IBS Hyderabad

Academic Year – 2021-23

SUPPLY CHAIN MANAGEMENT

OF

Semester III
Course Faculty: Assistant Prof. Dr. Rishabh Rathore
Group Project Topic: Supply chain management of Zara
Section: A

S.No Name Enrollment Number

1 Balaji Asokan 21BSPHH01C0260

2 Aparna Puranam 21BSPHH01C0192

3 Janki Mishra 21BSPHH01C1598

4 Mohammad Shafiqur Rahman 21BSPHH01C0682

5 Sivansh Pandey 21BSPHH01C1741

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ACKNOWLEDGEMENT

A special gratitude we give to our faculty member of Project Management and our
project guide, Assistant Prof. Dr. RISHABH RATHORE, whose contribution in
stimulating suggestions and encouragement helped us to coordinate our project
especially in writing this report.

We are using this opportunity to express our gratitude to everyone who supported us
throughout the course of this Supply Chain Management final project. We are thankful
for their aspiring guidance, invaluably constructive criticism and friendly advice during
the project work. We are sincerely grateful to them for sharing their truthful and
illuminating views on a number of issues related to the project.

We would also like to express our warm thanks to our beloved faculty Mr. RISHABH
RATHORE for the opportunity given to us here at IBS Hyderabad.

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TABLE OF CONTENTS

1.) Introduction 4
2.) ZARA 4
3.) Supply Chain Model 5
4.) Design and Order Administration 6
5.) Sourcing and Manufacturing 8
6.) Distribution 11
7.) Retailing 13
8.) Merchandising 14
9.) Cultural Aspects 16
10.) Risk in Supply Chain Management 17
11.) References 18

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INTRODUCTION

The supply chain is the worldwide network used to supply services and products from uncooked
substances to end customers through an engineered glide of facts, bodily distribution and cash.
Supply Chain Management encompasses making plans and managing all of the sports concerned
in designing, sourcing and manufacturing, distribution, retailing and logistics. It also consists of
coordination and collaboration with channel partners, providers, intermediaries, third birthday
celebration provider companies and customers (Ayers).

ZARA

Zara is a Spanish clothing logo based totally in Arteixo, Glacia owned with the aid of a Spanish
magnate Amancio Ortego Gaona. Zara is a flagship chain shop of Inditex Group which is the
world’s biggest garb retailer. The commercial enterprise version of ZARA is characterized be a
high diploma of vertical integration as compared to fashions developed with the aid of worldwide
competition. The vertical integrated business version consist of all of the phases of fashion
technique: Design, manufacture, logistics, distribution to its owned stores. The key to this model is
potential to supply products to consumer as in keeping with their choice in shortest span of time.
Time is the primary component that is been taken into consideration as evaluate to the production
value in ZARA. Vertical integration shortens the turnaround instances and achieves more
flexibility thereby decreasing the stock to a minimum and as a result reducing the fashion hazard
to the finest possible quantity.

The exceptional characteristic of ZARA delivery chain management is that it takes most five to 6
weeks to supply the product to the clients as examine to its competition which supply the very last
product in five to six months
(Garcia).

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SUPPLY CHAIN MODEL

Zara has 2000 stores strategically positioned in 88 countries round the world. It turns into hard for
any such company to supply the orders as according to the cutting-edge demand. Although Zara uses
its flexible business version if you want to adapt to new adjustments as in keeping with the season
and thereby turning in the best output to the customers as per their goals. Specific retail locations are
decided on after an intensive marketplace studies to make certain that the target marketplace
segments by means of ZARA is of sufficient length in that unique locality to render the store
financially viable.
Moreover ZARA constantly tries to locate its stores in maximum up marketplace with high site
visitors and prestigious places. These top places gives the opportunities to the customers to browse
the stores as and whilst they're going lower back from paintings.
The supply chain management of ZARA is split into four classes as proven beneath: -

Information Flow

Design and order

Sourcing &
Manufacturing

Distribution

Retailing

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Zara vertical supply chain

DESIGN AND ORDER ADMINISTRATION

Zara designs all its products. It has a “industrial crew” which consists of designers, market
specialists, and customers. All of them are involved in distinct designing of the products where the
designers are the important thing gamers. Almost 40,000 merchandises are designed every 12 months
out of which 10,000 are selected for production.

The teams work on both subsequent season’s layout and concurrently updating the contemporary
season’s layout for you to keep a aggressive part. There is dynamic ecosystem most of the designers
and design idea is from worldwide assets which includes catwalk, magazines, change fairs,
discotheques and so on. Zara creates primary collection each 12 months- one in fall/wintry weather,
other in spring/summer season. The designers take round nine months earlier than the start of season
to make initial sketches. After the sketches are completed, the sketches are redrawn the use of
Computer Aided Design (CAD) and similarly changes are completed with the intention to locate the
better matching of weaves, textures and colors. Later, the cloth and other additives are finalised by
way of the designers. Simultaneously the price of the product is determined at which it will be
offered in destiny. The samples are presented in the front of sourcing and product.

Development unit for selection system. The sourcing unit identifies the manufacturing requirement
and makes a decision whether or not the item could be insourced and outsourced. Based on this, the
sourcing unit allocates a timeline to make certain that preliminary series arrives earlier than the begin
of promoting season.

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The process of adapting to the converting trends and differences across market is greater
progressive a good way to discover the call for of clients. The demand of target customers who're
very young and style conscious town dwellers performs an important function. Thus frequent
conversations with shop managers becomes crucial to capture the income statistics in IT gadget.
Various other assets of records includes TV, net, college campus, movie industry, or even Zara’s
fashion conscious body of workers. Market specialist performs an important role in linking the
designers and stores. Several dozens of gadgets are designed each day however simplest one third of
the objects is going into production. Due to time constraint, very confined volumes of items are
prepared and provided in key shops to decide consumer reaction. If the purchaser response is
unambiguously effective then those gadgets are produced on huge scale.

Market professional are in regular touch with the store managers thru phones discussing the income
order, new strains and different matters. The save managers are similarly in touch with Market
specialist and thereby depend heavily on those discussions earlier than setting the final order. Thus
the failure price is meant to be 1% compared with an average of 10% in this area. Overall, the
obligation of the design team is to song purchaser alternatives and use income statistics along side
other factors for a detailed evaluation of product lifestyles cycle. Based on this evaluation the orders
are repeated and new designs are given to inner and external suppliers. Thereby the layout teams with
market specialists bridge the merchandising and again quit production procedure (Kasra Ferdows)

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SOURCING AND MANUFACTURING

Zara manufacture approximately 50% of its product in its very own keep in Spain however uses
outside providers for all its stitching operations. Zara resources fabric, threads and different additives
from outside supplier with help of buying offices in Barcelona, Hong Kong along with sourcing
personal in headquarters located at Arteixo, Spain. About one half of of the bought cloth isn't always
dyed in an effort to offer present day season fashion with most flexibility, thereby decreasing the
waste fee. Comditel, a one hundred% owned subsidiary of Inditex deals with wide variety of external
providers of cloth and other additives. Comditel deals with dyeing, patterning and completing undyed
material.

Due to the vertical integration of Zara, it makes around forty% of its own fabric and purses rest of the
dyes from its personal subsidiary. After reducing and dyeing, the gadgets are stitched with help of
many local cooperatives. Since Zara manufactures around 60% of its own product, consequently it is
extra bendy in range, quantity and frequency of latest fashion that are produced. Fifty percent of the
items which might be bought by means of Zara are being manufactured in Spain, 28 % in Europe,
and 24% in Asia and rest of the world. Zara has a international distribution centre that functions as
mentioned under:

There is greater hazard worried in maximum elegant item as a result these types of gadgets are
produced on small scale and if the purchaser response is fine then those gadgets are reordered
depending upon the call for. The gadgets which can be price touchy instead of time sensitive are been
outsources to Asia as the manufacturing price in Europe is 15-20% higher as evaluate to Asia. Zara
has the ability to create fast product turnover because of limited inventory manufacturing and
controlled inventory. This creates opportunities in retail shops of Zara.

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The short reaction system of Zara is precise which consists of human assets and Information
generation. Zara makes a specialty of remaining customers and emphasizes on the use of brief
backward vertical integration rather than production efficiencies. It turns into essential for Zara to
speed up the facts flow from consumer wants to clothing designers. The combination of vertical
integration, generation-orchestrated coordination of providers, fined tuned logistics and simply in
time manufacturing makes Zara a lot aggressive.

Inventory optimization enables the corporation determine the precise requirement of objects that
desires to be brought two times every week and what sort of stock desires to saved to fulfil the
requirement of retail stores. The common time taken by way of Zara to enforce an concept right into
a very last product is most 15 days as evaluate to different companies which takes 4 to five months.
Zara is twelve instances faster than its competition in handing over a product. Generally, there may
be a lead time of about four to 5 weeks for brand spanking new garments and weeks to restock. In
this period, Zara is capable of find the response of favor gadgets which can be selling properly and
objects that are to be discontinued.

The manner of design and procurement starts offevolved five to 6 months previous to the selling
season so as to discover the requirement of approximately 65% of the material desires, rest depends
on the trendy trends of marketplace. Zara manufactures about 15-20% of the gadgets before the
season so as to check the reaction of clients towards the newly designed gadgets, it later
manufactures 50-60% at start of season and rest is synthetic inside the season. The production of the
gadgets is executed is any such manner that purchaser inputs are received in any respect stages if you
want to determine the gadgets produced are in keeping with the expectancies of the fashion diva’
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Zara usually keeps the clients priority first and always provides as in step with the beneath method:-

ZARA
SCM Focus Speed
Target Customers Young Women
Products Fashion conscious item
Manufacture System Small quantity batch production
Outsourcing Vertical Integration
(Design-Manufacture-Sales
R&D Strategy Trendy designs
Inventory Control Low inventory, short implementation
cycle

The manufacturing commitment of the business enterprise isn't the same as different garb industries.
The stock of Zara is regulated and the gadgets are been revealed on different levels as in step with
changed designs to preserve curiosity a few of the customers and not in contrast to different
industries in which the designs are found out in one level and the equal inventory is repeated for the
duration of the season , thereby growing monotony among customers.

Product precommitment zara vs other industries

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Since Zara has a very extensive network the world over, hence transport of raw materials becomes
essential inside the outline time period. In order to deliver the raw materials on time, the shipping
logistics need to be sturdy and reliable. Zara makes sure the order of raw fabric is positioned before
begin of season with a view to avoid any final minute rush. Moreover, Zara has a very robust and
flexible shipping system that guarantees well timed shipping of raw materials. Also, majority of the
material suppliers are based totally in Europe and Spain, consequently the delivery of raw materials
is fast. The uncooked materials which have fee constraint and no money constraint are typically
introduced from across the world especially Hong Kong and rest part of Asia.

Suppliers Zara
across Manufacturing
World unit Spain

Logistic Others suppliers Inditex,

DISTRIBUTION

The distribution gadget of Zara is centralized giving it a competitive advantage by minimizing the
lead time of the products. Zara has a device which is set 600.000 rectangular meter facility in Spain
and other smaller satellite tv for pc centers in Argentina, Brazil, Mexico that consolidate the whole
cargo from Spain.

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Zara has 4 most important warehouses in Spain that receive shipments of finished garments from
inner and outside providers across Europe and exceptional parts of global. These finished items are
then directed to Zara keep within the global twice every week for the duration of ordinary intervals
and two times in the course of sale seasons. New fashions of items are integrated with each transport
for steady clean inventory maintenance in stores. The products are inspected so as to test if there are
any defects in the stock that needs to be added, after right inspection the inventory is right away
shipped. There is a rule in Zara that the stock will not be saved on hold in warehouses for longer
length. As a end result the gadgets are shipped as soon because the inventory arrives from numerous
providers after inspection. In order to growth the transport speed, the shipments are scheduled
through time zones and the inventory is distributed either through land or air. The retail stores which
are located close by Spain receives the stock through land transport. Rest the shipment is performed
through air the world over for fast delivery.

The software of logistic gadget is designed by using the enterprise’s own team, for this reason it
reduces the time between receiving the order at distribution middle to the shipping of order in shops.
On a median it takes 24 hours to deliver the order within Europe and forty eight hours for order
transport in America or Asia. The distribution center movements round 2.5 million gadgets consistent
with week. Trucks serve closer locations like Europe and chartered cargo flights serve locations that
are far from significant distribution middle.

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RETAILING

The goal of Zara is constantly to offer easy newly designed style clothes and accessories like
baggage, jewelry, scarves, footwear at quite low charges that allows you to draw interest of style
divas so that those clients become normal. Zara makes a specialty of backward vertical integration
rather than production efficiencies to determine the subsequent order of customers. As the inventories
are strictly control, therefore Zara guarantees that backward vertical integration is been tracked
cautiously so that the following orders may be added on time with new designs and ultra-cutting-edge
style stock. The vending and keep operations assist in reaching the goal for the organization. The
closing dates to order devices are very strict and are been followed internationally. If any keep misses
the closing date then it has to appearance in advance to the next upcoming cut-off date.

Orders have to be positioned before three PM on Wednesday and six PM on Saturday in Spain and
southern a part of Europe at the same time as in relaxation of the arena orders desires to be placed by
way of 3PM on Tuesday and six PM on Friday. The orders are cautiously tracked through centralized
IT tool that enables in maintaing the song document of incoming orders at some point of the globe.

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MERCHANDISING

The merchandising regulations of Zara’s product interest on excessive fashion content cloth,
changing product strains and affordable physical awesome. Product lines are divided in 3
predominant categories – Women’s put on, Men’s put on and youngsters’ line. Women’s line is
segmented in three set of offerings charge, fashion content material and age desires. Since Zara has 0
marketing insurance in the end the prices stored in zero marketing is utilized in international
enlargement of the marketplace making it greater cost-efficient. This indicates Zara in particular is
based totally on its hold to project the photo of clothing. This is the motive why Zara acquires
worldwide pinnacle places across the sector. There are precise departments in Zara that do an
extensive research in locating the prime places in which Zara shops might be made.

1.Three Store Operations

Sale isn't the stop of system instead it’s restart as the store offer comments to the design teams
approximately the trends. Store layouts are spaciously designed in order that the customers can with
out troubles find out the alternatives to be had and proportion their feedbacks to the shop supervisor.
The store manager continuously updates the design companies about the consumer feedbacks and as
a end result the designers start running at the updated inclinations a good way to prepare for the
subsequent assignment. Customer comments are of most importance to the shop managers to
discover the best requirement of clients in order that the following order profits will increase via
imparting the appropriate item that patron calls for.

CONTRACTS

A voluntary, deliberate and legally binding agreement between or more companies is called a
settlement. Contracts not best allows in constructing take delivery of as true with among two
activities but also impact alternatives regarding Plan Procurement Management technique. The assets
which have an impact at the Plan procurement manipulate method inside the employer are :-
• Formal procurement, regulations and pointers.
• Management device taken into consideration in growing procurement plan and selecting
contractual relationships a good way to be used the various business agency and suppliers.
• Established mutli-tier dealer device of prequalified vendors based totally on experience.

The prison contractual relationships are classified in three classes :-

I. Fixed Price Contracts: In this elegance, the overall fee of a product is steady. Fixed charge
contracts consists of financial incentives for achieving or exceeding project objectives like transport
dates, highly well designed product in confined ultimate dates, or some thing that can be quantified
and measured. In case of any monetary damages the seller has to take entire fee of the damages.
Fixed fee contracts are in addition labeled into 3 classes –

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Firm constant Price Contracts (FFP) : This sort of settlement is especially possessed by the use of
the patron. In this settlement the product value is described and will now not alternate until the scope
of exertions changes. Any increase within the fee due to poor universal overall performance is the
responsibility of the vendor. Under FFP settlement, the client ought to clearly specify the goods
which are to be procured otherwise boom in fee may be the responsibility of patron.

Fixed Price Incentive Fee Contracts (FPIF): This charge agreement gives flexibility to the
customer and provider that lets in normal performance deviation with financial incentives. Financial
incentives includes price agenda. The final settlement rate is decided after the delivery of product
based totally on the performance of vendor.

Fixed Price with Economic Price Adjustment Contracts (FP-EPA): It’s a set term agreement
with a unique provision wherein agreement charge modifications due to modified conditions, along
with inflation, increase in fee of uncooked substances.
This agreement is meant to both provider and consumer as it includes charge adjustments because of
external factors that are beyond control.

II. Cost- reimbursable contracts: This category entails bills to the vendor for all the actual rate that
have been incurred even as completing the paintings together with provider earnings. Cost –
reimbursable contracts has three training –

Cost Plus Fixed Fee Contracts (CPFF) : It is a difficult and speedy fee agreement wherein the
vendor receives the calculated cost for finished work. In this settlement the charge does no longer
changes until there may be alternate in task scope.

Cost Plus Incentive Fee Contracts (CPIF) : In this agreement the vendor receives predetermined
incentive expenses primarily based upon overall performance fulfillment. If the final value of the
venture is lesser or extra than the estimated mission cost then if so the client and provider percentage
expenses based totally on pre-negotiated rate sharing machine.

Cost Plus Award Fee Contracts (CPAF) : This price is based on dealer performance and charge is
determined by consumer based at the overall performance and is typically not difficulty to appeals.

III. Time and Material Contracts: These contracts are combination of cost – reimbursable and
fixed fee contracts. Time and cloth contracts are used for group of workers augmentation, specialists
acquisition, and so forth.

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CULTURAL ASPECTS

The information of cultural components will become crucial while doing industrial organization in
the course of the globe. The cultural versions among the worldwide locations influences the
enterprise conversation which ends up in failure of the organization in that specific country.
Sometimes the organizations may additionally loose commercial organization due to distinction in
information the cultural requirements throughout the borders. The cultural category gadget designed
through Geert Hofstede allows in knowledge the dynamics of company all through national
limitations. The class device consists of six dynamics: -

• It expresses the diploma to which less powerful contributors inside an organization in a country
assume and receive that energy is sent unequally.

• It expresses the degree to which members in a society revel in uncomfortable with uncertainty and
ambiguity.

• It expresses the degree to which the gender roles in an company are wonderful and adhered to
inside a society

• Individualism is largely looking after oneself and instant households at the same time as
collectivism is a size in which the human beings can expect their family or specific group
individuals taking care of them in exchange of loyalty.

• A society that allows loose gratification simple and natural human drives to revel in lifestyles and
have a laugh. It restrains strict social norms that hinders the social life of the society.

• Society has to keep links with its personal past while managing present and destiny stressful
conditions. In organization terms the scale are referred as Normative instead of pragmatic
(Hofstede)

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RISK IN SUPPLY CHAIN MANAGEMENT

Management of dangers which might be imposed through way of unethical practices in Supply
Chain.

A gadget of moral principle wherein human actions or proposals are judged proper or incorrect is
described as ethic.

Code of ethics is a record that represents values, how professionals are supposed to approach
problems.

Supply Chain ethics

Management of supply chain with none unethical sports is named as moral supply chain. The ethics
of supply chain are subdivided into four lessons: -

Relationship Orientation
Channel Orientation
Completion Orientation
Environmental Orientation

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REFERENCES

• https://www.supplychain247.com/article/zaras_fashion_retail_supply_chain_strategies
• https://www.slideshare.net/chspravin/supply-chain-management-of-zara-28247084
• https://www.tradegecko.com/blog/supply-chain-management/zara-supply-chain-its-
secret-to-retail-success
• https://www.ivalua.com/blog/supply-chain-management-zara/
• https://www.scmglobe.com/zara-clothing-company-supply-chain/
• https://www.academia.edu/16674169/Supply_chain_management_of_ZARA
• https://blog.edited.com/blog/resources/supply-chain-management
• https://www.mbaknol.com/management-case-studies/case-study-zaras-supply-chain-
success-story/

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