Lambton College (Mississauga Campus) – Queen’s College
SUP 2013 – Introduction to Supply Chain Practices
ASSIGNMENT 3
Time Deadline: 6 AUGUST 2021 Total Weightage: 15%
Please refer to the instructions provided along with the assignment especially Instruction-4
requires to be followed completely. There will be no marks/points awarded for the Assignment
submitted after the date of deadline specifically mentioned.
Faculty: Yoav Yosipovich
Instructions:
Please refer to the following before attempting:
➢ The purpose of this Assignment is to have students develop their basic knowledge of
specific supply chain management concepts related to the course, SUP 2013:
Introduction to Supply Chain Practices.
➢ The Assignment questions should be answered in students own words using the course
supply chain theories, concepts and applications discussed in the class.
➢ The Assignment calls for additional research primarily secondary research. Make sure to
cite all references appropriately.
➢ The student will provide/submit a soft copy (Word/PDF) for their answer submission and
provide a cover sheet with the name and student number, name of the instructor and
course number and assignment name in typed Times New Roman 12 point font.
➢ Refrain from copying or sharing answers as the same will be considered “plagiarism” and
students will not be awarded any marks.
➢ The answers submission deadline is 06 AUGUST 2021
Assignment Background
Zara: Apparel Manufacturing and Retail
Zara is a chain of fashion stores owned by Inditex, Spain’s largest apparel manufacturer and
retailer. In 2009, Inditex reported sales of about 11 billion euros from more than 4700 retail
outlets in about 76 countries. In an industry in which customer demand is fickle, Zara has grown
rapidly with a strategy to be highly responsive to changing trends with affordable prices. Whereas
design-to-sales cycle times in the apparel industry have traditionally averaged more than six
months, Zara has achieved cycle times of four to six weeks. This speed allows Zara to introduce
new design every week and to change 75 percent of its merchandise display every three to four
weeks. Thus, Zara’s products on display match customer preferences much more closely than the
competition. The result is that Zara sells most of its products at full price and has about half the
markdowns in its stores compared to the competition.
Zara manufactures its apparel using a combination of flexible and quick sources in Europe (mostly
Portugal and Spain) and low-cost sources in Asia. This contrasts with most apparel
manufacturers, who have moved most of their manufacturing to Asia. About 40 percent of the
manufacturing capacity is owned by Inditex, with the rest outsourced. Products with highly
uncertain demand are sourced out of Europe, whereas products that are more predictable are
sourced from its Asian locations. More than 40 percent of its finished-goods purchases and most
of its in-house production occur after the sales season starts. This compares with less than 20
percent production after the start of a sales season for a typical retailer. This responsiveness and
the postponement of decisions until after trends are known allow Zara to reduce inventories and
forecast error. Zara has also invested heavily in information technology to ensure that the largest
sales data are available to drive replenishment and production decisions.
In 2009, Inditex distributed to stores all over the world from eight distribution centers located in
Spain. The group claimed an average delivery time of 24 hours for European stores and up to a
maximum of 48 hours for stores in America or Asia from the time the order was received in the
distribution center (DC) to the time it was delivered to the stores. Shipments from the DCs to
stores were made several times a week. This allowed store inventory to closely match customer
demand.
The following questions raise supply chain issues that are central to Zara’s strategy and success:
Questions:
1. What advantages does Zara gain against the competition by having a very responsive
supply chain?
2. Why has Inditex chosen to have both in-house manufacturing and outsourced
manufacturing? Why has Inditex maintained manufacturing capacity in Europe even
though manufacturing in Asia is much cheaper?
3. Why does Zara source products with uncertain demand from local manufacturers and
products with predictable demand from Asian manufacturers?
4. What advantage does Zara gain from replenishing its stores multiple times a week
compared to a less frequent schedule? How does the frequency of replenishment affect
the design of its distribution system?
5. Do you think Zara’s responsive replenishment infrastructure is better suited for online
sales or retail sales?
