Zara makes about 40% of their raw material (fabric). The remaining 60% is outsourced from within Spain, mostly from the La Curuna. Designing of clothes at Zara is done by creative teams of over 300 professionals at the headquarters in La Curuna, Spain. They act on the information fed to them from the stores managers.
The first stage in Zara’s production system is cutting of fabric. The design is then sent for sewing by one of several hundred local cooperatives. After sewing, the clothes are returned to Zara’s facilities for ironing by an assembly line of workers. After this, the clothing items are wrapped in plastic and transported on conveyor belts to a group of giant warehouses.
In the warehouse, the customised machines patterned after the equipment used by overnight parcel services, sorts, packs, labels, and allocates clothing items for shipment to Zara’s retail stores. For Zara’s retail stores within a 24-hour drive, goods are delivered by truck whereas goods meant for stores beyond 24-hour drive are delivered by cargo jets.
Zara sells to customers at their own retail stores, each managed by a retail manager who gives feedback on fashion trends to the design team.
1. Discuss the concepts of horizontal and vertical conflict as they relate to Zara. Channel conflict is generated when one channel member’s action prevent the channel from achieving its goals. It can stem from difference between channel members goals and objectives, from disagreements over the domain of responsibility and from difference in perception of the market place. Channel conflict can be vertical or horizontal.
Horizontal Conflict occurs among firms at the same level of the channel. Vertical Conflict, conflicts between different levels of the same channel, is even more common.
2. Which type of vertical marketing system does Zara employ? List all the benefits that Zra receives by having adopted this system.
The type of vertical marketing system which Zara employ is the Corporate Vertical System which integrates successive stages of production and distribution under single ownership. Zara makes 40 percent of its own fabrics and produces more than half of its own clothes, rather than relying on a hodgepodge of slow-moving suppliers. New designs feed into Zara manufacturing centers, which ship finish products dirictly to 1,161 Zara stores in 68 countries, saving time, eliminating the need for warehouses, and keeping inventories low. Efective Vertical Integration makes Zara faster, more flexible, and more efficient than International competitors.
3. Does Zara experience disadvantages from its “fast-fashion” distribution system? Are these disadvantages offset by the advantages?
4. How does Zara add value for the customer through major logistic functions?
One of the successful organizations that use the vertical marketing system (VMS) is Zara which have a distinctive feature of business model. With the aid of the vertical integration, the company is allowed to develop the strong merchandising strategy that continuously led the Zara to create the opportunities particularly in the fast-fashion system. Because of the lack of flexibility found in traditional retailing, the organization is obliged to produce the products in varieties, amount, and frequency of the new styles. This type of system begins in the corporate areas, wherein the leaders plan the changes that will create an impact in the organization. All the plans are administered to the stores that are mostly visited by the customers.
In this way the regular customers will know that the new products are already available for merchandise (Craig, Jones, & Nieto, 2004). The quick response of Zara in the fast-fashion system places the emphasis on using the VMS to be very quick fashion follower than to achieve manufacturing efficiencies. The continuous product development in the retail environment enables the organization to facilitate the chain f competitive advantage.