Sourcing Management
With over 19 outlets in Australia and over 4000 outlets in 96 countries globally, Zara’s sourcing management must be distinctive, responsive, and flexible in meeting the constantly changing tastes and preferences it harbors (Xuejie, Chang & GuangHao, 2019). One of the aspects that gives Zara a competitive advantage over other fashion and apparel companies in Australia is the effective management of its sourcing and procurement mechanisms that allow it to seamlessly meet the demand of the customers at a faster rate compared to any other competitors in Australia. Since Zara inventory turnout is 12 times compared to the other companies whose inventory turnout ranges between three to four, Zara’s sourcing strategies and management have proven success over globally. In outlets, it has in Australia and other 95 other countries around the globe (Aftab, Yuanjian, Kabir, & Barua, 2018). The following are ways in which Zara has put in place to manage its sourcing capabilities.
First, Zara partly manufactures its products in its stores as well as rely on external suppliers to meet the existing demands and remain responsive in addressing the needs of the customers. In a bid to effectively meet the constant dynamic tastes and preferences of the customers that typifies the fashion industry, Zara engages in the manufacturing of 50 percent of its product in the main headquarters in Spain (Singh, 2015). Normally known as the Cube, Zara’s global distribution center located in Spain normally carry out activities such as dyeing, manufacture of the selected products, and a recipient of the bulk fabric it orders (Singh, 2015). However, the company does not entirely rely on the manufacture of the products to meet its expansive and global market needs. In that regard, the company sources threads, fabrics, and most of the fashion assortments from most of the external suppliers who are based in Hong Kong and China (Singh, 2015). To effectively manage the sourced products and materials, Zara relies on Comditel, one of its subsidiaries, to deal with the external suppliers that deal with the fabrics. Such instances lead to improved sourcing strategies and effective management of inventory by a single entity.
On the other hand, the vertical integration of Zara makes it relatively effective in managing sourcing activities. The vertical integration model that Zara harbors makes it relatively easy for procurement practices to be centralized. Zara’s sourcing is centralized and managed at the Cube in Spain (Xuejie, Chang & GuangHao, 2019). Subsequently, the purchased fabrics are distributed to various subsidiaries that either turns them into finished products or dye them based on the needs of the fashion designers. In that regard, the centralization of most of the services of the company makes it relatively easy to manage the inventory and plan for the distribution of the products across the globe from the company’s global distribution center (Aftab, Yuanjian, Kabir, & Barua, 2018). On the same note, the sourcing strategy has expanded to other countries around the globe. To guarantee a constant flow of fabric and prevent any instance of supply chain disruption, Zara’s partnership with the external suppliers are grounded on mutual benefit (Xuejie, Chang & GuangHao, 2019). Therefore, the external suppliers are of the understanding that Zara’s purchasing power is not grounded on the prices of the fabric but the current market demands. The external suppliers are therefore obliged to ensure that material supplied to Zara is based on the bulk orders of the company as identified by fashion designers and design reviews and sales performance rather than the type of fabric and the cost associated with it (Xuejie, Chang & GuangHao, 2019). These dynamics in demand regularly change, making the sourcing routine inflexible and responsive to the aspects such as trend, preference, and tastes of the customers, and their purchasing power of the potential clients.
On the other hand, Zara’s approach to sourcing management is typified by a combination of human resources and the effective use of technology. Owing to the risks involved in mass production of the fashion products without the reviews of the customers, Zara ensured that its sourcing aligns with the prevailing market demands, which will prompt the reordering of the products (Xuejie, Chang & GuangHao, 2019). However, the aspect is made possible through the seamless integration of information technology and human resource in the effective management of the inventory. Through technology, elements such as inventory optimization have played an instrumental role in determining the precise amount of products that are required weekly as well as how much products are needed in the stock to meet the demands of the retail stores based on the popular demand (Singh, 2015). Further, through this effective human resource and technology, there is no single day that instances of sourcing of products that are not used are reported. The inventory is synchronized with the product reviews and the anticipated demands, which are subsequently communicated to the suppliers that deliver in a fortnight (Aftab, Yuanjian, Kabir, & Barua, 2018). Such instances have led to robust sourcing management as there are little instances where oversupply or undersupply of the fabrics or threads are realized as the external suppliers solely rely on the market demands as given to them by the company.
Supply Chain Relationships
Due to the constant shift in demands of the products in the fashion industry due to the changing tastes and preferences of the customers, Zara adopted a flexible business model that was bound to ensure that there is interdependence between various departments in the supply chain (Xuejie, Chang & GuangHao, 2019). The relationship between these essential entities in the supply chain of the company is interdependent to the extent that there is a unified performance among these entities (Singh, 2015). Zara’s supply chain is constituted by five different entities, such as design, manufacturing, distribution, sales, and information technology. The following are the relationships between these entities within the supply chain of Zara. In Zara, the fashion designers and the reviews they collect with them virtually determine all the aspects of the supply chain in the company. The individuals in these entities, according to Zara’s business model, are essential in ensuring that they give accurate reports about the prevailing market demands based on the existing reviews from the customers (Aftab, Yuanjian, Kabir, & Barua, 2018). These reviews are relatively crucial in initiating a supply chain in the company as the information provided is used in sourcing products from the external suppliers (Singh, 2015). To show the relationship between the information between these entities in the supply chain, the fashion designers always report back to the manufacturing to customize and tailor products of the company based on the reviews.
At the manufacturing, Zara uses an in-house manufacturing strategy and, together with the clothing factories in Spain and other parts of the globe, Australia included, provide the finished products and deliver them to Zara global distribution center (Xuejie, Chang & GuangHao, 2019). The manufacturing entity strictly produces the products based on the recommendations from the design department in the company. In a show of further collaboration and enhanced relationships between these entities in the supply chain of the company, all the manufactured products are often pooled in distribution centers (Aftab, Yuanjian, Kabir, & Barua, 2018). The distribution center does not only act as a warehouse for the finished goods but also houses the fabrics and assortments from the external suppliers, receives information from the design, and offers logistical support needed for the transportation of the fabrics to the companies and finished goods to the stores (Singh, 2015). The sales entity is another pivotal and collaborative aspect of the supply chain management of Zara. The sales department is mostly characterized by stores and other outlets globally. At the sales, crucial information about the prevailing trends and tastes of the customers is gathered, and the information is relayed to the design section (Aftab, Yuanjian, Kabir, & Barua, 2018). Therefore, there is a cycle of information flow between the essential departments of the supply chain in Zara, as depicted below.
References
Singh, M. (2015). Supply chain management of ZARA. Retrieved 2 May 2020, from https://www.academia.edu/16674169/Supply_chain_management_of_ZARA
Aftab, M. A., Yuanjian, Q., Kabir, N., & Barua, Z. (2018). Super responsive supply chain: The case of Spanish fast-fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), 212.
Xuejie, C., Chang, Q., & GuangHao, Z. (2019, August). Research on Innovation supply chain Management in Fast Fashion Industry——A comparative analysis of ZARA and H&M. In 2019 3rd International Conference on Education, Culture, and Social Development (ICECSD 2019). Atlantis Press.