A supply chain comprises the entire system in a company or business that manages the sourcing of raw materials, production processes, and delivery of finished goods and services to the end-users (Min et al., 2019). It is a crucial factor alongside logistics that enables businesses to have a competitive edge over other firms. Accordingly, the supply chain lays out every aspect of the production activities that go into the finished goods or services. Therefore, it includes the processes at every stage, details of shared information, an inventory of the natural resources being used, and the human resources being utilized, among other components of the production process.
Different companies choose distinct supply chain management, depending on their unique needs and preferences. It follows that an organization makes certain considerations before settling on the most suitable approach to supply chain management. These may include policies on the utilization of certain channels, product lines, procurement, and distribution costs, among other aspects. In the foregoing, this paper presents a comparative analysis of the different approaches to supply chain management as adopted by Zara and Schoeller Industries, respectively.
Executive Summary and Overall Design of Supply Chains
Zara is one of the leading international fashion companies in the world. It was founded in 1975 in Galicia, Spain, by Amancio Ortega and has grown over the years and has been exemplified as a pioneer in the fashion industry. The company has more than 10,000 employees and operates well over 2,220 stores across 88 countries around found mostly in Europe (BOF, n.d.). Zara uses a highly responsive supply chain with the customer being at the heart of its unique business model comprising design, production, distribution, as well as sales through an extensive retail network (Aftab et al., 2018). It follows that Zara’s success is attributed to its effective supply chain, which focuses on producing regular small batches of deliveries at clockwork precision every week to all their stores across the globe. As opined by Camargo (2020), ultra-fast fashion supply chain management is advantageous as it helps in avoiding excess inventory, maintains focus on local manufacturing, and reduces lead times. Accordingly, Zara controls its manufacturing and supply chain, thus it can deliver and retail its products at a much quicker pace in comparison to its competitors in the fashion industry.
The second chosen company, Schoeller Industries, is linked to the Schoeller companies in Munich, Germany. The group of companies is one of Europe’s leading manufacturers of non-sorbent materials (Schoeller Industries, n.d.). Schoeller industries also engages in various operations and activities such as the management of supply chains, protection of intellectual property, utilization of renewable energy, as well as recycling activities for environmental conservation (Schoeller Industries, n.d.). Therefore, the company mainly focuses on sustainability and environmental conservation in its supply chain management as it recycles most of its products.
As posited by Brandenburg (2019), sustainable operations, as well as sustainable supply chain management, are increasingly forming important aspects for research, management of businesses, and policy decisions. Correspondingly, many multi-national corporations (MNCs) are adhering to high social and environmental standards (Villena & Gioia, 2020). Accordingly, Schoeller Industries utilizes existing knowledge in sustainable supply chain management and is therefore structured into several entities to streamline its operations with a reduced carbon footprint. Moreover, the firm follows guiding principles such as providing support to customers by being reliable and innovative, as well as employing a combination of ecological and economic strategies to realize sustainability and environmental conservation.
How Decisions are Made
As already noted, Zara follows a supply chain management approach that prioritizes the customer; thus, products are organized in such a way that consumers can access them easily. In the foregoing, Zara’s products are not designed “from scratch,” such as those produced by other high-end brands (Gazzola et al., 2020). It follows that fashioners at Zara do not have an obligation to advance any items but rather to redesign components of an existing item, thus turning them into new products. Accordingly, Zara’s fashioners do not make style, but instead, they translate it. Information is collected about trending fashion from different spaces and settings such as clubs or important festivals but not through an inclined board (Gazzola et al., 2020). The identified trends in fashion, which are noted to change over time and in various settings, are then reproduced and sold (Gazzola et al., 2020). Therefore, Zara upholds flexibility in the kinds of products it produces as it seeks to keep pace with the rapidly changing fashion trends in various spaces and settings.
Additionally, Zara puts much of its focus on fabrics as the resource is considered a crude material that ought to be available for use earlier in the production process. It follows that crude materials such as fabrics have longer lead times and may jeopardize the entire production and distribution processes if not managed appropriately. As opined by El-Kassar et al. (2020), production control and inventory management enable a firm to keep the right amount of inventory as well as maintaining quality levels. As a result, it becomes possible to guard against excess inventory or shortages while satisfying consumer demand. Correspondingly, Zara purchases the fabrics in their uncolored form in a bid to give room for their adaptability to various shades and patterns as per specific customer needs (Gazzola et al., 2020). Therefore, a large part of the stock is held in anticipation of set-up directions and is determined by prevailing fashion trends at the time of production.
As also aforementioned, Schoeller Industries’ supply chain management approach is focused on achieving environmental conservation and sustainable utilization of resources. Under a sustainable supply chain management approach, the firm chooses to integrate its goal of environmental protection by recycling its recyclable products. Moreover, Schoeller Industries makes use of waste materials from other industries to turn them into useful products (Schoeller Industries, n.d.). Such an approach ensures, that wastes that would have otherwise been dumped haphazardly causing environmental problems are recycled. Accordingly, a study by Wang et al. (2018) established that waste reuse helps improve the sustainability of strategies used in managing it such, as incineration. It follows that the amount of waste for the incineration plant will be reduced if it is reused, thus minimizing the amount of energy for combustion or carbon emissions that could have otherwise been evolved.
Schoeller Industries, therefore, undertakes material handling operations that utilize locally available waste materials such as used crates and plastic bags to make new products of high quality (Schoeller Allibert, 2019). Moreover, an affiliate company known as Schoeller Renewables carries out its operations using renewable sources of energy such as solar and wind power, thus conserving the environment in the process (Schoeller Renewables, 2020).
Additionally, the direct investment operations by Schoeller Industries are geared towards extending the company’s methods of organization and design of products based on environmental sustainability (Dominguez, 2020). Accordingly, all designs are engineered in such a way that they fit in the company’s vision to achieve sustainability and environmental conservation. Therefore, the components of the supply chain, both at the product organization and design stage as well as in all the other stages, are based on the efforts aimed at protecting the environment.
Procurement Processes in the Two Firms
The supply chain utilized by Zara involves the acquisition of distribution of items such as crude materials, parts of goods, or the finished goods themselves. As posited by Bäckstrand et al. (2019), such materials are either purchased or rented; thus, procurement in the organization is charged with the responsibility of overseeing transactions in various units such as advertising, designs, assembling of materials, among many others. Accordingly, procurement processes are critical for a company as they make available the resources needed to support the production and distribution processes of materials and products (Bäckstrand et al., 2019).
Two forms of procurement operations are evident in the company, namely strategic and operational types of procurement. Strategic procurement means having the items required at the right place, quantity, and quality, while at the same time based on a competitive price (Dasci & Guler, 2019). To realize such attributes, Zara evaluates the product market in a bid to keep improving the purchasing actions. Moreover, the firm has carefully selected suppliers who provide the required materials when they are needed (Gazzola et al., 2020). Such an approach enables prompt management of any issues with suppliers to avoid delays, and the procurement departments are supported appropriately.
Regarding operational procurement, Zara works towards maintaining a constant stream of raw materials and services while always managing the operational costs to have the right amount of stock at all times (Aftab et al., 2018). To achieve this kind of procurement practice, the organization prepares forecasts with quantities of delivery times as a collaborative effort between the commercial and marketing teams (Aftab et al., 2018). Such forecasts thus are aligned with the customer demand as communicated by its stores in various locations. Moreover, there are strategies aimed at maintaining a continuous stream of raw materials, services, and products by constantly collecting demands, sourcing new items, managing the shipment of goods, and placing purchasing orders (Aftab et al., 2018). Additionally, Zara possesses its production factories, with 18 of them found locally in Spain; thus, procurement is streamlined and can be easily monitored (Aftab et al., 2018). Therefore, the company achieves high levels of efficiency.
In turn, procurement at Schoeller Industries focuses on realizing the company’s goals of environmental protection and attainment of maximum profit. Accordingly, green supply chain management is visible in the way the company acquires waste materials for use in its production processes. The company also procures or produces its green energy such as solar or wind power to save on costs on other sources of energy that produce carbon emissions (Schoeller Renewables, 2020). Moreover, the company recycles materials such as paper bags and crates, which may be purchased or collected from garbage, thus, forming the basis of another form of procurement (Schoeller Allibert, 2019). Therefore, Schoeller Industries follows a simpler procurement strategy that involves waste recycling and the use of renewable energy as compared to the complex and customer-centric one used by Zara.
Production Strategy and Operations
The supply chain operations at Zara are consistent with three viewpoints: 1) Augmenting the utilized assets, 2) Minimizing stock, and 3) Reducing the lead times. Accordingly, these three viewpoints influence the level of client satisfaction, as well as general business aspects such as turnover, benefits, and deals entered (Aftab et al., 2018). Zara’s production strategy of minimizing its part in creating new products provides more room for items that are mostly needed for assembling. Such a move has worked in the favor of the company as it balances stock by only allowing the right amount of requests to be received (Aftab et al., 2018). Moreover, Zara’s expanded stores throughout Europe and other parts of the world have been effective in minimizing lead times to realize production efficiency (Aftab et al., 2018). Consequently, there is more cost-saving with the implication of better profit margins.
It is noteworthy that Zara’s originators regularly collect information concerning deals and stocks at each of the firm’s stores, thus gaining insight on the prevailing trends of consumers’ use of their products and services (Aftab et al., 2018). Accordingly, Zara uses sales and feedback strategies that are aimed at obtaining important information about customers’ unique needs and preferences (Gazzola et al., 2020). The only way to gain such data is to continuously engage with customers to make suggestions to the company. Since the firm deals in goods within the fashion industry, the sales and marketing department focuses on collecting as much information as possible and using it in tailoring the products to meet consumer needs (Aftab et al., 2018). The information in form of customer feedback is particularly critical as it communicates what customers’ needs are in the present and what they are likely to be in the future.
Schoeller Industries, on the other hand, carries out its production operations through an environmentally conscious supply chain. Therefore, its production strategy implies that companies have a responsibility to protect the environment in their production processes. As observed by Żelazna et al. (2020), businesses in operation today tend to overuse natural resources and produce harmful pollutants; thus, they degrade existing ecosystems and irreparable loss of biological diversity. It is, therefore, important that all businesses undertake measures aimed at minimizing the negative impacts of their production activities on the environment. Accordingly, Schoeller has put in appropriate measures to realize sustainability and environmental conservation in its production activities (Schoeller Allibert, 2019).
For instance, only environmentally friendly raw materials are used in production while wastes are recycled or reused (Schoeller Industries, n.d.). Additionally, the company is committed to producing high-quality modern products (Schoeller Allibert, 2019). It follows that customers appreciate the efforts by the firm to conserve the environment and to realize sustainable management of natural resources. Customer feedback is thus utilized, such as when they give their views on how best the company can achieve its goals of environmental conservation and sustainability.
Conclusion
Every company engaged in the production of goods and services requires an elaborate supply chain to operate effectively. Accordingly, the supply chain encompasses every aspect of production activities that go into the finished goods or services. It includes the processes at every stage, details of shared information, an inventory of resources being used, and the human resources being utilized among other components of the production process. Depending on the unique circumstances of a company’s operations, it will ensure suitable approaches to supply chain management are selected and followed.
A comparative analysis of the supply chain management by Zara and Schoeller Industries reveals two different approaches. On the one hand, Zara utilizes an approach to supply chain management that is focused on meeting the customers’ needs. Consequently, there is much emphasis on customer-centric decision-making, product organization, and design, procurement processes, as well as production strategies. Accordingly, the goal is to get as much profit as possible. On the other hand, Schoeller Industries follows a supply chain strategy that is keen on realizing environmental conservation and sustainable management of natural resources. As such, Schoeller makes profit while also conserving the environment.
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