goods via air
parcel. Sale: All stores are company owned.

2. Discuss the concepts ofhorizontal and vertical conflict as they relate to Zara.

There is little information given in the case regarding channel conflict. But one could
easily speculate as to the outcomes. Because Zara owns much of its own supply chain
and exhibits an extreme amount of control over the elements that it does not own,
conflict is likely minimal. With respect to horizontal conflict, the only members of the
supply chain on a horizontal level would be the hundreds of local sewing co-operatives.
It is difficult to imagine the type of complaints that such co-operatives might wage
against each other that would affect Zara. However, horizontal issues might result in
vertical conflict. Zara owns much of the supply chain. Thus, any conflict would be
internal and could be handled in a much different manner than if the entities were
independent. But the co-operatives are not company owned. Because there are so many
of them, however, conflict should be minimized as Zara has plenty of options.

3. Which type of vertical marketing system does Zara exhibit? List all the benefits that Zara
receives by having adopted this system.

While Zara does not own all of the stages of the vertical marketing system, it seems to
have a strong control over those that it does not own. Zara’s system fits the description
 of a corporate VMS better than it fits the contractual or administered systems. The text
provides an outtake example of Zara in the section on corporate VMS that illustrates the
benefits that Zara achieves through this structure. These include control over almost
every aspect of the supply chain, more items produced, faster design-to-shelf times,
lower inventories, and more frequent shipments. In short, Zara is faster, more flexible,
and more efficient than other fashion houses and chains because of its corporate VMS.

4. Does Zara incur disadvantages from its “fast-fashion” distribution system? Are these
disadvantages offset by the advantages?

One disadvantage that Zara incurs is possibly a higher cost on materials and labor by
not sourcing globally to the cheapest source. This, however, is offset by the cost savings
of not having items shipped all over the world. It is also offset by dramatically faster
response time between each stage. Because Zara’s competitive advantage is the “fast”
part of the fashion, this is much more important than the minimal amount that Zara could
save by sourcing globally.

5. How does Zara add value for the customer through major logistics functions?

Warehousing: The only warehousing done in this system is local and brief for the
component parts and the finished items. This adds value by cutting down on costs
associated with warehousing and by decreasing the time-to-shelf. Inventory
Management: The IT system and the VMS in general both contribute to Zara’s ability to
offer a just-in-time system. This results in lower inventories, cut costs, and faster
throughput. Transportation: Zara’s shipping system is certainly quick. That is the big
advantage. Shipping by air freight to individual stores is not the cheapest way to go. But
again, Zara’s competitive advantage is speed.