Distribution and Channel Management

Zara Quick Response Model

Submitted by:
Usman Akbar-18247
Haseeb Abbasi-18236
Agha Saqlain-18409
Azam Shehzad-18163
Submitted to:
Sir.Zeeshan Khan

Zara Quick Response Model

Amancio Ortega founded Zara in 1975 as an attempt to better understand world
markets for his fashion merchandise. From that first store in Spain, Zara has since
expanded to 1,770 stores in 86 countries around the world.

In 2012, Inditex, Ortegas parent company made up of Zara and other retail concepts
and suppliers, reported total sales of US$20.7 billion, with Zara representing a powerful
66 percent, or US$13.6 billion, of that total.

Zara produces around 450 million items a year. How can it stay so efficient with the
sheer volume that passes through its supply chain? Regular, small batch deliveries
happen with clock-work precision twice a week to all of their stores around the world.

Ensuring all this runs smoothly is what Zara does best - controlling more of its
manufacturing and supply chain than most of its competitive counterparts.

Whats the secret to Zaras competitive advantage? Its Quick Response Model.

Quick Response:

QR is a management concept created to increase consumer satisfaction and survive

increasing competition from new competitors. It intends to shorten the lead time from
receiving an order to delivery of the products and increase the cash flow.

QR was created from a project to improve the supply chain management of the daily
necessities industry such as the textile industry and ECR (efficient consumer response)
concept was created by the processed food distribution industry. Both concepts were
developed from the standpoint of increasing consumer satisfaction and as a mean to
survive against certain types of competitors that producer-retailer alliances call
discounters and category killers. These concepts intend to shorten lead times from
order receipt to delivery, minimize unsold inventory by holding minimum inventory
levels, and increase cash flow.

A QR system can trigger a series of benefits

 First and foremost Increased sales due to an increased retail in stock position

Lower inventory label and reduce carrying cost

Accuracy of information, efficient distribution

Element of Quick Response

The element required for effective QR can be summarized by 3 Cs

Control

Communication

Collaboration

Zara Quick Response Model:

Zaras Quick Response Model Focuses on

Short Lead Time

Lower Quantities

More Styles

Short Lead Time:

Zara focuses on Short Lead Time (more fashionable clothes), Lower quantities (scarce
supply), and more styles (more choice available for customers).

Because Zara wants to focus on customers having clothes at a specific time, they focus
on shorter response time, like this the company ensures that their stores are able to
carry clothes at this specific time frame. Within 30 Days Zara is able to identify a trend
to having clothes in its stores, while Competitors are struggling to catch up. Zara is able
to catch trends fast in the industry and produce them fast so costumers find them
available at the stores when they are looking for the new style. Zara moves in step
with its customers, while others try to forecast what and how much its customers might
buy months in future. Zara has constant research so they can constantly identify new
trends; they have daily calls and emails from the stores to head offices to keep in touch.
Zaras machinery can react to the report immediately and produce a new style or a
modification within 2-4 weeks.

Normal Lead Time

Zaras Lead Time

Lower Quantities:

Zara does not produce a large quantity from each style, like this they create an artificial
scarcity (rare). Because the less is available of the product the more desirable it is for
customers. At the same time if a design does not work well, Zara does not loose sales
because of the lower quantities produced. The result of this is that Zara only puts about
18 percent of its production on discounts.

More Styles:
Zara produces more styles and producing large quantities of one style. 12 000styles a
year are produced to keep customers happy. When a style sells out quickly, there are
new ones already waiting to take the space. They deliver merchandise twice a week,
and nearly every other day they get products that already ran out in stores, like this,
customers always find the products they are looking for.

ZARA Customer offer

 References

https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success

https://www.coursehero.com/file/p7ni5d6/Zaras-Success-Zara-focuses-on-Short-
Lead-Time-more-fashionable-clothes-Lower/

http://www.slideshare.net/rainajhamb/case-study-zara