Zara

3.        Zara’s rapid turnover of inventory created a sense of freshness in the choices and attracted the customers. This convinced the customers to buy the products as soon as they liked them. On the other hand Zara should face some challenges for the rapid turnover of inventory. As this system invites new customers, Zara should try and match the number of sales person in the stores to provide the quality customer satisfaction and assist them during shopping. The rapid turnover of the inventory primarily creates lost sales. As the slow moving items were removed quickly, this does not provide broad range of selection to the customers and are potential to cause lost sales. Customer who cannot find the item that has been removed at Zara, may find the similar item at another store. The rapid turnover of inventory may also increase operating costs. This is mainly due to the reason that this method eliminates to gain advantages from volume discounts. It also faces challenges in terms of design as new products are to be produced consistently to create a sense of scarcity to the customers. This system makes the supply chain complex, has chances to stock out during a sudden increase in demand and leaves the shelves empty in the store. Rapid inventory turnover causes an increase in work force costs to hire temporary workers, faster modes of shipping in case a particular product had a very high demand during a specific period. This system calls for high investment in information handling to check the inventory and take the information from the retailers to take the decision on number of items to be produced in each lot. Zara’s rapid inventory turnover can also increase the transportation costs and labor costs as the products are to be shipped once in two weeks. The cost incurred per item would also be higher as the quantity shipped is less during each shipment. Retailers need to put orders frequently which also increases the setup costs.