Zaras as a Supply Chain Example

1
Zaras as a Supply Chain Example
2
Questions

• What is Role of Clothing Store Manager?
• What does the clothing store sell?
• What is customer value?
• Who designs the clothes?
• What is important for fashion industry?

3
Zaras

• Madrid Spain
• Handheld computer to reorder stock
• 200 designers in La Coruna, Spain
• Create latest designs on computers
• New dresses arrive in stores in 3 weeks compared
  to 36 weeks for Gap
• Profits increased 3 times from 1996 to 2000
• Increased 31 in 2001
• Two advertisements / year
• No major mark downs
• If not selling well store managers wears the
  clothing
• Manufacturing costs run 15 to 20 higher than
  competitors

4
Zaras

• Twice a week delivery schedule
• 1,315 stores (519 Zaras) in 40 countries
• 460,000 sq meter (5,000,000 sq ft) (90 football
  fields) distribution center
• Twice a week delivery
• Delivers at night when less traffic and does not
  distract from customers

5
Background

• Founder started in family kitchen 1963
• Opened Zaras in 1975
• Worlds riches fashion executive

6
Zaras Supply Chain

• What is Zaras supply chain?
• Store manager notices a certain dress is selling
  well
• Send new order via internet
• Designers and production manager compare input
  from stores
• Draw new styles
• Send to factory for design
• Sent to distribution center reach stores 48 hours
  later
• Picture of Tailor shop
• What is lead time? What is Zaras lead time?
• How is it reduced?
• Would you want to be part of a company like
  Zaras.

7
Questions on Readings

• What is Zaras?
• What market do they appeal to?
• Where are they located?
• What is Zaras primary strength?
• What is the significance of 3 weeks vs. 36 weeks
• Zara vs. Gap
• How have they fared financially? From 1996 to
  2000 and 2001

8
How do they make money?

• Using sweatshops in Asia to sew clothes?
• Lots of advertising?
• Big markdown sales?
• How often do they receive new styles? How does
  this compare to most clothing firms?
• What attracts new customers?
• How old is Zaras? Is it an old company with
  lots of experience and highly capitalized? Is it
  small so that it can be more responsive?

9
What does the article showcase?

• Marketing?
• Finance?
• Fashion Designers?
• Advertising?
• Distribution Center? Why?
• What are important delivery issues?
• What is the role of Ester Fernandex Gomez, the
  store manager in downtown Madrid?

10
What is supply chain management?

• What is the Supply Chain management process?
  What is described on page 3.
• What is a distribution center?
• Ground to customer and in necessary return.
• What is lead time? What is Zaras lead time?
• How is it reduced?
• Would you want to be part of a company like
  Zaras.

11
Update on Zaras

• Another article
• Short lead time More fashionable clothing
• Lower quantities scarce supply
• More styles More choice, and more chances of
  hitting it right
• Miami Herald
• 2004 update
• Web site

12
Some Fundamental Natural Concepts you will need
to know.

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Two Key Terms

• Batch Process
• Customer Responsive Management
• Give examples of each of these
• How do these terms affect retailing?
• How do they affect marketing?
• How do they influence customer value?
• What was role of wholesaler?
• Has that role changed?

14
Law of Large Numbers

• Variability decreases with volume
• Will a persons batting average be more variable
  by game, by season, by career
• Will record demand be more variable by store, by
  artist or by music type
• Will your grades be more variable by day, by
  class, by quarter, by school

15
Trumpet of Doom

• The longer the forecast horizon the less accurate
  the forecast
• What is the stock market going to be this
  afternoon? Next month? In 2020, 2050?
• What will be your income next week, in 10 years,
  in 40 years?
• How many SUVs will be sold this year, in 2008, in
  2005?

16
Recency Effect

• People overreact to recent events
• Are you more sensitive to events in Iraq, Russia,
  German, Japan, Cuba or Northern US?
• Does the stock market usually go up or down?

17
The Hockey Stick Effect

• Activity increases near the deadline
• When are most income tax returns filed?
• When do you study for an exam?
• If I make the exam available for 5 days when will
  most people take it?
• If 0 financing is available on a car until May
  1st when will most people buy their new car?
• Why should you be careful how you drive at the
  end of the month?
• Why can you get a deal at the end of the month?

18
Pareto Phenomenon

• The important are few and the trivial are many
• 80 20 rule
• Small number of customer make up most of demand
• Examples

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Curse of Variability

• Variance cause congestion
• What happens to traffic flow when drivers start
  looking at something?
• What happens when there is variation in the rate
  that people arrive at a cafeteria?

20
Curse of Utilization

• When there is variation in demand, resources
  cannot be utilized 100 of the time.
• What does each bus have at the end of the line?
• If a highway operates at full capacity, what
  happens if someone touches their brakes?
• If you are totally committed to classes and work
  schedule what happens if you get sick or need to
  do something else?

21
Satisfaction Perception - Expectations

• How good you feel depends on the gap between what
  you experience and what you expect.