ZARA

What advantage does zara gain against its competitors by having a responsive
supply chain?

It allows zara to match demand for fickle trends more accurately. This in turn
means that they can sell products at full price and thus secure their margins and
make a profit.

It also increases customer loyalty to the brand as zara builds a reputation for
being up to date on trends which increases demand products.

It also allows zara to reduce inventories and forecast error.

Why has Inditex chosen to have both in-house and outsourced manufacturing?

In-house manufacturing is used as part of a responsive pull supply chain strategy

and also as the final leg of its manufacturing process. After the sales season has
started Inditex begins to use in-house manufacturing as a way of quickly
responding to trends. It either makes new products or turns incomplete products
made from its outsourced manufacturers and turns them into specific finished-
goods in response to market demands. Outsourced manufacturing is used to
create non-specialised products that can be produced in bulk.

Why does zara source products within uncertain demand from local
manufacturers and products with predictable demand from Asian
manufacturers?
Products with uncertain demand will most likely be produced at a lower volume
to products with a certain demand and therefore sourcing from local
manufacturers provides zara the speed it needs to test and deliver these products
before they become obsolete and have to be sold at a discount. It is part of a
responsive pull strategy.

Predictable demand products are made in Asia due to low labour costs and high
volume of products needed. It is more cost effective to manufacture in bulk due
to the fact that predictable demand products have a larger window with which to
deliver products without becoming obsolete. It also means that they can be made
before the season starts as part of a push strategy

What advantage does Zara gain from replenishing its stores multiple times a
week compared to a less frequent schedule?

This makes sure that store inventory is always up to date and that new designs
can be introduced often to meet trends. It also means that products can be
replenished if demand is high and can be taken away if demand is low.
Furthermore, it is responsive to the fickle nature of the fashion market if a new
trend comes into fashion zara need to be able to adapt their quickly and change
their in store merchandise to meet customer demand.

How does the frequency of replenishment affect the design of Zaras distribution
system?

The frequency of replenishment has made zara increase the size and also
centralise its distribution design by handling its global operations through 8
Distribution canters based in Spain. This centralised structure means that
products can be distributed rapidly from in house manufacturing in order to meet
worldwide demands in as little time as possible.

Do you think Zara’s responsive replenishment infrastructure is better suited for

online sales or retail sales?

Whilst its quick distribution system allows zara to respond to trends very quickly
its lack of decentralised distribution means that it is better suited to retail as
online sales tend to have more a diverse product demand and customers expect
quicker delivery times. Companies such as amaazon are able to respond quicker
to online sales due to the fact that they have distribution centres all around the
world and can offer same day delivery. Zaras 24 hour delivery times from Spain to
outlets all around the world may not be as efficient with online sales as it is with
retail sales.

What information infrastructure does Zara need in order to operate?

Zara needs a constant flow of information in the form of sales data to accurately
forecast demand and respond quickly. They need a centralised information
infrastructure in order to coordinate distribution and obtain information close to
real time.

Tyota
Where should the plants be located and what degree of flexibility should be built into each? What
capacity should each plant have?

Toyota’s global strategy is to open factories in every market it serves.  Additionally, Toyota has adopted
a strategy of “global complementation” which allows it’s specialized local factories to export to non-local
markets in times of local economic downturn.  This allows Toyota the flexibility of capturing the demand
of non-local markets to remain profitable.
It would be wise for Toyota to choose the location of its parts plants in a way that complemented its
assembly factories and maximized profitability.  For parts plants to operate only locally may have
prohibitively high costs, while parts plants that operate only globally may reduce relevance in local
markets.  Logically, Toyota should apply its “global complementation” strategy to its part plants, and
locate the plants in areas that minimize costs (currency exchange, freight, inventory holding, etc).  This
will allow them to achieve local/regional agility and remain flexible enough to supply non-local
factories/assembly plants however necessary.

The capacity of the part plants shouldn't exceed the forecasted demand of local/regionally located
factories/assembly plants that each part plant will supply.  The ability to supply factories adequately is
critical, and each plant should be designed with the capacity to supply it’s regional factories.

Should plants be able to produce for all markets or only specific contingency markets?

Depending upon the location and production capacity of each plant the decision can be made as to
produce for all markets or only specific contingency market.  Furthermore,

By applying the strategy of “global complementation” to Toyota’s part plants, it will have developed
parts plants with the flexibility to supply other markets when their local market demand is weakened.
For this reason parts plants must be able to supply at least one more market/region than it’s normally
responsible for supplying.  Depending on the requirements of global parts, it may be appropriate for
parts plants to be able to supply to all markets.  But in the case that markets are so differentiated that
the ability for a parts plant to provide global supply is cost prohibitive, then a specific contigency market
should be designated for each regional parts plant.

A parts plant in a certain region should only serve markets in that specific region, otherwise costs will
inevitably go up.  Since Toyota makes different cars in different regions, it does not make sense for
EVERY parts plant to carry parts for EVERY market right

How should markets be allocated to plants and how frequently should this allocation be revised?

Japanese plants are more flexible than U.S. plants, since most assembly plants are located in Toyota City,
which means that employees can be moved from one plant to another if demand shifts from one model
to another. In the U.S. such arrangement is not feasible, and building a flexible line that can assemble
different car models is more expensive.

How should this flexible investment be valued?

The investment in flexibility will allow Toyota to capture demand and revenue from non-local markets
when local profitability/demand/etc declines.  The flexible production and distribution will prevent idle
facilities and reduced profits during economic downturns.  By integrating flexible production and
distribution, Toyota's supply chain will have greater access to markets and has the potential to capture
greater value.  Therefore, this investment should be regarded as highly valuable.