Zara and the Limited Brands
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- The Role of SCM in Retail Industry
One of the main roles of the Supply Chain Management (SCM) is to ensure the quantities produced by a firm correlate with the consumer demands in the market. The SCM function enables retailers to survive in the increasingly uncertain market and strangling competition. According to Singh et al. (2014), supply chain management involves the management of raw materials, flow of finances and information in a network comprising of manufacturers, suppliers, distributors and consumers. Failure to manage the supply chain could lead to late deliveries, lack of raw materials or a backlog of finished products ready for distribution.
Limited has consolidated its technology into a single shared service for all its brands. The responsibility for this plan lies with a company called Limited Technology Services. The consolidating company is reliable since it has over 750 IT professionals and a budget of $150 million. Using Tibco software, Limited has created a system of integration between its vendors and customers. The company can track information as it flows along the supply chain.
Zara has an efficient communication technology, typical of any successful supply chain management. The company collects information from customers regularly through its sales clerks that directly interact with customers. The information is then convertedinto new designs that find their way to the shelves within a short duration. The distribution network is simply appalling. With over 200 KM of underground track connections, distribution trucks move the end product to the final consumer.
- Is Zara’s competitive strategy aligned with supply chain strategy?
Zara’s competitive strategy has three key themes- short lead time, lower quantities, and more styles (Tiplady, 2006). The supply chain strategy complements this competitive strategy. The short lead time is a result of the short duration it takes to generate a finished product from a sketchy idea. As depicted in the case study, some products take a mere 2 weeks from the day of inception to the finished product. The tight distribution network between overseas factories and stores also leads to a short lead time.
Because of the continuous introduction of new designs, Zara sees to it that low quantities of the designs are produced. The main idea behind this strategy is to cushion the company from greater losses in the event that the new product sells poorly.
Zara has continued to produce more styles thanks to its team of top -notch designers. The company produces a new design at least weekly to ensure that the customers come back to view the new trends. The sales clerks also enhance this competitive strategy by collecting information from the customers and then relaying it to the designing team.
- The role of Zara’s SCM system and possible improvements.
The number one role of Zara’s SCM is to ensure a continuous creation of new designs throughout the year. The company has factories all over Europe hence the need for maximum coordination. To maintain a smooth run of activities, there is effective communication between the factories all because of SCM. The interconnection between the factories and retail stores requires high levels of coordination and communication. SCM is also responsible for the swiftness in which the end products reach the retail stores. There are over 200 KM of underground tracks that could be a source of confusion. SCM has ensured that the right product reaches the right destination, on time.
However, the system could use a few improvements. The number of new products is too high. From the case study, it is quite evident that the company spends exorbitantly on product development. The turnover is not as good. The alternative method would be to do extensive research before producing a new design (Johnson, 2000). With enough research, few things could go wrong unlike the haphazard research that Zara does that leads to low turnovers.
- Limited’s Supply chain Problems.
The company works with multiple vendors operating under different brands. In such an arrangement, limited has little or no control over the outfit that it relies on to supply its products. This type of supply chain could also taint the brand of Limited.
Limited buys merchandise from over 1000 suppliers. This means that the company has no control over the flow of the merchandise. Industrial unrest in other parts of the world could negatively impact the supply chain of Limited. The supply chain is also bound to be affected by international currency fluctuations that will in turn increase the price of its products.
- Is integrating brand delivery a correct SCM strategy for The Limited?
Integrating brand delivery could help solve Limited’s supply chain problems. Using the Tibco software, Limited can now track the flow of information as it moves along the supply chain. Unlike before when the vendors operated in a kind of freelance fashion, Limited can now monitor their activities. The integration has also ensured real time communication with delivery agents. When a problem arises with the delivery of products, the management team can easily find out and act accordingly. Previously, information regarding hiccups in delivery reached the managers late rendering them incapable of correcting the error before it disrupts the entire supply chain.
References
Johnson, P. (2000). Supply chain management: the past, the present and the future. Journal of Manufacturing engineer 2000, 57 (8)
Singh, J., et al. (2014). Role of supply chain management in the retail sector. International Journal of Management Research & Review, 2014, 4 (11)
Tiplady, R. (2006). Zara; taking the lead in fast fashion. Businessweekonline.com. Business Week Online, April 4, 2006