Supply chain management

In today’s highly competitive and global marketplace, the pressure on organizations to find new ways to create and deliver value to the customers grows even stronger. Market development combined with new sources of global competition has led to over-capacity in many industries. Putting an incredible pressure on price, as often is the critical competitive variable. This leads to the need of more effectiveness and efficiency inside a business. It is against these new conditions that the use of supply chain management has moved to the center stage over the last two decades (Christopher, 2004). To manage the supply chain better, is to serve the customer more effectively and yet reduce the cost of providing that service. There has been a growing recognition that is through this kind of management that it can be achieved a twin goal of cost reduction and service improvement. Even if the concept of integration within the business and between businesses is not new, the acceptance of its validity by managers is. According to Chris Zook managing the supply chain is not an easy task (Zook, 2001). Most companies do not manage to achieve their intended goals. Nevertheless, those which are doing well today have on average low adds to be doing so in the next five to years. An important key to do well is to understand why some companies succeed and others do not. This to avoid common pitfalls and instead of spending time recovering from previous mistake, the company can focus on the future. The objective of an effective supply chain management is to meet the requirements of end customers by supplying appropriate products and services when they are needed, at a competitive cost. Doing this requires the supply chain to achieve appropriate levels of the five operations performance objectives: speed, dependability, flexibility and cost. (Cowe, et.al.2008:249). This report will compare and contrast the supply chain management strategies of Zara and Primark in the light of the five pervious supply chain objectives. Finally, conclusion and recommendation for improving the supply chain strategy will be shown. Objectives for Zara's Performance Design: Flexibility: Designers (of average age 26) draw the design sketches then discuss it with market specials and planning & procurement staff illustrating a flexibility of ideas generation and on the other hand the huge number of designs reflects the ability to meet almost all the fashion requirements by customers of all ages (up to 55). This adaptive model rather than traditional merchandising is very different from its competitors. Many competitors rely on a small elite design team that plans both design and production needs well in advance. Stores have little autonomy in deciding which products to display or put on sale because Headquarters plans accordingly and ships quantities as forecasted. Zara owned many of the fabric dying, processing and cutting equipment that provided Zara added control and flexibility to adopt new trends on demand. The added flexibility helped Zara on two fronts: shorter lead times and fewer inventories. (OPPapers.com, 2009) The flexibility objective: demand for different types of clothing will changes and Zara must react accordingly. Sizes, color, quality and quality will change continuously. The customer has an active role from the start of the chain and is the drive for its business model. Customer requests are considered by the commercial and design team. Quality Zara brand has been said to be 'synonymous with the cutting edge of fashion at affordable prices.' (123helpme.com, 2008) Another Quality advantage is the added sense of quality to the product as the tags would be labelled with "made in Europe" rather than "made in China" due to Zara's trade-off between Low labour costs in Asia and operational efficiency. Zara brand name is synonymous with quality and the right price. Stores are located on emblematic streets like Oxford street and 5th avenue; the standards of products are demanded in these areas. 65% of products sold in Europe are produced in European plants where quality controls are higher and easier to manage. Flawed clothing items would erode the brand name eventually. Manufacturing: Zara speed: Speed and responsiveness to Market, Zara has changed the way clothing industry works where deigning, production and delivery to the retailers requires period of six months. The design and distribution cycle of the company takes just 10-15days in the whole process. Zara's speed to market in product development exceeds the capabilities of its competitors. This in itself provides additional value to stakeholders, customers, and stores in producing quality clothing at affordable prices. The proximity of their manufacturing and operational processes allows Zara to maintain the flexibility necessary to design and produce over 12000 new items annually. This capability allows Zara to achieve their strategy of expedited response to consumer demand. The process of obtaining market information and relaying it to design and production teams expedites product development by shortening the throughput time of their products from design to store. The speed objective: hectic changes in fashion and high street tastes imply a need for logistic speed. Goods can be designed and delivered to the shelf within 6 weeks. In fact items spend so little time in the warehouse that they are already sold before they have to be paid for their suppliers. Distribution: Zara is one of the largest international fashion companies. It belongs to Inditex, one of the world’s largest distribution groups. Retail: Zara Dependability: Due to Zara's ownership and control of production, they ensure timely delivery and service. Although most of their stores run out of stock, signifying that they have low dependability in terms of product availability, another perspective of dependability in terms of keeping to date with fashion is achieved. Delivering on time to stores in a must. Customers have come to expect new items on a weekly basis on the shelves. Cost: Zara produces most of its products in Europe. Compared to their competitors, they outsource very little to Asia [6] . Though the cost of production in Spain is 17-20% more expensive than Asia, Zara does have a competitive advantage over its competitors in regards to operations. Though there is a cost advantage in their approach in regards to labour, the lack of flexibility in changing orders based on current trends hinders their operational efficiencies. Inventory costs are higher for competitors because orders are placed for a whole season well in advance and then held in distribution facilities until periodic shipment to stores. Lower inventory cost is a key sustainable advantage as it enables Zara to manufacture and sell its products at cheaper prices. The cost objective affordability is vital to Zara’s strategy however only 35% of goods are produced in Asia. This implies that operations management must be at its leanest as they operate within Europe where the cost structure is higher. Zara’s senior managers seem to comprehend intuitively the nonlinear relationship between capacity utilization, demand variability, and responsiveness. This relationship is well demonstrated by queuing theory which explains that a as capacity utilization begins to increase from low levels, waiting times increase gradually. But at some point, as the systems uses more of the available capacity, waiting times accelerates rapidly. As demand becomes ever more variable, this acceleration start at lower and lower levels of capacity utilization. Assignment Brief: consider the following questions on the case companies of clothing retailers Zara and Primark. 1. Compare and contrast the supply chain management strategies of Zara and Primark in the light of the five supply chain objectives. 2. Make recommendations for improving the supply chain strategy.