Zara Supply Chain China

Case Study and Exercises Exercise #1 We were given the formula of distance , where D – Distance from location L (distribution center) to location I (consumption point); – X coordinate of the warehouse l (distribution); – X coordinate of the store i (consumption); – Y coordinate of the warehouse l (distribution); – Y coordinate of the store i (consumption). Consequently, applying these formula in the Excel we receive the following result: Then, multiplying the distance by the amount of demand and summing up for each relevant location, we get: Thus, the answer is LOCAY, because it has the minimal score. Exercise #2 Using provided formulas , where – X coordinate of the optimal location for warehouse; – Y coordinate of the optimal location; – X coordinate of store i; – Y coordinate of store i; – Load (or Demand) of the store i, we get And finally The answer is (8;11). Zara's Case Study Company Profile Zara is one of the largest international fashion companies with 1671 stores around the globe. It is a part of Inditex holding. Inditex is one of the world's largest fashion retailers, welcoming shoppers at its eight store formats -Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterque – boasting 5. 93 stores in 85 markets [www. inditex. com], [www. zara. com]. In 1975 the first Zara shop was founded in Spain. In 1976-1984 In-Spain expansion takes place. In 1988 it enters Portuguese market. Followed by US and France, it quickly becomes world-brand and until 2006 it had 52 countries which held retail operations of the company. Za ra concentrates on the three principles to satisfy the customer [http://ru. scribd. com/doc/27372254/Supply-Chain-Practices-of-Zara#]: Short lead Time which results in â€Å"more† fashionable clothes Lower quantities – scarce supply More styles, which create a greater possibility of attracting needed customers. ) Zara's designing process organized in a way such that the stores, which actually interact with the customers, communicate to the head office in Spain the needs of the customers and the trends in fashion clothes. Thus, making it possible for the company to react to market changes within 30 days [http://thirdeyesight. in/articles/ImagesFashion_Zara_Part_I. pdf], which makes Zara unreachable for the same-size competitors. 2) Reducing the number of clothes manufactured in each style creates the â€Å"scarcity† which is applicable to fashion clothes. The less it is available, the more desirable it becomes. As a result, Zara discounts only approx. 0% of its products. 3) The stores are supplied with new merchandise twice a week, thus making them seem â€Å"new† every 3-4 days. On average, Zara creates around 11,500 styles per year [http://thirdeyesight. in/articles/ImagesFashion_Zara_Part_I. pdf; http://www. slideshare. net/koffman/zara-case-study-2780928#btnNext]. Moreover, m ost of the production facilities are located in Spain, near the headquarters, so that the company has more control over the operations, producing and distributing. Zara's characteristics of vertical supply chain Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls most of  the steps on the supply-chain: It designs, produces, and distributes itself. The business system that had resulted was particularly distinctive in that Zara manufactured its most fashion-sensitive products internally. Zara did not produce â€Å"classics†, clothes that would always be in-style. In fact, the company intended its clothes to have fairly short life spans, both within-stores and in customers' closets. Retailers like the American chain ‘Gap’ and the Swedish retailer  Ã¢â‚¬ËœHennes ; Mauritz’   completely outsource their production to factories around the world and mostly to low cost Asian countries. In contrast, it is estimated that 76 percent of Zara's production is carried out in Europe which is within the small radius of its headquarters in Spain. In fact, almost half of its production is in owned or closely-controlled facilities. Another 24% are produced in Asian region [http://www. slideshare. net/anusaj/zara-ppt#btnNext] While this gives a tremendous amount of flexibility, it does contend with higher people costs – that of up to 19 times as much as Asian ones. The group also owns capital intensive facilities in Spain, which can do dyeing and processing of the fabric as well as cutting and garment finishing. Provided that, Inditex has an ability to adjust to the new trend or demand in a very short time. Overall Supply Chain is can be described as follows: Collect the information from retailing points. At least two times per week the sailing points should somehow conduct the information to the headquarters in Spain, providing information for the groups in charge to develop and decide on the range of clothes which will be demanded by the customers in the observed future. This work is done by approx. 200 people, which develop up to 1,000 styles per month [http://ru. scribd. om/doc/27372254/Supply-Chain-Practices-of-Zara#] The information is also received via sales reports from retail points. Thus it can be claimed, that Zara has invested a lot into IT, to make the up-to-date information flow possible. Decide on the needed clothes, distinguish trends. After depicting and sketching appropriate merchandise for the stores, they send the order to facilities, which are located near the head offic e. Moreover, it should be said that Zara somehow lowers its risks by purchasing uncolored fabric or even raw materials, thus making enhancing flexibility. The process organized in such way, that final product may be even painted on demand. However, only cutting of material is done within the company. Actual sewing is done by workshops, which are mostly located in Spain or Portugal. None of the workshops belongs to Zara. The company provides them with instructions how to do the work for its own needs. Zara being vertically integrated has its own distribution network, which allows the company to further control physical flow. Since the time has a great value for Zara, the newly produced merchandise arrives to the stores within 48 hours. [http://ru. cribd. com/doc/27372254/Supply-Chain-Practices-of-Zara#] An esteem of time, needed to pass from development of the product to actual shipping is around 7-10 days. [http://thirdeyesight. in/articles/ImagesFashion_Zara_Part_I. pdf] Zara's development in China First Zara's store was opened in Shanghai, in February 2006, and during the first day store has managed to generate 800,000 RMB of revenue . Within a year Zara opened 12 new stores across China, and accorfding to the latest data (31st of July) its chain had 114 stores within China (out of 355 operating in Asian region) [http://en. wikipedia. rg/wiki/Zara_%28retailer%29#Stores] in over 40 cities, including Beijing, Guangzhou, Shenyang and other. [http://www. chinadaily. com. cn/business/2012-09/06/content_15737684. htm] During 2011 Beijing Consumer Association was checking the quality of Zara's product. The result was that they accused company of selling lower quality products on chineese market. [http://www. chinadaily. com. cn/business/2011-04/26/content_12396211. htm]. However, the company doesn't seem to be damaged: no apologizes nor compensations followed. .On 5th of September, 2012 Zara opened its on-line shop in China.