Zara Quick Response Model [PDF]

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Distribution and Channel Management Zara Quick Response Model Submitted by: Usman Akbar-18247 Haseeb Abbasi-18236 Agha Saqlain-18409 Azam Shehzad-18163 Submitted to: Sir.Zeeshan Khan



Zara Quick Response Model



Amancio Ortega founded Zara in 1975 as an attempt to better understand world markets for his fashion merchandise. From that first store in Spain, Zara has since expanded to 1,770 stores in 86 countries around the world.  In 2012, Inditex, Ortega’s parent company made up of Zara and other retail concepts and suppliers, reported total sales of US$20.7 billion, with Zara representing a powerful 66 percent, or US$13.6 billion, of that total. Zara produces around 450 million items a year. How can it stay so efficient with the sheer volume that passes through its supply chain? Regular, small batch deliveries happen with clock-work precision twice a week to all of their stores around the world.  Ensuring all this runs smoothly is what Zara does best - controlling more of its manufacturing and supply chain than most of its competitive counterparts. What’s the secret to Zara’s competitive advantage? It’s Quick Response Model.



Quick Response: QR is a management concept created to increase consumer satisfaction and survive increasing competition from new competitors. It intends to shorten the lead time from receiving an order to delivery of the products and increase the cash flow. QR was created from a project to improve the supply chain management of the daily necessities industry such as the textile industry and ECR (efficient consumer response) concept was created by the processed food distribution industry. Both concepts were developed from the standpoint of increasing consumer satisfaction and as a mean to survive against certain types of competitors that producer-retailer alliances call discounters and category killers. These concepts intend to shorten lead times from order receipt to delivery, minimize unsold inventory by holding minimum inventory levels, and increase cash flow. A QR system can trigger a series of benefits



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First and foremost Increased sales due to an increased retail in stock position



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Lower inventory label and reduce carrying cost



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Accuracy of information, efficient distribution



Element of Quick Response The element required for effective QR can be summarized by 3 Cs •



Control



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Communication



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Collaboration



Zara Quick Response Model: Zara’s Quick Response Model Focuses on •



Short Lead Time



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Lower Quantities



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More Styles



Short Lead Time: Zara focuses on Short Lead Time (more fashionable clothes), Lower quantities (scarce supply), and more styles (more choice available for customers). Because Zara wants to focus on customers having clothes at a specific time, they focus on shorter response time, like this the company ensures that their stores are able to carry clothes at this specific time frame. Within 30 Days Zara is able to identify a trend to having clothes in its stores, while Competitors are struggling to catch up. Zara is able to catch trends fast in the industry and produce them fast so costumers find them



available at the stores when they are looking for the “new style“. Zara moves in step with its customers, while others try to forecast what and how much its customers might buy months in future. Zara has constant research so they can constantly identify new trends; they have daily calls and emails from the stores to head offices to keep in touch. Zara’s machinery can react to the report immediately and produce a new style or a modification within 2-4 weeks. Normal Lead Time



Zara’s Lead Time



Lower Quantities: Zara does not produce a large quantity from each style, like this they create an artificial scarcity (rare). Because the less is available of the product the more desirable it is for customers. At the same time if a design does not work well, Zara does not loose sales because of the lower quantities produced. The result of this is that Zara only puts about 18 percent of its production on discounts.



More Styles:



Zara produces more styles and producing large quantities of one style. 12 000styles a year are produced to keep customers happy. When a style sells out quickly, there are new ones already waiting to take the space. They deliver merchandise twice a week, and nearly every other day they get products that already ran out in stores, like this, customers always find the products they are looking for.



ZARA Customer offer



References 



https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success



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https://www.coursehero.com/file/p7ni5d6/Zaras-Success-Zara-focuses-on-ShortLead-Time-more-fashionable-clothes-Lower/



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http://www.slideshare.net/rainajhamb/case-study-zara