Zara’s responsive strategies improve the efficiency of information exchange in every level of supply chain; customers, store managers, designers and market specialists, production stuffs, subcontractors, buyers, warehouse managers, distributors, and so on. As a result of efficient exchange of information, Zara can increase product turnover rate and delivery speed of products, designs, and trends, so each store can get new products just in time. Each shop is also able to reduce inventory risk, which makes Zara to offer products at an affordable price.
Question 2; Zara chooses both in-house and outsourced manufacturing. What are the reasons for choosing both strategies? Using in-house manufacturing, Zara can be more responsive to trend and customer demands. This strategy also provides Zara more quality control and faster exchange of information on each level of supply chain. The main reason using outsourced manufacturing is to reduce overall cost and increase company’s productivity. Question 3; Compare Zara’s possible supply chain disruptions with that of Hewlett-Packard using the assessment matrix of Exhibit 2.
Outsourcing’s logistic failure would be more likely to influence Zara’s supply chain than HP, because its production and delivery spans are much faster. Zara’s outsourcing method may not be influenced by commodity price risks because only labor intensive activities are outsourced. Most of products are produced by Zara’s own factories, so regulatory risk would not be high. The case does not provide any information about Zara’s sole sourcing method. The multi-source approach provides company to have alternative choices when there are some problems with a vender at a certain point (ex.
failure of delivery goods, increasing price). As Zara is a world successful cloth retailing company has presence in more than 45 countries in the world. The identifiable competitive priorities on which Zara has built up its successful business model are as follows: (i) Speed of Production – Zara has the ability to transform a fashion concept and place finish products in the stores within a period of 2 weeks successfully. Zara has dedicated teams at stores which allow the retailer to get designer influenced products at a very rapid pace within the stores.
(ii) Variation of Production – Zara’s value chain comprises of members who dedicated work closely with customers in spotting new trends of demand in fashion. They have the ability to launch new trends, designs and variation of products in short span of time. (iii) Cost Leadership – Zara produces fashionable range of products at an affordable pricing. When compared to other competitors in the same strategic group, Zara’s products are priced lower than GAP, Benetton and H&M.
The most important reasons to achieve consistent cost leadership in the modern market due to they keep a very low level of inventory in stores. Their efficient distribution system allows them to get products in the store just in time. As a result of which Zara has a high annual inventory turnover compare to their competitor in the market. Read more: http://www. ukessays. com/essays/business/operation-management-of-zara-and-benetton-business-essay. php#ixzz2gGzijXSa