A5Ch5: Zara Business Model
Supply Chain Transparency and How it Can Help the Earth, by M. Mutz
Have a great week!
Oh, just for fun…have you ever watched the robot system at one of Amazon’s fulfillment centers? Absolutely amazing. Check it out here:
“Fast Fashion: It’s“Z-Day”
Each year, millions of Americans follow the happenings of February’s Fashion Week, hoping to get a glimpse at what will be available in July from designers like Marc Jacobs, Ralph Lauren, and Dolce and Gabbana. How-ever, customers in cities such as Dallas, Atlanta, New York, Miami, and Los Angeles no longer need to wait; in fact, they better not. Fashion has a short shelf life, and at Zara (www.zara.com), it’s only a few weeks. Zara, a clothing company based in La Carnapian, has revolutionized fast turn in fashion. On aver-age, it takes less than two weeks for Zara to spot, design, and ship one of the 300,000 new SKUs it sells in stores each year. Thus, it routinely beats the high-fashion houses to market with nearly identical products that are made with less-expensive fabric and at much lower prices. For example, Zara recently sold a long, pink boucle jacket resembling one of Chanel’s current spring and summer offerings for $129 and a pair of black stretch pants similar to a Prada design for $33. The cost of the originals: $7,326 and $350, respectively. How does Zara do it? Creativity in supply-chain design! First, Zara is part of a corporate-owned, vertical marketing channel, Inditex, which owns and operates retail stores, distribution centers, a design and manufacturing headquarters, and textile-manufacturing facilities. Second, by controlling all steps in the supply chain, Zara is able to run each step (manufacturing, designed.) below full capacity. This is in stark contrast to most competitors who seek large runs to gain economies of scale and the resulting lower costs. Finally, they produce limited runs of each style; they overlook the possibility of being stocked out on any item. In fact, Zara’s business model thrives on these stock outs as they create instant demand.
In addition, Zara has introduced the Z-day concept to its target customers. Z-day, as the Zara faithful know, is the two days a week when new shipments of styles arrive in retail stores. On these days, Zara is packed with20- and 30-somethings seeking to get their hands on the newest clothes before they’re gone. Zara shoppers know that if they find a style they like, they better purchase it immediately or it’ll be gone. Zara’s supply chain was designed to create this feeding frenzy. By limiting the number of any one style, customers gain fashion exclusivity while Zara limits the number of discounts taken due to poor-performing lines.
In an industry riddled with seasonal discounts, Zara rarely has any because Zara headquarters is inconstant communication with its retail stores. Twice a week (Tuesday and Friday) store managers phone in their orders to market specialists dedicated to each store. During these phone conversations, problems are discussed and new styles are conceived. In addition, customized handheld computers (PDAs) augment these calls and communicate such hard data as orders and sales trends and soft data such as customer reactions, customer requests, and the“buzz”around a new style.
Zara’s headquarters knows, in real time, what is working and what is not. By controlling every detail from the dying of fabric and stitching of designs to the delivery and display of fashion within its stores, Zara is able to alter, discontinue, or modify current styles to arrive the following-day. To facilitate speed, its headquarters is designed primarily around three halls. Each hall has its own design, planning, manufacturing, and market specialist staff broken down by clothing line: men’s, women’s, and children’s. The three parallel lines, although expensive, allow information to flow quickly and unencumbered. Using a just-in-time (JIT) model, all aspects of Zara are linked by computer. Designers and market specialists gather data in real time.
A small prototype shop is also set up in the corner of each hall to encourage everyone to comment on the new garments as they progress. Once line teams have reviewed the prototypes (often within hours), designers refine them using computer-aided systems and transmit the specs directly to the cutting machines. Bar codes then track the cut pieces of fabric through the various stages of production. Once developed, garments are transferred to a central warehouse where shipments are prepared for every store (usually”)
ZARA & SPRINT Compare and contrast each store based on price, quality, appearance, customer service, customer engagement, product offering, customer and employee, diversity, social media presence, brand, website, customer feedback.
Read the ZARA Case study attached and answer the 2 questions bellow: Question 1: What are the key considerations by Buyer and Merchandiser in pricing a range? Through the use of industry examples, explain the process(es) followed by fashion retailers in deciding on the most appropriate price to charge. Question 2: Explain how Buyer and Merchandiser work together to maximise profits, outlining their roles at each stage of the Buying Cycle. Evaluate the differences and similarities in the roles, giving examples of good practice of retailers to support your response.
1. In what ways is the Zara model counterintuitive? In what ways has Zara\’s model made the firm a better performer than Gap and other competitors? 2. What do you believe are the most significant long-term threats to Netflix? How is Netflix trying to address these threats? What obstacles does the firm face in dealing with these threats? 3. Spend some time online researching services such as Netflix, BlockBuster, Hulu, and other streaming movie sites. How do these services compare? What are the advantages and disadvantages of each of these different services? 4. Describe some of the features of the information system that you chose in week one (make sure you have an approved information system before you complete this assignment). For each feature, describe how that feature is used, what data inputs the system receives through that feature, and what information outputs can be accessed through that feature.
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