CASE STUOY CONCEPT: The Zara supply chain drives its successful business model. Zara changes its clathing designs every two weeks an average, while competitors change their designs every two or three months. It carries about 11,000 distinct items per year in thousands of stores worldwide compared to competitars that carry 2,000 to 4,000 items per year in their stares. Zara's highly responsive supply chain is central to its business success. The heart of the Zara supply chain is a huge, highly automated distribution ceater (DC) caled "The Cube". The screenshat belaw shows a closeup satellite view of this facility. A satellite image of the Zara cube and the surrounding buildings. There are roads, vehicles, and blue lines upan it. The company was founded in Spain in 1974 by Aoxacio Ortega and his wife Beolla Mera. It is the flagship business unit of a halding company called Inditex Corparation with headquarters in Acteriva. Galicia, a city in northwestern Spain near where Mr. Ortega was born. In 2019 Zara was ranked as the 46 th most valuable brand in the world by Forbes. Company Business Model Agents for the company are always scouting out new fashion trends at clubs and social gatherings. When they see inspiring emamplas they quickly send design sketches to the garment designers at the Cube. New items can be designed and aut to the stares in 46 weeks, and existing items can be modified in 2 weeks. The company's core market is women 24 - 35 years ald. They reach this market by locating their stores in town ceotera and places with high concentrations of women in this age range. Short production runs create scarcity of given designs and that generates a sense of urgency and reason to buy while supplies last. As a.fogseguepre, Zara does not have lots of excess imentory, nor does it need to do big mark-downs on its clathing items. Zara has 12 imentory turns per vear compared to 34 per vear for competitors. Stores place orders twice a week and this drives factary scheduing. Such shart tarm focused order cycles make forecasts very accurate, much more acrurate than competitors who may arder every two weeks or every month. Clothing items are priced based an market demand, not an cost of manufacture. The shart lead times for delivery of unique fashion items combined with short production runs enable Zara to offer customers mare styles and choices, and yet still create a sense of urgency to buy because items aften sell out quickly. And that particular. item or style may not be available again after it sells out. Zara sells 85 percent of its items at full price compared to the industry average of selling only 60 percent of items at full price. Annually there is 10 percent of inventory unsald compared to industry awerages of 1720 percent. In Spain customers visit Zara stares 17 times per year on average compared to 3 times per year for competitors. Because their clathing besigns change often, it is harder for peaple to see them clearly on the Internet and thus they are encouraged to come into the stares instead and try on the unique fashions that Zara offers (screenshot below shows people at a Zara store in Madrid, Spain). Peopie entering a Zora stove in Mactrid Zara spends its money on opening new stores instead of spending a lot on ad campaigns. Estimates vary on the number of Zara stores worldwide. An article in the New York Times Magazine (November 2012, "How Zara Grew into the World's Largest Fashion Retailer", placed the store count at around 5,900. An article in Forbes simply states there are "mare nearly 3,000 stares" (June 2019, "The World's Most Valuable Brands - 146 Zara']). Annual sales for 2018 were estimated by Forbes to be $21.3 bilion. The holding company, Inditex SA, is a public company and Inditex provides annual statements, but it does nat break aut Zara sales from sales of the other brands awned by Inditex eullaReac, Massimo Dutti, where its stores can be owned, franchised, or co-owned with partners. So it is not always passible to find exact numbers for Zara's business operations and finances. Manufacturing and Supply Chain Operations Make Zara Unique Zara buys large quantities of only a few types of fabric (just four or five types, but they can change from year to year), and does the garment design and related cutting and byeing in-house. This way fabric manufacturers can make quick deliveries of bulk quantities of fabric directly to the Zara DCthe Cube. The compary purchases raw fabric from suppliers in Italy, Spain, Portugal and Greece. And those suppliers deliver within 5 days of orders being placed. Inbound lagistics from suppliers are mastly by truck. The Cube is 464,500 square meters (5 million square feet), and highly automated with underground monorail links to 11 Zara-owned clathing factories within a 16km (10 mile) radius of the Cube. All raw materials pass through the Cube on their way to the clothing factories, and all finished goods also pass through on their way out to the stores. The diagram below illustrates Zara's supply chain model. A Module showing the Zara cube and the distribution flow from it. Zara's factories can quickly increase and decrease production rates, so there is less inventary in the supply chain and less need to finance that imentory with working capital. They do only 5060 percent of their manufacturing in advance versus the $090 percent dene by competitors. Zara does nat need to place big bets an yearly fashion trends. They can make many smaller bets an shart term trends that are easier to call correctly. The Zara factories are connected to the Cube by underground tunnels with bigh sgeed monorails (about 200 kilowetess or 124 miles of rails) to move cut fabric to these factories for dyeing and assembly into dothing items. The monorail spstem then returns finished products to the Cube for shipment to stores. Here are some facts about the companv's manufacturing aperations: Zara competes on flevibility and aglity instead of law cost and cheap labec. They emplay about 3,000 workers in manufacturing operations in Spain at an average cost of 8.00 euras per hour compared to average labex cost in Asia of about Q.40 euros per hour. Zara factories in Spain use flexible manufacturing systems for quick change aver operations. 50% of al items are manufactured in Spain 26% in the rest of Europe 24% in Asia and Africa The screenshot below illustrates how the Zara supply chain is organized. Manufacturing is ceotered. in northwestern Spain where company headquarters and the Cube are located. But for their main distribution and logistics hub they chase a more centrally located facility. That facility islocated in Zaragoza in a large logistics hub developed by the Spanish gavernment. Raw material is sent by suppliers to Zara's manufacturing oenter, Then finished garments leave the Cube and are transported to the Zara logistics hub in Zaragoza. And from there they are delivered to stores around the world by truck and by plane. A screenshot of the Zara company in northwestern Spain with green arrows and a red arrow on it. (clirk on screenshot for larger image) Zara can deliver garments to stares worltwide in just a few days: China - 48 hrs; Eurape -24 hrs; lapan -72 hrs; United States -48 hrs. It uses trucks to deliver to stores in Europe and uses air freight to ship clothes to other markets. Zara can afford this increased shipping cost because it does not need to do much discounting of dothes and it also boes not spend much maney on advertising. Zara's Supply Chain is Lean and Agile Stares take deliveries twice per week, and they can get ordered imventory often within two days after placing their orders. Items are shipped and arrive at stores already on hangers and with tags and prices on them. Sa items come off delivery trucks and go directly anto the sales flaor. This makes it possible for stare managers to arder and receive the products customers want when they want them, week by week. Zara stores respond practically in real-time as styles and customer preferences evolve. It is a great business model for success in the high-change and hard to predict fashion industry. It means about half of the clothing the comparry sells, which includes mast of its high margin and unique fashion items (but nat its lower margin basic items), is manufactured based on highly accurate, short-term (2 -6 week) Bemand forecasts. Because this business model tracks so clasely to real customer demand from one month to the next, it frees the comparry to a large degree from getting caught in cyclical market ups and downs that ensnare its competitors (those cycles are driven by boom-to-bust grations generated by the bullwhip effect). Turbulence in the global economy since 2008 has hurt sales at marry competing fashion retailers, but Zara has seen steady, profitable growth during this time. A fast-moving and finely tuned supply chain like Zara's requires constant attention to keep it running smoothly. Supply chain planners and managers are always watching customer demand and making odiustupents tq manufacturing and supply chain operations. The screenshat belaw shows the result of ane simulation using the supply chain model outlined above. Continuous adjustments need to be made to production rates, vehicles, and delivery routes and schedules to keep this supply chain working well. A map of Eurape with routes highlighted in green and somputer generated images of semi-trucks. Zara is a clathing and fashion retailer that uses its supply chain to significantly change the way it aperates in a very traditional industry. No other competitor can copy its business madel until it first copies its supply chain. And since supply chains are composed of people, process, and technology, even the latest and greatest technologr is not a competitive advantage all by itself. People must be well trained, and processes must be put in place that enable people to apply their training and their technalogy to best effect. Zara has spent more than 30 years building its unique real-time supply chain and training its people. So competitors have a lot of learning to do to create the mental models, and rall out the operating procedures needed to do what Zara boes so well. The screenshot below shaws a closeup of the Zara Lagistics Hub in Zaragoza, Spain. Praduct deliveries are made to stores by airplane and truck from this facility every day. screenshot of Zara Lagistics Geater in Zocogosse Spain Pandemic hits Zara hard. Refer to for further details: stemes-araund-the-sandid Zara supply chain concerns: https://www.ft.com/content/c43e281c-0a17-4392-boc7-9643ft47763a OVERVIEW Imagine you arcsip fbagrge.gf Zara's supply chain operations and since the COVID pandemic hit in 2020 the fashion industry has been hit hard. The changed consumer emironment has resulted in lass sales (including hundreds of stores being shuttered), supply chain and logistical challenges which has showeased fast fashion's need to focus on their supply operations and technolagy integration. The CEO of Zara has requested you provide a recommendation for new technology integration that the company should explare utilizing/implementing within their supply chain within the next ane (1) to two (2) years. Although Zara has historically been seen as a leader in supply chain management, the company needs to explore further technolagy-based integration to maintain their competitive position in the fast fashion market. You will provide a minimum of two (2) technalogr-based recommended solutions to integrate into their supply chain aperations that can assist the organization in mitigating their supply chain and logistical issues using a case study approsch to the response. You will utilize a case study approsch utilizing the following format: 1. Executive Summary 2. Backgraund 3. Case Evaluation 4. Proposed Solutions 5. Conclusion 6. Implementation 7. References Refer to 'Writing a Case Stuty Analysis' which provides key details which should be indluded in each section of the case response. Website Resource: https://writingcenter-uagc.edu/writing-case-study-analysis