Logistics And Supply Chain Management Digitalization

Question: Discuss about theLogistics And Supply Chain Management for Digitalization. Answer: Introduction: With the latest trend of globalization, Agility and digitalization, Supply Chain management and logistics is has become quite critical for any organization. Specialists are saying that the supply chains provide the competitive advantage to any organization. For instance, consider Dell, Amazon, Wal-mart, Zara, they are known throughout the world for their supply chain excellence. Also, Due to constant innovation and new product development, Product lifecycle has also become shorter and it is a matter of few days before a latest fad fades away and if the supply chain is not fast, Organization will suffer huge losses due to excess inventory at various storage locations of supply chain. Zara is one such organization that is known in the world for managing its supply chain and operations very well. The objective of this report is to discuss how Zara is maintaining excellence in its supply chain and its key strategy. Along with that, further open issues like role of technology in supply ch ain management and sustainable practices will also be discussed. Inventory Management and Strategic Planning Zara has a very good sourcing strategy. Fabric is the most important raw material for the textile companies and since their suppliers are located across the world and have high lead time in delivering the material, they started procuring the material long before season accounting for higher lead times. Zara has suppliers in Italy, Spain, and Germany and outside Europe also. Those suppliers located in Europe fulfill the orders in 5-6 days however suppliers outside Europe takes long time. Zara collaborate with its supplier by sharing of the information and latest trend through establishing long term relations. Zara uses Oracle Demantra for forecasting demand (Tan 2006).. They also uses reverse auction whereby various vendors can bid as well they see the lowest quite also. In this way, Zara get very good quotes from its suppliers. The most important part of their strategy is delayed differentiation or postponement which helps them to keep the inventory levels lower as well save the inventory from getting obsolete. This means they keep the most of the inventory as work in progress inventory and convert it into finished goods only when it is clear about the latest trends which are in demand. Zara does not believe in new product development but in exploiting the latest trends. They operate in a reverse fashion. They try to analyze the consumers taste and their liking and disliking about certain patterns and then exploit those patterns to create more demand. Thus, they uses the postponement strategy whereby manufacturing of finished goods is delayed to a last minute as per the market demand and carry their inventory in semi-finished form (Chaudhry, Hodge, 2012). Zara sell high variety and low volume and thus use flexible manufacturing to achieve that. Zaras Distribution Strategy/ Logistics Distribution strategy is very important for the organizations these days because of a short product life cycle and constantly changing tastes and patterns of the consumers. The finished good inventory which is process of being transferred from 1 place to another risks has the risk of becoming obsolete by the time it reaches to the market if it remains in transportation for long time. Zara maintain the agility of its supply chain using GPRS enabled trucks and Air medium and thus they fulfill the orders from more than 1800 stores in seventy countries worldwide in just less 15 days. Zaras stores that are in Europe are replenished by the GPRS enabled truck having dynamic routes based on the communication with the central server through the technology and thus can fulfill the orders from maximum number of stores in a fastest way with minimizing the number of the trips. For stores which are outside Europe, they are using Air logistics to fulfill the orders. It is fastest which makes its ex pensive too but this medium makes perfect sense for Zara s it competes on agility and thus this medium is aligned with the strategy of Zara (Vijayan, Kamarulzaman, Mukherjee, Vaiappuri, 2015). They need to make sure that latest fashions should be in the stores at an appropriate time. They also replenish their stores twice a week so that customer will always find new products on the shelves whenever they visit Zaras stores Figure 1: Zara's Supply Chain SCM in a Globalized World and Sustainable Practices in SCM Globalization has become a buzzword today. Organizations are buying raw materials from the suppliers across the world and also selling their goods and services to customers across the world. As a result, supply chains are also become difficult to maintain as often there are longer lead times. Competition is at all time high and product life cycles are also becoming very small. It is very important all the supply chain should focus on the customers. Customer focus is very important practice in supply chains of today. Zara is always focuses on customers and (Gaubinger, Rabl, Swam, Werani, 2015) carry their most of the inventory in a semi-finished form and convert it into finished goods after analyzing the latest trends among the consumers (Chaudhry, Hodge, 2012). Constant innovation is the supply chain is the most important criteria if the organizations wanted to sustain. Not only this, Technology which was seen once as an enabler has now become the differentiator and organizations must adapt to latest technology and process excellence to sustain (Martinex, Errasati, Rudberg, Mediavilla, 2015). . Inventory minimization across supply chain is another important sustainable practice for the corporates. The Role of Information Technology in SCM Information technology has been a differentiator in different supply chain. They can provide huge amount of information and increase the visibility of inventory across various channels which helps to balance demand and supply better. Zara has always at the forefront of the technology. They adopted RFID, latest technology at a time when there are not many successful case studies about the RFID. RFID helps significantly to reduce the inventory and track the items in a more effective way (Madhani, 2011). It helps Zara to automate various processes like shipping and receiving the material. They are using best of the software for e-procurement and demand forecasting. They are also using analytics since their business is based on interpreting latest design and patterns among customers and then to exploit them. Analytics helped them better in analyzing the trends. References Chaudhry, H., Hodge, G. (2012). Postponement and supply chain structure: cases from the textile and apparel industry. Journal of Fashion Marketing and Management: An International Journal, 16(1), 64-80. Gaubinger, K., Rabl, M., Swan, S., Werani, T. (2015). Life Cycle Management. InInnovation and Product Management(pp. 207-220). Springer Berlin Heidelberg. Madhani, P. M. (2011). RFID deployment: Fast fashion retailing. SCMS Journal of Indian Management, 8(2), 40-51. Martnez, S., Errasti, A., Rudberg, M., Mediavilla, M. (2015). Clothing Industry: Main Challenges in the Supply Chain Management of Value Brand Retailers. InEnhancing Synergies in a Collaborative Environment(pp. 69-76). Springer International Publishing. Tan, P. K. (2006).Demand management: a cross-industry analysis of supply-demand planning(Doctoral dissertation, Massachusetts Institute of Technology). Vijayan, G., Kamarulzaman, N. H., Mukherjee, A., Vaiappuri, S. K. (2015). Strategic Value Creation in a Supply Chain.Handbook of Research on Global Supply Chain Management, 186.