1. As completely as possible, sketch the supply chain for Zara from raw materials to consumer purchase.
Zara’s supply chain basically revolves around the concept of domestic manufacturing. In this concept, the basic idea is to source out local suppliers, even relying on one own’s production facilities for the raw materials of production.
So, the first step comes from raw materials such as fabric which, 40% of the time, Zara makes for itself. This avoids supply chain inefficiency when sourced out from Asia, which is the practice of Zara’s competitors. The next step is cutting the fabric, which is done in-house by Zara.The designs are then sent to the local hundred or so cooperatives for sewing, mimimizing the time for material distribution. The next step is when these items go back to the Zara warehouse facilities where an assembly line of workers specialize on specific tasks such as sewing labels, lapels, etc.The warehouse is almost completely devoid of humans as machines process 80,000 parcels per hour for sending to the 1,000 Zara distribution outlets by land or by air.
2. Discuss the concepts of horizontal and vertical conflict as they relate to Zara.
The concept of vertical and horizontal conflict as it relates to Zara is shown by the reluctance of Zara to extend its vertical supply chain by not accomodating distant and slow suppliers. In fact, Zara promotes the horizontal chain by relying on its own resources to make it the market leader. This it does by manufacturing or even growing its own raw materials and fabrics.
In effect, Zara minimizes conflict between the distribution and production system by running their own efficienntly ahead of its competitors, of course with a little help from technology.
3. Which type of vertical marketing does Zara exhibit? List all the benefits that Zara receives by having adopted this system.
The type of vertical marketing that Zara exhibits is called Contractual VMS (Vertical Marketing System). In this type of VMS, coordination and conflict management are attained through contractual agreements among members of the system. One benefit of this system is the fast response time in terms of identifying the next fashion trend and having it on the shelf in less than two weeks. The bottom-line is that the supply chain is fast, making Zara surge ahead of its competitors, leaving them behind in a clouds of dust.
4. Does Zara incur disadvantages from its ‘fast-fashion’ distribution system? Are these disadvantages offset by the advantages?
One of the disadvantages in this ‘fast-fashion’ system is the risk of misreading the fashion trend for a particular period and paying the price by disastrous losses in sales. Another disadvantage is that as owner or CEO, you must keep track of what is happening in several departments at the same time. This is especially true in Zara, where quality checks must always be regularly conducted among the cooperatives doing the sewing of the designs. You must place some of your trust in others from time to time and hope that they perform as expected. Another disadvantage is the high cost involved in maintaining the complex high-end supply chain of the whole system.
However, such disadvantages can be offset when Zara becomes the market leader among those who follow the ‘fast-fashion’ system. This translates in capturing a bigger market share resulting in increased revenues and profits.
5. How does Zara add value to the customer through major logistics functions?
Zara adds value to the customer through major logistics functions. For example, wearing the latest fashion to hit Vogue magazine ahead of the next issue is quite a feat that fashionable people try to emulate. The fast-fashion concept, supported by major changes in the logistics funbctions, have benefited Zara by winning over clients who usually prefer to be first than late in the fashion trend.