Logistics Operation 2

Team 3
SBR 1
Syed Mohammed Sumaiz - mj18gl058
Prashant Verma - mj18gl058
Nadit Khatri- mj18gl056
1. Map out Zara’s product design, production, supply chain management and retailing processes.
What you find interesting, different or surprising about them?

Product design

 Consisted of a lean 260 including designers, market specialists and buyers. The team was
fairly young. Only 1 out of 4 from the designs were selected.
 Better flow of ideas and idea development due to flat and decentralized organization. Better
collaboration between departments enhance productivity.
 Major accountability given to designers, market specialists and procurement and production
planners that constantly refresh current season designs

Production-

 Low inventory is held by Zara with error-free stock through sampling.

 This leads to rapid replenishment that is high turnover and movement of goods.
 The procurement department is experienced and efficient.
 Production is swift with close proximity of suppliers
 Smooth process as Zara is favored by its suppliers for it large scale of purchases.
 Good risk management within production and procurement as low dependency on a
singular supplier and quick response
 Priority is always given to error-free production, adherence to time schedule, and pure
quality control at distribution center.

Supply chain management-

 better relations between managers and market specialist,

 rapid exchange of data through digital devices,
 singular DC
 brazil, Argentina, Mexico warehouses established for distance and season advantage
 On time delivery to retailers with the help of 3 party logistics

Retailing processes-

 Stock is ordered and received twice per week with adherence to on time delivery
 The stock have quick turnover in a opportunity to chase trends. They are strongly dependent
on seasons.
 Due to nimble and quick operations, better forecasting occurs as they gauge the trends
better
 The unsold stock of a store is moved to another store to keep their retail stores look fresh
and distinct from one another. This is rare as there are few unsold items.

2. While reasons behind Zara’s success? Your answer, describe what it does well and how it does it

The reason behind Zara’s success is majorly attributed to its lean supply chain and lean operations.

Zara is in the fashion business and not in the clothing business, and hence has to deal with stock
having high turnover. This high turnover should increase costs for R&D and transportations. But both
costs are controlled due to its lean operations. The suppliers are close to manufacturers who strives
for error-free production with keeping the status of the movement of goods to be as fast and
prompt as possible. They stay with the trend due to this as they can understand the trend as it
occurs, they response rapidly to the customer reactions to trends and then designs its collection.

They have a great retailing strategy wherein goods are moved between stores so as to keep their
stock refreshed and distinct from other stores. They have a singular distribution center that is quick
in its operations with its inbound and outbound goods and is supported by 3 warehouses scattered
throughout the world.

Right from flow of communication innovations from the design team to quick operations and
procurement performance under an efficient supply chain with a distinct and unique retailing
strategy can only be supported with lean techniques.

There is no wastages, or errors. There is clear flow of communications between levels of

management. There is quick inventory turnover, with an attempt to constantly improve all of its
processes.

3. What role should joint venture and franchised stores play in the future development of
Zara?
Keeping JV’s and franchised stores in light, there are significant roles they would enable for a
bright future growth of Zara:
a. Gaining new insights and expertise locally.
b. It would enable in risk and cost-sharing
c. Expansion of networks
d. Building of relationships
e. Gaining expansion capital
f. Minimised growth risk
g. Avoid employee-related issues (JV’s/Franchisee would deal with their own employees)
h. Support for advertising and marketing
i. Scalability of facilities.
j. Its independent functionality increases self-motivations.

4. Who should pay for inventory at the retail shops: store managers or headquarters? What
about franchise stores

For retail shops, Store managers should pay for the inventory considering following reasons:
a. Stores will have a centralised ownership of stocks.
b. Inventory bought would be on the manager’s accountability to be sold.
c. Manager can organise the SKU’s better.
d. There is no imposition from the headquarters.
e. Reduces complexity and material handling for headquarters.
f. Manager can better handle the inventory knowing the capacity and customer
requirement.
g. Manager’s accountability reduces the risk of bull-whip effect.
h. HQ can cut-down transportation costs based on the terms with store managers.

For franchise stores, the inventory, again, in our view should be bought by their respective
store managers due to the following reasons:
a. Dedication of workforce from franchise.
b. No conflicts of standard SKU’s.
c. Make-to-order may be implemented from HQ.
d. Local acceptance and preference of goods can be better understood.
e. Inditex can understand and implement local business tactics.
f. Ease of management.