Measure against Other Companies

Locating the right supplier is also another key success factor of Zara retail stores. This is the strategic positioning of the supplier in the chain basing on the ‘proximity model’ to the store for the quick delivery. This geographical nearness lowers the costs as well as reduces ambiguity for the delivery. Zara’s proximity model suppliers supply half of its inventory from spain, Portugal and Morocco. Nearly 65% of production is sourced from Europe. Though Zara sources from Asian market, it is considerably to other places and industry’s average, due to the non proximity for speed delivery.

The supply process begins with a demand forecast, calculated once for a lifecycle of a given product, for the production order to be issued. For replenishment purposes, a daily demand forecast will be estimated in Zara. It’s on the replenishment side that the MIT model comes into play. The model looks at inventory in the warehouse, what’s remaining in all sizes at all stores, and the recent history of sales data. With several million individual shipments to calculate each week, “differences by only a few units here and there quickly added up,” Diaz says.

Though MIT and Zara didn’t fully appreciate the system’s impact on sales and the ability to shift items between stores, the company has achieved an increase in sales of 3 to 4 percent when compared with the old way of replenishing stores. This way the product life is more on the sales stores, than in warehouse. The transfer between stores reduces the returns to the warehouse and lowered misallocated inventory. The automated system reduces the need for extra allocation of manpower, even when the distribution network grows.

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The coordination between the Logistics and IT team made the MIT model to roll over to Stores by June, 2007 Currency-exchange rates is another successful factor involved in the Zara sourcing patterns The efficiency of the purchase the priority of the most of the participants is the quality of the performance, then comes the pricing. The Internal benchmarking and competitive survey stood at the top while measuring the sourcing activities against other companies

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