1.

What advantage does Zara gain against the competition by having a very
responsive supply chain?

Zara is one of the successful manufacturers and retailers in fashion industry. It

business strategy is unique comparing to competitors. As demand for clothing is
unpredictable, Zara is flexible in responding to the need of consumers. First of it
responsive strategy is the “Fast Production Cycle” with “Efficient Distribution System”
this allow Zara to introduce new design and distribute to all store by weekly. More
frequency product display in stores, with more choices of new design attract most
consumers and likely to match consumer preferences. Furthermore, Zara has adopted
a strategy of scare production, which encourage consumer to shop more frequency
for new design. This strategy allows Zara to attract more consumers, build customer
satisfaction and increasing level of their loyalty. Nonetheless, Zara is able to sell most
of it products at full prices and at low markdown prices which result in less inventories.
Therefore, Zara could gain high profits margins.

2. Why has Inditex chosen to have both in-house manufacturing and

outsourced manufacturing? Why has Inditex maintained manufacturing
capacity in Europe even though manufacturing in Asia is much cheaper?

Inditex chose to have both in-house manufacturing and outsourced

manufacturing because In-house manufacturing allows Zara to be able to respond
quickly to the changing trend. Zara will be flexible in producing products with uncertain
demand especially the fast move of new product design either makes new products or
turns incomplete products made from its outsourced manufacturers and turns them
into specific finished-goods in response to market demands. Outsourced
manufacturing is for the general, common and out season products. This outsource
manufacturing also benefits the company as low cost of production, supplier
knowledge bases and development and the available of new technologies and
innovations.
1
 Zara maintain manufacturing in Europe rather than move everything to Asia
because the company and management believe that having a factory in its own
country, the company can manage and response to unpredictable quick change of
demands. Although the cost of production in Spain is consider to be high comparing
to Asia countries but the Zara factories is located in the areas where is known to be a
cheap labor in Spain. The factories are also located near to the distribution center so
the cost of delivers finished goods to the distribution centre is low.

3. Why does Zara source products with uncertain demand from local
manufacturers and products with predictable demand from Asian
manufacturers?

Zara sources products with uncertain demand from local manufacturers

because local manufacturers can supply quick products to the need of each store in
local market. Products with uncertain demand will most likely be produced at a lower
volume to products with a certain demand and therefore sourcing from local
manufacturers provides Zara the speed it needs to test and deliver these products
before they become obsolete and have to be sold at a discount. This strategy is to
respond to the fickle need and to improve customer satisfactions. Another reason for
Zara to produce goods in Europe because it wants to test the demand for new
innovative design before it distribute to worldwide market for better customer
understanding of that specific goods. It is part of a responsive pull strategy.
On the other hand, products with predicable demand sources from Asia
manufacturers because Zara could produce product with low cost. Since it has certain
demand with the large volume of productions, Zara chose to manufacture that goods
with low cost but large amount of goods for greater profit margin. Moreover predictable
demand products have a larger window with which to deliver products without
becoming obsolete. It also means that they can be made before the season starts as
part of a push strategy.

4. What advantage does Zara gain from replenishing its stores multiple
times a week compared to a less frequent schedule? How does the frequency
of replenishment affect the design of its distribution system?

2
 Frequent replenishment allows Zara to continue supply new design as
consumer desire. This replenishment is one of Zara inventory management strategy
where all stores are well managed. This means each store keep update the stocks
and replace with high demand for goods base on consumer desire in geographically.
This makes sure that store inventory is always up to date and that new designs can
be introduced often to meet trends. With this effective strategy brought greater
customer satisfaction and gains more market share globally.
The frequency of replenishment has made Zara increase the size and also
centralise its distribution design by handling its global operations through eight
distribution centers based in Spain. This centralised structure means that products can
be distributed rapidly from in house manufacturing in order to meet worldwide
demands in as little time as possible.

5. Do you think Zara’s responsive replenishment infrastructure is better

suited for online sales or retail sales?

Zara’s business success has demonstrated from the accuracy of demand

forecasting, efficient distribution, flexible and quick response, well managed
inventories, lower markdown and less advertisement, which result in high profit
margins. The most contribution of this success is it effective supply chain from
distribution center that enable Zara to distribute products at efficient time to meet
consumer demand. Because Zara has only eight distribution centers from Spain to
distribute products to the stores all over the world, it natures of business is suit more
on retail business rather than online sell. For online sell, there is a need of more
distribution center because of quick and speedy deliver service requirement. Online
company should have distribution center at the countries its service provided for fast
deliver. The speed delivery is one of the core online business strategies. For example,
company such as Amazon are able to respond quicker to online sales due to the fact
that they have distribution centres all around the world and can offer same day delivery
while Zara’s 24 hour delivery times from Spain to outlets all around the world may not
be as efficient through online. Therefore, Zara’s responsive infrastructure is better and
only for manufacture and retailer.