Operation Strategy of Zara

Zara has very responsive supply chain.

a) Does it offer a competitive advantage?

Answer: Yes, Zara offer a competitive advantage by their production plans. They own 25 factories world-wide for 60% of products and another 40% are from outsourced factories. This can be a big advantage for Zara to prevent themselves from many unpredicted natural (i.e. natural disaster, lack of resources) or man-made situation (labor strike, or political coup). When one place meets the problem, another factory from the other side of the world can still cover the situation. Also, they have the outsourced factories because they want to reduce overall cost.

b) How does this affect supply chain design and performance?

Answer: Zara introduces 12,000 designs every year. So they need a rapid supply chain for inventory, production and logistics to response to their customer’s needs. 60% of Zara’s products are produced on one shift basis by their own factory worldwide and they replenish their inventory twice a week. This makes them can produce the products on time and can fulfill if the order suddenly increase. Another reason is that they have about 25 factory worldwide, this makes them can easily deliver to the nearest store very fast with the lowest delivery cost. This makes Zara’s become an efficient brand with rapid and competitive products.

Question 2: Zara choose both in-house and outsourced manufacturing. What are the reasons for choosing both strategies?

Answer: Both in-house and outsourced have their advantages. For in-house, Zara can 100% control the material, production process, quality, and response rapidly to seasonal demand. On the other hand, Zara also has outsourced manufacturing to reduce overall cost so they do not have to control the factory by themselves. After combine both in house and outsourced strategies together Zara become a competitive brand, productive factory and consistent in cost leading.