SUPPLY CHAIN AND LOGISTICS

IMPROVEMENTS

O. ESSEGHAIER

& R. KARIM

Année universitaire 2015/2016

Students: Prof.

L. BATTEZZATI

Presentation plan

Introduction

Zara Key points

Order management process

Proposal of distribution networks

Proposal of outsourcing logistics

Conclusion

Problems

Introduction

3

The founder, Amancio Ortega, founded Zara in 1975 in order to better understand world markets for his fashionmerchandise. A decade later, he formed Inditex as a parent company for Zara, as well as several other retail conceptsand suppliers that he had built.

While Zara originated in Spain, it has over 2000 stores in 88 countries today - in Europe, the Americas, the Middle East,and Asia. In 2014, Inditex reported total sales of US$18.12 billion, with Zara representing total sales of US$14.8 billion.

50% of the products Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in Asian and Africancountries and the rest of the world.

Introduction

4

Retail environment (Managers and Sales associates)

sales analysis, the product life cycles, and the store trends to the designers

Manufacturing environment (Product development team)

high-fashion fairs and exhibitions, traveling to universities and clubs, The young, fashionable, and international staff helps to

interpret the desire of the moment

Order management process

5

Human resource team (retail and manufacturing environment)

Young Designers draw the design sketches then discuss it with market specials and planning & procurement staff. It

is worth to mention that out of 40,000 designs only 12,000 are approved. This illustrates the flexibility of ideas

generation and on the other hand the huge number of designs reflects the ability to meet almost all the fashion

requirements by customers of all ages (up to 55). And within 6 hours using technology (IT network) they sent the

sketches to the factory with slight differences in the design for manufacturing.

Decision making

6

Every ZARA store linked with ZARA IT network and store manager through this network can directly order toheadquarters. The headquarters know every store's information directly by the network, and then get the store's sales,inventory and order and other news, comprehensive analysis of all products whether are selling or slow-moving.If one product slow-moving, it can be cancelled from the original production plan. So order management ensureeffective of production supply and greatly reducing the supply time, and also preventing effectively the productionshortages and overproduction as well.Each Zara outlet sends in two orders per week on specific days and timing. Trucks leave at specific times and shipmentsarrive in stores at specific times. Garments are already labelled and priced upon destination.

Time line

7

Zara business is organized around processes not functions, to close the information

loop. All team is involved in all processes. This method minimizes the time as decision

is conducted in one room, and in direct proximity to the information. As a result, Zara

reduces the inherent uncertainty associated with new designs in this industry that is

characterized by long lead times and very high variability of demand e.g M&S could

need a whole season to get a new item to stock. Whereas, under computerized system,

the company reduced its design to distribution process to just 10 to 15 days.

Key points

8

Short lead time

Lower quantities

More styles

More fashionable clothes

Scarce supply

More choices and chances to hitting it right

Problems

9

More emphasis on using vertical integration to be a very quick

fashion follower than to achieve manufacturing efficiencies.

Due to that, there is a slight possibility of deterioration in

quality of manufacturing

American Supply Chain

Zara supply chain in Europe proved to be extremely efficient.

However , Zara has not built a distribution strategy in America

which is a constraint to the selling ability in US.

American Consumer Taste

American consumer view of Zara differs from the European

one who view Zara as fashionable house. If Zara needs to

grow in American market it needs to address specifically the

American needs and perception of fashion

Proposal

of distribution networks

10

Expand the distribution centers to serve the US market. The products can be

purchased centrally and then shipped directly to North America for manufacturing and

distribution, instead of having to go through Spain. This will result in a slight increase

in manufacturing cost (due to increased labor and facilities costs in US), but these will

be offset by reduced shipping and tariff costs. The rest of the system can stay

centralized and provide support for the North American manufacturing and

distribution. By using this distribution center ZARA can deliver goods to its American

outlets within 24 hours.

Warehouse localisation

11

Our proposal

Zara’s strong distribution network enables the company to deliver goods to its

European stores within 24 hours, and to its American and Asian outlets in less than 40

hours.

- The high fashion products are demanding short lead- times.

- Products such as men’s shirts are not demanding such short lead-times since they

have a more constant demand. These products are produced in China and Turkey

where the lead-time is two to four months.

Type of products

12

Our proposal

Advantages of 3PL:

- Risk- sharing

- Less investment

- Focus on core competency

- Improved efficiency, service and flexibility

- Cost reduction

Outsourcing logistics

13

Disadvantages of 3PL:

- Loss of control over the logistics function

- Differences of opinion or perception of the service level of the 3PL provider.

- The success of this brand is in its “special” supply chain.

Outsourcing logistics

14

CONCLUSION

15

Thank you for your attention