Zara/Supply Chain Managment

Just-in-time manufacturing

inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

What are the advantages and disadvantages of vertical integration? What are the advantages and disadvantages of contract manufacturing?

Advantages: Contract Manufacturing Lower costs, allows for focus on main company issues Disadvantages: Contract manufacturing Need to audit the company hired to make sure they are doing everything legally (extra cost) Takes longer to get product back Advantages Vertical: Allows for better communication between sections Quicker turn around Better control Disadvantages: Vertical: More costly to maintain and may not be an expert/ know how to do everything in value chain

Information System (IS)

An integrated solution that combines five components: hardware, software, data, procedures, and the people who interact with and are impacted by the system. Getting the right mix of these five components is critical to executing a flawless Information System rollout

How do we reduce the bullwhip effect? How does Zara reduce it? How does disintermediation affect this challenge? How is the flow of information important to reducing it?

Effects: Excessive inventories (lead to large discounts) Insufficient and excess capacities Poor customer service and lost sales (long backlogs) Frequent revision to product schedules High costs for corrections- expedited shipments and/or overtime Zara: Make smaller batches. Vertical integration ( does not depend on other companies) Flow of Information: If each part of the value chain coordinated more, then the bullwhip effect would be greatly reduced

What are differences between Push and Pull Demand? Use Gap and Zara as examples in your explaination.How does the type of product affect whether you choose a Responsive Pull supply chain model over a Predictive Push Model?

GAP- push method- produces stock and forecasts what consumer wants (customer at end of the chain) ZARA- Pull: what is demand of customers now Produce on order; customer at beginning of chain Info substitutes inventory Small batches and more customization

What are the five components that make up an information system? Which is hardest to change and why?

Hardware, Software, Data, Processes, People People are the hardest to change

How does Zara's approach differ from the conventional wisdom in fashion retail? How does the firm's strategic use of information technology influence design and product offerings, manufacturing, inventory, and logistics?

Has vertical integration that allows for more control and faster output Doesn't believe in ads and sales Takes 3 weeks to design and build and get into stores Just-in-time manufacturing (makes it as soon as order comes in can go on shelf, popular now not future) Process driven by customer satisfaction

Vertical Integration

Hold all steps in process (responsible for inbound logistics, outbound logistics, operations, ect) More control but has more risk Coordination in all parts of the value chain

Disintermediation

Let all participants have access to consumer-demand info Consider vertical integration Consider shortening supply chain through cutting out the middle man

What are the causes of the bullwhip effect?

Order batching- longer time period higher the variability Demand forecast updating: longer the lead time, the higher the variability Price Fluctuations- can be caused by retailer unbeknownst to supplier Rationing and shortage gaming

Horizontal Integration

Owning less parts of value chain Spread out risk (outsourcing) split work with many companies

Pull Demand

Produce-on-order: customer at beginning of chain Info substitutes inventory Small batches and more customization

Push Demand

Produce-to-stock: Customer at end of chain Focus on promotions Driven by mass-market Large inventory levels

Why is inventory management so important? What happens when a retailer has too much inventory? What happens when a retailer has too little inventory?

Too much inventory leads to the business having to put on sales and discount the items to free up storage space Too little inventory leads to the company losing money since they aren't able to sell popular items

Bullwhip effect

Variability in order size and order timing increase at each stage up the supply chain Beer Game example from class Natural dynamic occurs due to multistage nature of supply chain Reduces overall profitability of supply chain

Point-of-Sale (aka POS) systems

a cash register (which in recent times comprises a computer, monitor, cash drawer, receipt printer, customer display and a barcode scanner) and the majority of retail POS systems also include a debit/credit card reader.

Contract Manufacturing

a manufacturer that contracts with a firm for components or products It is a form of outsourcing. In the food business a contract manufacturer is called copacker. It's the production of goods by one firm, under the label or brand of another firm.