Pmac Module 1 Session 3

1. How is Zara organized with respect to its vertical integration and outsourcing decisions? What governance structure does it appear to follow? Support your conclusions with reference to details of the Zara case and the Ferdows reading.

“Control what happens to you product until the customer buys it.”

• Close the communication loop

Does not try to reduce excess labour (parallel, operationally distict, product families) but has a flat organization structure, important conversations don’t fall through the cracks

Mitigates bullwhip effect – the amplification of small disturbances

• Stick to a rhythm across the entire chain

“It (Zara) spends money on anything that helps to increase and enforce the responsiveness of the chain as a whole.”

Order cutoff times remain constant

Quick order fulfillment and shipments

No online orders that would be to small for the DC’s to handle efficiently

• Leverage your capital assets to increase flexibility

Much more heavily invested in production and distribution

Produces complex products in-house and simple products and process are outsourced

Gives control over scheduling and capacity

By owning can control Capacity and leave a buffer to allow for extra production and minimize wait times.

2. How does Zara's situation support, or not support, its supply chain strategy? Refer to specific details of Zara's operations, and concepts developed in Hayes et al (see session notes for summary of Hayes).

3. Is Zara organized properly with respect to vertical integration or outsourcing? What changes, if any, would you recommend? State the reasons for your recommendations.

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Upgrading does have risks and will have definite costs. A fast flowing supply chain like Zara’s cannot afford delays or store stocks will run dry. However by continuing to use inefficient software Zara allows its...