zara case: supply chain 2015

8/17/2019 ZARA CASE: SUPPLY CHAIN 2015

1/16

UNIVERSITY OF TEXAS AT SAN ANTONIO

Supply Chain Management MS 4543

Final Project

“Analyzing logistics process and suggesting improvement o !A"A#

C$sar Ch%vez

&'()*+

,dsel M$ndez

&-./5/

Al0ert 1ern%ndez

""234

Proessor Minghe Sun

April /) /)+

)


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Index

I. Abstract 3II. Introduction 4III. Literature Review 5

!ARA"s current #rocess 5 !ARA"s business strate$% + Ti&e and '(exibi(it% 6 Inventories and #roduction * !ARA"s #rocess ca#abi(ities )IV. )et*odo(o$% )) +rob(e&s and ,ea-nesses )) A&erican #(ant )/ urrent networ- )3V. Resu(ts )4 I(e&entation )+

VI. onc(usions )+VII. Re'erences )+

.7 Abstract

Our tea&

2ur team emerged in a search or ne8 logistic solutions and possi0le

opportunities in various companies that are 9no8n 8orld:8ide7 2ur main o0jective o

this research is to sho8 ho8 our 8or9 has 0y itsel a ne8 point o vie8 o the current

8ay o shipping products around the 8orld and innovative 8ays o improve the

9no8n and oten used ones7

-o ind the 0est choice or an enterprise to 8or9 8ith 8e searched or an

organization that could provide us a large amount o data or in the 8orst case

scenario the aculty to calculate and analyze it 0ecause o its ame and success7

-his is the reason 8hy 8e chose the company !A"A a 8orld:8ide amous

organization that is in charge o delivering clothes and ashion accessories across

the 8orld not only constantly 0ut changing the product itsel S;(


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other important matters or the aculty o deliver them at the same time in every

country they appear on7

=esides the 9no8n act that !A"A has ne8 trending ashion collections some

times every month and ne8 accessories and parts o the collection 8ee9ly 8e have

ound that !A"A has opportunity areas 8here 8e can suggest ne8 solutions to

improve their service >uality logistic management costs and diminish their la0or

8or9 or ameliorate the current one7

II. Introduction

T*e Fas*ion Industr% toda%

-he current 8ay the 8orld sees ashion has changed almost completely

compared 8ith ho8 it 8as done no more than t8enty years ago7 Fast ashion is a

trending 8ay or the clothing industry to present ne8 collections 0rought rom the

ashion 8ee9 in spring and autumn 0ut in a ast delivery using cheap >uality te?tiles

and >uic9ly design ta9ing almost all o the production processes in developing

countries li9e @ietnam China .ndia Me?ico etc7

-he suggestions that 8e 8ill propose are divided in three types Strategic

-actical and 2perational7 -his dierentiation is very important to analyze 0eore

starting the planning stage and even more 8hen the solutions 8ant to 0e applied7

-he strategic decisions are characterized or implicate investment on plantsand capacities introducing ne8 products and creating logistics net8or9s7 -his

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decision ma9ing level sho8s a timeline o implementation o three to ten years

0ased on historic data7 -actical decisions are recognized or changes on inventory

policies implementation o procurement policies and adoption o transportation

strategies7 -he implementation timeline o this 9ind o decisions are rom three to t8o

years to complete7 -he operational decisions sho8 immediate results and are

relatively easy to implement 8e 8ant to ma9e at least an operational decision

ma9ing suggestion7 -his decisions could 0e Scheduling o resources routing o ra8

materials and inished products solicitation o 0ids and >uotations7 -he

implementation timeline o operational strategies is more or less than one day7 -his

tells us the importance o this little changes in processes that impact the

competences o a company in a long term planning7

III. Literature review

!ARA"s current #rocess

-his 0eing said 8e continue to discuss the position o !A"A in the mar9et on

the current timeline7 -he mayor compara0le competitors o !A"A are =enetton 1BM

and ap7 -his three as 8ell as !A"A have a vertical scope and include men

children and 8omen clothes in their collections7

.n comparison 8ith ap and 1BM 8hich o8n most o their stores 0ut

outsource all production !A"A o8ns much o its production and most o its stores7

=enetton in other hand has invested in production on a relatively high >uantity 0ut

its stores are ran 0y licensees7 -hey compete in the same mar9et 0ut have

dierences that ma9e them 9ind o uni>ue or e?ample the “ashion level# o !A"A is

higher than the other three 0ut its prices are lo8er than =enetton and ap7 1BM

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sho8 a relatively good ashion level Dstill lo8er than !A"AE 0ut its prices are

considera0ly lo8er than !A"AuG and o

course !A"A7 -he design and production unit o !A"A is located in Ha CoruIa

Spain 8here a large amount o outsourced operations are made in more than a

thousand irms7 !A"A is updated 8ith the ashion 8ee9 at a very precise level 8ith a

creative team o more than / designers oering li9e this a designer line o clothes

or every0ody at any age at an attaina0le price7 2ne “invisi0le# cost is payed thought

the te?tile >uality o their clothes 8on


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Fi$ure /. Re$iona( Sa(es

!ARA"s business strate$%

!A"A strategy is 0ased on 0eing as le?i0le as possi0le to satisy customer

changing needs in a lo8 cost mass ashion mar9et7 -his o0jective is achieved 0y

0eing the most vertically possi0le7 !A"A is involved in every part o their process7

Most o the a0rics are 0ought undyed to acilitate le?i0ility in every seasonal

change7 !A"A ma9es 4K o their o8n a0rics and +K o their o8n products7

Fi$ure 0. Su##(% o' Fabrics and !ARA"s +roducts

+


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=eing the o8ner o the process allo8s !A"A his constant le?i0ility7 Most o

providers cannot 0e as le?i0le since they are not involved in ashion tendencies7 A

!A"A


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Fi$ure 1. Fas*ion +rocess

-ime and le?i0ility are vital metrics 0ut still costs need to 0e maintain lo8 to

arrive to 0ig mar9ets7 -hey dont have advertising instead they invest on the 0est

locations in cities to 0e positioned as a top 0rand7

Inventories and #roduction

-hroughout the e?pansion o !A"A this company has remained ocused on its

ashion philosophy that creativity and >uality design together 8ith a >uic9ly response

to mar9et demands 8ill get proita0le results7 -o have this results they developed a

0usiness model that incorporate the three ollo8ing goals develop a system that

re>uire short lead times decrease >uantities produced to decrease inventory ris9

and increase the num0er o availa0le styles and choice7 -his goals helped to

com0ine moderate prices 8ith the a0ility to oer ne8 clothing styles aster than its

competitors7

.n terms o inormation and communication protocols !A"A spend less than

75K o total revenue on .- and .- employees account or only 75K o !A"A


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alicia region near head>uarters7 Also the local strategic partnerships that !A"A

maintains 8ith manuacturers allo8 or a product throughput time o 3 or 4 8ee9s

rom conception to distri0ution7 Store inventory changes re>uently a0out 65K o the

merchandise is changed three to our 8ee9s so they need to 0uy it on the spot7 1is

inventory models are 0ased mainly in determining the >uantity that should 0e

delivered to every single one o its retail stores so the stoc9 delivered is strictly

limited ma9ing sure that each store only receive 8hat they need7 Also the >uic9 in:

reason turnaround allo8s !A"A to ship more oten and in smaller 0atches7

!A"A has a centralized distri0ution system that gives the chain a competitive

advantage 0y minimizing the lead:time o their goods7

Fi$ure 2. 3istribution S%ste&

!A"A


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!A"A


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+rob(e&s and ,ea-nesses in t*e current #rocess o' !ARA

As it has 0een discussed some o the 9eys to !A"A


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.t is clear that !A"A


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As a >uic9 e?ample 8e 8ill calculate the shipment costs that !A"A incurs in

the Americas lets assume !A"A has + stores and that each store sells roughly

the same amount o garment this 8ould mean that rom the )/5 million clothing

produced in Spain each year each store receives appro?imately /) garments

D)/5+E7 According to !A"A 0usiness model each store receives a

shipment each 8ee9 giving us a total o 4/ garments shipped each 8ee9 to each

store D/)5E7. 8e set the average garment 8eight at / gr 8e get 8ee9ly

deliveries o *4 9g to each store7 An estimation 8ith Fed,? resulted in a cost o

Q/ (S per shipment Drom Ha CoruIa to ChicagoE assuming !A"A o0tains very

good rates 8e 8ill set the shipment cost at )5 (S7

-he ollo8ing ta0le sho8s the estimated total annual shipping costs to the

three 0iggest mar9ets in the Americas

ountr% 5 o' stores Annua( S*i##in$ costs 6US37

Me?ico ++ 4J5

=razil 5+ 4/

(S 5 365

Total 172 12,900,000

ountr% 5 o' stores Rate6US38tri#7 Annua( S*i##in$ costs 6US37

Me?ico ++ )5 4J5

=razil 5+ )5 4/

(S 5 )5 365

Total 172 12,900,000

V. RESULTS

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-hese num0ers do not ta9e into consideration the pooling o shipments so 8e

8ill assume that the total annual shipping cost is o appro?imately ) million (S7

. !A"A had a production plant in Me?ico or e?ample air transport o *4 9g

pac9ages to the (S according to Fed,? is Q* (S7 -his represents roughly a

5K reduction in shipping costs to the (S urthermore shipments 8ithin Me?ico

8ould certainly 0e made 0y truc9 reducing cost 0y almost *K and shipments to

=razil 8ould 0e reduced 0y /K DQ)5 rom Ha CoruIa to Sao Paulo vs Q)/ rom

-ijuana to Sao PauloE7 2verall shipping cost could potentially 0e reduced 0y 5K

8hich according to the ) million (S annual shipping cost to the Americas

represents 5 million (S per year7 ;eep in mind that these savings 8ere calculated

assuming air transport to all parts o the (S 8hen i shipping rom -ijuana most

places can 0e reached 8ithin 4* hours 0y truc9

Finally i 8e assume that !A"A had 4 stores in the (S Dsame amount o

stores as his competitor 1BME the total shipping cost using the current net8or9

8ould 0e as sho8n in the ne?t ta0le


Me?ico ++ )5 4J5

=razil 5+ )5 4/

(S 4 )5 3

Total 172 39,150,000

Comparing these to the cost o shipping rom -ijuana

)4


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Me?ico ++ /5 */5

=razil 5+ )/ 33+

(S 4 *R )+

Total 172 20,185,000

R2nce again these assumes air transport to all (S stores 8hen most could 0e

reached 8ith truc9

"oughly a / million (S saved each year7 Le thin9 that these savings

ma9e it very easi0le to 0uild a production plant some8here in Me?ico

Fi$ure 9. +ro#osed networ-

. 8e analyze the current structure o the productions plants in ,urope 8e can

see that the production plants are located in countries 8here the la0or 8ages are

lo8er to other countries in the region De7g7 8ages in Spain vs 8ages in ermanyE 0ut

the countries 8here the production plants are located are also 0ig mar9ets or the

products themselves D!A"A has over 4 stores in SpainE7 2ur proposed distri0ution

net8or9 creates a replica o this net8or9 Me?ico has lo8er 8ages than the (S or

Canada and at the same time is a strong mar9et in the Americas7

I(e&entation

)5


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-hese proposed changes depend greatly on the strategic o0jectives set 0y the

company7 .n order to justiy a production plant in ''' large eorts to penetrate the

(S Me?ican and =razilian mar9ets 8ould need to 0e made7 -his coupled 8ith the

capital investments that a production plant 8ould need 8ould place a large inancial

0urden on the company one that the company might not 0e 8illing to ta9e in the

coming years7

.t is also possi0le to maintain the current strategy and let the mar9et penetration

o such countries occur at a slo8 rate this strategy ho8ever 8ould re>uire at some

point in time to include a production plant in the mentioned country7

VI. onc(usions

.t results logical that one o the most important steps or the gro8th o !ara is to

increase their mar9et share in the (S 8hich is not only the largest one in the 8orld

0ut also one o the most proita0le ones7 Le consider that in order to do so some

changes to the current distri0ution methods 8ould need to 0e implemented7 Le have

concluded that 8henever !ara decides to ully enter the (S mar9et a production

plant 8ould need to 0e 0uilt some8here in Hatin America7

VII. Re'erences

Palladino A7 D/)E7 !ara and =enetton Comparison o t8o 0usiness models

D)st ed7 @ol7 )E7

utta 7 D//E7 "etail Speed 2 Fashion D@ol7 )E7

!ara7 Dn7d7E7 "etrieved rom http8887indite?7comen0randszara

!ara leads in ast ashion7 Dn7dE7 "etrieved rom

http8887or0es7comsites8alterloe0/)533!A"A:leads:in:ast:ashion

)+
http://www.inditex.com/en/brands/zarahttp://www.forbes.com/sites/walterloeb/2015/03/30/zara-leads-in-fast-fashion/http://www.forbes.com/sites/walterloeb/2015/03/30/zara-leads-in-fast-fashion/http://www.inditex.com/en/brands/zara

zara case: supply chain 2015

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