Supply Chain Performance Firm Performance -Myassignmenthelp.Com

Question: Discuss About The Supply Chain Performance Firm Performance? Answer: Introducation Zara is a well-known multinational retaining chain which offers fast fashion products to its customers; it was founded by Amancio Ortega in 1975. The company is considered as one of the most innovative and devastating retailers in the fashion retailing industry. As per 2017, the corporation has established more than 2200 stores across 93 nations worldwide (Forbes, 2017). The parent company of the enterprise is Inditex Group. In 2017, Inditexs profits jump more than 18 percent as Zaras global sales increases and the firm reported revenue of 654 million euros in the first quarter of the year (BBC, 2017). Due to its global expansion, Zara has reported a growth in its sales by 14 percent in the first quarter of 2017. In 2017, Zara started offering its products through online platforms in various new locations such as Vietnam, Malaysia, Singapore, and Thailand and it is planning to expand its operations in India through an online platform. The corporation has achieved tremendous success b ecause of its effective and efficient supply chain which allows the company to offer new products to its customers in just 14 days (Bagaria, 2014). This report will focus on analysing the attributes and issues of Zaras supply chain operations by examine the case study called Zara: A case of Rapid-Fire Fast Fashion Strategy. The report will evaluate the reason for success for Zara and compare its operation with a successful and an unsuccessful firm. Further, the report will examine the reason due to which Zara has gained competitive advantage and provide recommendations that can be implemented by the firm to maintain its competitive advantage. Current Situation/Issues Analysis As per the case, Zara effectively manage its supply chain operations by using smart communication systems and by controlling each function of the operations. Inditex, the parent company of Zara, is currently the worlds largest fashion apparel retailer and it maintains various international brands including Zara, Pull Bear, Bershka, Oysho and others (Farfan, 2017). Zara is Inditex most popular brand, and it is also the largest contributes to its total sales. The company has increased its operations worldwide, and it maintains its competitive position through effective Supply Chain Management (SCM) strategy. Although the firm has reported tremendous success, it faces various political, economic, environmental, technological, social and legal issues at a global stage. The firm has to comply with different legal and social policies while operating in different countries and global economic conditions also influence company profits. The corporation is facing fierce competition from vario us multinational brands such as HM, Marks Spencer, GAP, and many others (Joy, et al., 2012). In global markets, the supply chain operations of the company are also affected because nowadays products have a shorter lifespan and fashion trends changed rapidly due to social media sites. The company also facing issues in maintain effective supply chain operation as its operations grow in international markets (Barnes and Lea-Greenwood, 2010). Many of the competitors have started imitating Zaras supply chain which all them to increase their efficiency which increases Zaras competition. Zaras competitive advantage include it fast fashion system through which it offers newly designed products to its customers in 14 days whereas other companies take months. However, many corporations have reduced the time taken by them in offering new products, for example, Benetton Group SpA offer new clothes in one week and other companies such as Fast Retailing Co. and Forever 21 display new products within six weeks. The fashion retailers are facing unstable demands from customers worldwide whic h increases the issues face by Zara in global markets (Caro and Gallien, 2010). Fundamental Reasons for Zaras Success Zara has achieved substantial success in international markets because of its effective supply chain and communication system. The business logistics of Zara include inventory management, purchasing, transportation, and warehousing. Zara implements a strategic logistic theory which focuses on different parts of its supply chain (Christopher, 2016). Theoretical framework of the enterprise includes Just-in-Time manufacturing, Porters generic strategies, and supply chain patterns which increase the efficiency of companys supply chain operations. The company has three intangible in its value chain which provides them a competitive advantage; it includes information system, process model, and brand image. Following are various factors which assist in increasing Zaras success in international markets and provide them a competitive advantage. Communication System The company has tight communication loop and effective IT infrastructure which assist them in establishing high responsive communication system across its international stores. All the necessary information regarding sales data, changing market trends and global demand is shared between retailer stores and companys head office which is situated in La Coruna. Effective communication channels enable the company to implement Just-in-Time manufacturing theory which reduces the time of decision-making which allows the company to quickly offer new products to its customers (Qrunfleh and Tarafdar, 2014). Control over Operations Zara has total control over its sourcing and distribution channels which allow them to modify them as per companys demands and increase its efficiency. In Porter Generic strategy, corporations focus on establishing competitive advantage across its market scope. Zara maintains a competitive advantage due to effective control over logistic operations which enable it to perform all design, warehousing, distribution and logistics functions internally and display new items in the stores in less than 14 days. More than 50 percent of companys production is in-house which increases its efficiency (Caro, et al., 2010). Rapid-Fire Supply Chain Management The corporation has implemented Rapid-fire supply chain through which it has established a rigid schedule that allows them to place Just-in-Time inventory orders. The firm uses self-made software for performing logistic operations which increases shipments accuracy to 98.8 percent and reduced shrinkage to 0.5 percent. It enables the corporation to ship products in European stores in 24 hours and American and Asian stores in 48 hours. Effective supply chain operations allow the corporation to target fast fashion industry (Mehrjoo and Pasek, 2016). Positive Brand Image The enterprise has a positive brand image of offering high-quality products at inexpensive prices which allow them to increase its global operations. The company has implemented no advertising strategy in which it spends only 0.3 percent revenue on marketing expense. In comparison, other competitors spend around 3.5 percent of their revenue on advertising. It allows Zara to increase its investment in store locations and open stores in prime locations. The firm also refurbishes its stores more than its competitors that increase companys reputation and allow them to maintain their positive image by word-to-mouth marketing (Rageh Ismail and Spinelli, 2012). Comparison between Zara and Other Corporation Zara maintain its competitive advantage through effective supply chain operations and controlling its distribution and sourcing channels. Similarly, Dell is another company which has established an effective supply chain and control over its distribution and sourcing channels. Following is a comparison between supply chain of Dell and Zara. Dells Supply Chain Dell is a successful corporation which operates in computer hardware and software industry. The company has gained a competitive advantage due to its effective and minimalistic supply chain. There are three key players in Dells supply chain: customer, company, and supplier. The customer book place order and Dell manufacture such products by getting quality parts from suppliers. Effective communication between supplier and the company and just-in-time strategy are key part of the success of Dells supply chain (Tang and Musa, 2011). Zaras Supply Chain Zaras supply chain is different from Dell; the companys supply chain includes different functions such as designing, manufacturing, sourcing, and distribution. The company closely monitor its supply chain operations which increase its efficiency. Though, the company also uses effective communication channels and just-in-time ordering strategy just as Dell to increase its efficiency. Point of Difference Zara follows a vertical integration supply chain through which it controls the operations of its suppliers which allow them to easily meet the demand of customers and manufacturing process. Dell manages different suppliers to maintain speed and accuracy in its supply chain, but it faces various risks including a shortage of goods, uncertainty, delay, and Therefore, more than 95 percent of companys suppliers are located new the manufacturing units (Christopher and Holweg, 2011). Zara has a number of warehouses to store its inventory and make them quickly available in the production unit which increases their warehouse costs. On the other hand, Dell has low inventory costs since it has 7 hours of inventory, unlike Zara which has ten days of inventory (Choi, et al., 2011). Comparison between Zara and an Unsuccessful Company Target was founded in 1902, and it is second largest discount store in the United States after Wal-Mart. The company has achieved tremendous success in the US markets, but they failed terribly in Canadian markets. Target Canada was the subsidiary of Target which established discount stores across Canada in 2013. The company failed to attract customers and decided to shut down its operation in 2015 due to lack of effective supply chain system (Dahlhoff, 2015). Target Canadas Supply Chain The company did not have control over its suppliers and ordering operations, and they failed to assess its customers demands. Lack of effective communication channels between the corporation and its suppliers increase the confusion, and it also increases unnecessary stock in the company. Points of Difference Zara maintains control over different sections of its supply chain by effective communication system. Target Canada, on the other hand, did not have an effective communication system which increases unnecessary stock in its stores. Zara use just-in-time strategy, whereas, Target Canada did not have such strategy (Gabrielli, Baghi and Codeluppi, 2013). Zara spends significantly low on advertisements and uses the revenue to open its stores at prime locations and continuously refurbish them for customers (Li, et al., 2014). Whereas Target Canada spends more on advertisement, and their stores did not provide a premium experience to customers, therefore, the company failed. Zaras Competitive advantage Zara has become worlds largest fast fashion retailing corporation because of its effective supply chain, brand image, control over distribution and efficient communication system. The company uses Supply Chain Management (SCM) strategy, Just-in-Time strategy, and Porters Generic Strategy that assists them in gaining a competitive advantage and sustains their future growth. Sustainability or sustainable development is defined as development that fulfils the requirement of the present without compromising the growth of future generations and their needs (Turker and Altuntas, 2014). Zara uses effective supply chain for sustainable development. The companys supply chain reduces the waste of products which protect natural resources; it controls over suppliers, distribution system, and effective communication channels assist in reducing overstocking its stores. The production operations of the enterprise reduce its manufacturing costs and wastage of material. All these factors assist in th e sustainable development of the enterprise which provides them a competitive advantage and creates a positive brand image. Suitable for Other corporations The supply chain management strategy of Zara is suitable for other corporations as well, and they can use it to gain a competitive advantage. Many multinational companies find it difficult to maintain a similar level of quality and services while offering services in different countries. For example, Marks Spencer failed to increase its operation in Canadian markets because the company failed to maintain a similar level of quality which did not attract customers. Therefore, organisations can implement the strategy of Zara which assists them in establishing effective communication channels that connect every retailing store to the firms head office (Jang, et al., 2012). Organisations can also control the distribution and sourcing operations which will reduce their overall cost. Effective supply chain allows fast fashion corporations to offer the latest design products to its customer in less time which will assist them in increasing their operations worldwide (He, 2012). Therefore, o ther companies can implement business strategy of Zara which can provide them a competitive advantage and sustain their future development. Conclusion In conclusion, Zara has implemented various logistics theories that provide them a competitive advantage in fast fashion retailing industry and sustain their future growth worldwide. The company uses effective communication channels to manage its operations worldwide, and it also assists in quick decision-making process. The firm control various supply chain functions including distribution, operations, productions, suppliers, sourcing, and others to maintain efficiency. Due to effective supply chain management, the corporation is able to reduce the waste of material and overall costs. Other corporations can also implement strategies of Zara to effectively manage their worldwide operations which can assist them in increasing their efficiency and sustain their future development. Recommendations Following recommendations can be implemented by Zara to address various issue face by the company to maintain its effectiveness. The company should increase its investment in marketing strategy that can assist them in increasing the number of customers worldwide. Zara can use their positive image in marketing strategy to increase its operations in global markets and attract new customers. Zaras competitors such as Benetton group SpA and Forever 21 are able to offer new clothes to their customers in less time than Zara. Therefore, the company should invest in new markets to set up new manufacturing and designing plants that can increase the speed of production in global markets. 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