Case Study on Zara

1. Describe what you understand about Agile Supply Chain based on this Zara case study.

Based on the Zara case study, Agile Supply Chain is a network’s ability to consistently identify and capture business opportunities more quickly than its rival do. Basically, ASC is an instant, brisk, or a smart flexible and able to quickly respond to emergency needs that driven by demand in supply chain. Along with flexibility, speed and accuracy are also hallmarks of this type of supply chain. The information-sharing between business and the market data in the supply chain is the key factors that drive the agile supply chain. In agile supply chain the visibility of information allows the supply chain to become more changes in demand in the market place.  

1. What are the advantages and disadvantages of the Agile Supply Chain practice as experienced by Zara?

By pioneering the agile supply chain practice, Zara has managed to become the third biggest retailer in the world. The agile project management that Zara practices gives it an edge over their competitors. Zara’s production schedule differs strongly from the average retailer's schedule. Instead of sending large shipments of initial seasonal stock to each store, Zara sends small shipments up front, with no pre-scheduled replenishment, but with the ability to re-stock each store twice a week. Zara clearly operates differently from most retailers, and the flexibility and agility provided to it by agile project management define its production and distribution methods. However, on the hand, the increased number of Zara stores around the world has becoming a problem to Zara’s supply chain operations (SCO) which is a disadvantage to company. The lead time cannot be kept short, and the delivery time may influence company image. Lack of company’s product on the shelf, turn the customer to competitor’s product and around 20% never come back.

1. Explain how supply chain management is related to those business activities at Zara: Procurement, Design, Distribution and Sales Marketing.

Procurement at Zara is considered as a value adding process and not a cost centre. Supply chain management puts great emphasis on procurement subcontracting and outsourcing makes the production become more cost effective. Every company required to purchasing items, supplies, raw materials, and the procurement of these is either buying or leasing them. Procurement interacts with every single unit in the organization, going from marketing and sales to engineering, design and manufacturing, therefore it is important for the organization.

Zara’s is an imitation of high-end brands other than the unique line of design model. In product organization and design, according to Nelson Fraiman, most apparel retailers commit six months in advance to the designs for 40 to 60 percent of their seasonal lines. By the start of each season, nearly 80 percent of that season’s inventory is committed meaning a lot of it has already been manufactured. Zara, on the other hand, commits six months in advance to only 15 to 25 percent of a season’s line. Zara reacts quickly, designs new styles, and gets them into stores while the trend is still peaking. Zara has this capability because it keeps a significant amount of its production in-house and makes sure that its own factories reserve 85 percent of their capacity for in-season adjustments.