Zara Case Study

LOGISTICS OPERATIONS 2 - SBR- 1

ZARA CASE

Date of submission 04.04.2018 CEO : GOWTHAM KRISHNA

COHORT NAME: MGB Sept 17 Group Members: 1. Shatakshi Pandey

2. Mohammad Suhail

3. Shivam chahal

Group No: Group 3 4. Utkarsh Tripathi

Q1-What is interesting or unusual about Zara’s supply chain

1. Zara follows the rule of buy low, sell high and buy on credit and sell on cash.

2. Vertically integrated supply chain.

3. They follow the H structure: information from each store is independent and parallel to the headquarter in Spain.

4. Books 85% of the full ticket price for its merchandise, while the industry average is 60%.

5. Nearly 60% of Zara’s merchandise is produced in house, saving on transportation cost.

6. They keep a very low inventory and stores place order twice per week.

7. As a result of low inventory policy, it was very usual to see empty racks by the end of the day.

8. Zara sought to minimize the risk of oversupply by keeping production volumes low at the beginning of the season and reacting quickly to orders and new trends during the season

9. Stocks which remain in the shelves for more than 2 weeks, are sent back to pain or other stores.

10. Rather than chasing economies of scale, Zara manufactures and distributes products in small batches.

11. Zara had large number of suppliers due to which they minimized the dependency on single supplier.

12. Zara outsourced highly labour-intensive operations such as sewing allowing its factories to be more flexible with the fluctuation in the demand.

13. Zara used hub and spokes system in which all its products were passed through their biggest warehouse in La Coruna.

Q2-What are the reasons behind Zara’s success

VARTICAL INTEGRATION

Design, production, shipment, display, promotion, sales, and feedback all were controlled by Zara itself with minimum out sourcing. This gives Zara control over their operations and enables them to create a flawless supply chain.