The theoretical scope of this literature review is distributed by purchasing strategy and by supply chain strategy prospective. This part of the literature is founded on the Internet and from the articles in the Burch International University library. Through searching for the adequate information's, definitions, articles, journals etc; research was being executed with the keywords such as purchasing strategy or supply chain strategy or management or just Zara supply chain management. There are different data's, articles and web sites that were funded by the Internet about the Zara, and all offers different ideas of the research direction. In order to collect lot of useful and accurate material of Zara, I obtain from friend who works as a seller manager in Azel store.
A Zara supply chain strategy was the key term of my research and was an important part of my theoretical focus on supply chain strategy. The aim of this research is to give a clear picture of the theoretical research and to be able to manage analysis of the Zara case study showing how company purchase and which supply chain strategy perspective is the most convenient for such a company. The purpose of use of review in this research is based on the explaining and verifying the role and impact of purchasing and supply chain strategy of the Zara industry and how it's making successful. The effects of supply are particularly fundamental in fashion industries of marketing research. Although through this review also it will be described different aspects of supply chain points in the fast fashion industry.
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This review however will be based on the two sections; describing and analyzing the structure of the Zara's stores and on understanding the influence of purchasing of supply chain strategies. The manufacturing ZARA clothing company has an excellent development of supply chain, practical and innovative distribution channel processes.
Brief description of supply chain management
In usual supply chain management (SCM) is studied issue in marketing practices and theories as well. "Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements." The supply chain management is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective & efficient ways possible. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities. The organizations that make up the supply chain are "linked" together through physical flows and information flows. Physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. But just as important are information flows. Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and material up and down the supply chain.
Zara is one of the perfect examples of fast fashion industry. There are six moths time of waiting for training production supplier, while for the fast fashion industry it takes only four to eight weeks that have much faster speed of supply chain productions. However, Zara control to drop new lines into its stores floor twice in a week.
The major success of ZARA Company is its dynamic supply chain with its specified outcome of focusing on a shortest response time. Using the supply chain management ZARA products generate its instant fashions being cheap, stylish and trendy by using a high wage form and it doesn't necessarily means poor quality. Therefore this means that the fast fashion industry involve requirements such as: low raw material costs, high productivity, low labor costs, good quality and mostly recognizing what the consumer's wants of fashion products; which means it meets the customer satisfaction. Zara has developed a supply chain which is efficient of getting a trend from the catwalk from their stores in period of one month, while for four to twelve months from its company competitors. According to this the strategy of reducing the quantity manufactured creates scarcity. Thus, this is productive for Zara because of two reasons; first the less availability leads to highest desirability and from the second reason, with fewer amounts being produced in any time means that there is less to be added at the end of season sales. An overall discount of Zara is about 18% of its total operation range, where half of the level its competitors.
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In order to get their supply chain integration Zara operates with decent level of sharing data and integration between retailers, manufacturer and third party researchers as essentials. In addition Zara is able to accept cost source of the customer quickly, have close enough manufacturing so that fast trendy replacement can be competed, higher tools of technology which means faster market sampling test provide the opportunities to gather and analyze market response from new products for the suppliers and of course include the online retailing to provide quicker customer feedbacks on both products satisfaction and customer behavior preferences which needs to ensure that Zara sales operations are running successfully. All these characteristics means that the information's sharing can help so that supply chain move faster.
In the case of Zara the time is one of the primary drivers to reach the competitive advantage, where an agile of supply chain management is created. Zara is being focused on the flexibility and market sensitive, until to comparisons of the ordinal method of being forecast driven.
Presence of the ZARA in the fashion world has pressurized competitors of entering their supply chains to keep the track with Zara; therefore it does recognize the importance for the quick response. With quick response system Zara is able to respond its customer's wants better than its competitors. ZARA industry is focused on the ultimate consumer with allocating a huge emphasis on implementation of backward vertical integration to perform the strategy into a fashion follower, before than to accomplish production efficiencies. Zara's accepts a quick response strategy communication that is effective expected to its management and collective culture. The continuous processes of information between managers provide the company to keep its customers satisfied, which in turn results in raising the sales.
Furthermore, Zara's centralized issuing offer the chain a competitive progress by decreasing the lead-time of their goods. Reducing the time to increase the delivery speed transportation is scheduled by time zones and it's loaded by way of air and place of land. The advantages of ZARA delivery time outside the Europe is around one or to two day approximately. Based on Zara's strategy centered on fewer advertising cost is one another advantages over its competitors. Investments advertising cuts minimize a total expense that makes the international expansion more profitable. According to this company relies mostly on its stores to project their image, so it is clear why Zara is familiar for its essential real estate locations.
Nowadays people all around the world have far higher access in world fashion because as the result of the e-commerce and internet. Company of Zara recognize this and use it to their advantages by offering the latest clothing trends to their customers. However, Zara has a successfully developed business model which distinguishes itself from its competitors, (H&,M, Benetton etc.) but it also has disadvantages that can have influence on its sustainable growth. Therefore there are some weaknesses that strategy of Zara creates. Furthermore, vertical integration is considered by many authors as a strategy which potentially raises profits and decrease risks, where the defects are still equally considerable to recognize. Thus, vertical integration often brings to the inefficiency to acquire economies of scale. Reflexive introduction and focus on speed of new products incurs increase costs as well. Hence they have greater research and development costs. Also they have increased costs due to the constant transformation of production techniques to make out their different clothing lines.
In general today's highly competitive fashion and apparel market place where quick changing of fashion trends forces the fashion industries to make responsiveness to the market need as much as possible. Supply chain strategy is a primary performance driver for these companies to attain the competitive advantage in the marketplace. Purchasing and supply chain management operates with the nuts and bolts in Zara industry. Implementing purchasing and supply strategies can help in saving the costs and in optimizing the ways in which companies integrate suppliers, manufacturing and transportation.
In addition to this they used to increase response time in market over lead time reductions, provide availability and flexibility of supply in response to customer desires, and connect supply chain strategy with e- commerce in order to accomplish efficiency and profitability. The importance of improving the efficient customer and quick response is vertical information integration and adjustments over the supply chain with information and communication technology. Within the fact that it can control the entire supply chain closely to the better end, which gives opportunity to the company to be in position to produce the most trendy fashion styles roughly in real time to respond in the fast changing customers tastes. More accurate market information and update data are always needed to avoid unsold inventory and markdown cost as fashion and custom products are with volatile demand and highly unpredictable. An effective way of aligning right supply chain strategy is to match product uncertainty. Postponement strategy can considerably reduce inaccurate forecast risk and do a responsive supply chain strategy.
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Zara has accomplished the benefits of agile and flexible supply chains for its innovative fashion items. Although, Zara overcome its competitors today's in terms of profit margins, without any stock out rates keeping the industry leader in the market. As a result the purchasing and supply chain strategy has a major role in this type of the company. The success of Zara is that it has attach the problem of the highly consumable fashion items in controlling and streamlining their supply chains so that they is capable to greatly decrease their lead time and thus to respond faster enough on the very fast changes in the fashion customer needs and wants in real time minimizing the fashion risks. Zara's excellent responsiveness to new fashion trends definitely needs to their optimal supply chain strategy.