Zara Case Study

Case Study two

Inventory management

Secondly, it is the fixed order interval system. Fixed order interval system is that the time interval is constant although the order size may vary. The major drawback of this inventory management approach is that the infrequency of inventory monitoring causes stock outs more easily and raises the stock out costs gradually. Thus, firms using fixed order interval system approach is tends to have higher levels of safety stock.

Thirdly, it is the Just-In-Time (JIT) inventory management strategy. JIT is a “demand-pull” manufacturing system that manufactures each component in a production line as soon as and only when need by the next step in the production line (Horngreen, C. T., Foster, G. & Datar, S. M., 2010). The goal of JIT is to smoothen the flow of products and meet customers demand timely with high quality products at the lowest possible cost. JIT starts by receiving customer orders. Then, managers schedule production. After that, manufacturers receive the materials needed just in time for production, complete different components just in time for assembly into products and complete products just in time to ship customers finally.

One of the benefits of JIT is that it lowers the inventory levels and the carrying costs. It encourages a small lot production instead of a bulk production. With the small lot production, it takes less manufacturing time and storage space than that of the large lot production. Take Zara as an example, Zara is currently implementing the JIT approach as its inventory management strategy. Instead of chasing the economies of scale, Zara produces and distributes its products in small batches. The major competitive edge of using this inventory management approach is that Zara can concentrate on manufacturing at the moment when needed. According to Heizer & Render (2001), it always produces in low volume with high speed and high efficiency. Besides, with the JIT inventory approach, Zara...