Case 1: Rapid-Fire Fulfillment
1: What are the supply chain objectives of Zara?
l Speed and quality: Zara use three lines which include women’s line, men’s line, and kids’ line to produce their apparel products. This organized three groups increase both speed and the quality. Moreover, Zara uses “postponement” in Benetton to gain more speed.
l Reliability: Zara has precise rhythm and they stick to the rhythm. The deadlines are strictly enforced. So, their order cycle is consistency. Also, they use airplanes and trucks to ship their products compare to other company use ships and trains. Their order promise date is easier to satisfied.
l Flexibility: Zara leverage its capital assets to increase supply chain flexibility. More capital assets mean less capacity utilization, and this made them more flexibility.
2: How is Zara’s supply chain different from most other supply chains in their industry?
l Zara keeps almost half of its production inhouse instead of outsourcing.
l Leverage its capital assets to increase supply chain flexibility.
l Zara operate three channels to make products which is more expensive, but the information flow for each channel is fast, direct, and unencumbered by problems in other channels.
l It’s supply chain not only focus on one single part, but in the whole system. Although some single method like: using small batches, shipping every two weeks, and shipping some garments on hangers will increase costs, its precise rhythm eventually let Zara carry less inventory cost so that they can maintain a higher profit margin on sales.
3: How does Zara control the bullwhip effect?
l The constant flow of updated data mitigates the bullwhip effect-the tendency of supply chains to amplify small disturbances. In an industry that traditionally allows retailers to change a maximum of 20% of their orders once the season has started, Zara lets them adjust 40% to 50%. In this way, Zara avoids costly overproduction and the subsequent sales and discounting prevalent in the industry.