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Zara Unveils a Strategy to Embrace and Integrate Physical and Online Presence


Many analysts and academics in our supply chain world often point to Inditex SA and its fashion and apparel retail brand Zara as the iconic benchmark in retail supply chain agility. It seems that despite the many iteration of retail apparel industry challenges, this fast fashion focused retailer continues to demonstrate a resiliency to changing economic conditions or online buying trends.  Today, Zara is cited as the world’s largest fashion retailer.  121202_ZR_460 Oxford_Shooting

It should therefore be no surprise that Zara continues to provide the content basis for many business case studies related to demonstrating a and industry-leading systemic integration of fashion retail business strategy with consistently admired agile supply chain response practices.

Thus, retail supply chain industry focused readers should take note to last week’s unveiling of Zara’s newest flagship store in the retailer’s hometown of La Coruna Spain. The store, sized at 54,000-square-feet and spanning over five stories, will replace five other existing smaller footprint stores, and will reportedly serve as the model for Zara flagships around the globe. The apparel retailer is now transitioning to a new strategy to meet the challenge of the Omni-channel focused online fashion consumer.

In a press conference held last week, Inditex Chairman Pablo Isla declared that Inditex seeks “full integration of the brick-and-mortar stores and online businesses, with store openings that are increasingly more relevant.” According to a published report by The Wall Street Journal, the 2017 strategy calls for the opening of between 450-500 new larger retail stores that will merchandise a full range of apparel, while consolidating 150-200 existing smaller sized stores.

The larger stores are being designed to allow consumers the opportunity to browse broader fashion and apparel offerings while also embracing online capabilities, allowing the ability for shoppers to either buy in-store or order online with the assistance of sales clerks. Online order pickup or return of purchases can be exercised at the retail store as-well.

Despite a rather difficult year in retail, this retailer’s latest report of financial performance established a new record of nearly $25 billion in revenues with a 10 increase in profitability.

As noted in our 2017 industry-specific predictions for the retail industry, we observed that the implications of permanent reductions in physical foot traffic have taken a toll on traditional mall-based retailers and department stores. While well-known broad-line retailers such as Macys are undertaking additional store closings, Zara once again has a different strategy emphasizing larger, more integrated stores to appeal to the Omni-channel consumer, supported by one of the retail industry’s most responsive supply chain response capabilities.  As noted in our prediction, the physical retail store is now the virtual online store, and that brick and mortar stores are the one advantage that differentiates retailers in their ability to offer more timely fashion from that of Amazon and Alibaba.

Obviously, consumers will be the ultimate determinant for the success of Zara’s new strategy.  A successful record of accomplishment up to now provides evidence leaning toward success.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

A Conversation with Tata Consultancy Services Global Supply Chain Practice and Center of Excellence


While attending the Oracle Modern Supply Chain Experience conference a few weeks ago, this Editor had the opportunity to once again catch-up with Rich Sherman, a long friend. Rich has been a guest contributor of thought leadership content on Supply Chain Matters and is author of the book: Supply Chain Transformation- Practical Roadmap to Best Practice Results. Rich now serves as a Senior Fellow, Global Supply Chain Practice & Centre of Excellence (GSCP&CoE) at Tata Consultancy Services (TCS).

Some of our readers may be familiar with TCS’s efforts in supply chain management. Practice areas include:

  • Supply chain strategy including strategic assessments (data driven for both maturity and digital), and supply chain segmentation strategy support.
  • Planning as-a-Service including Integrated Business Planning strategy and technology deployment.
  • Source to Pay and Logistics and Fulfillment business process support.
  • Digital Supply Chain and Factory of the Future process support.
  • Service Management operational support.
  • Supply Chain Applications – of course, at OMSCE TCS touted its platinum partnership with Oracle for cloud and supply chain applications. However, TSC has partnerships for implementation and support for all of the major supply chain application vendors.


I was surprised to learn that the TCS GSCP&CoE now includes over 350 supply chain management domain experts supported by upwards of 3000 IT strategy, applications, and solutions implementation staff resources. Rich informed me that the TCS GSCP&CoE has been engaged in over 150 consulting engagements over the past two years, and further has become a generator of supply chain thought leadership for clients.

In our conversation, Rich and I touched upon a few of the current burning topics and current initiatives that are common across various industry supply chains. They include:

  • Omnichannel Fulfilment and end to end Supply Chain Control Towers
  • Integrated Business Planning beyond traditional S&OP with integration into execution
  • The Digital Supply Network and advanced manufacturing methodologies such as additive manufacturing (3D Printing assessments) for the Factory of the Future
  • as a service” and cloud based operations
  • Advanced Analytics including assessments, Artificial Intelligence, and Cognitive Analytics for analytics maturity lifecycle management

While the GSCP&CoE focuses on supply chain management consulting, they also tap into other business units for even deeper specialization. As an example, each of TCS’ industry business units have industry supply chain domain experts. TCS’ Analytics & Insights unit has more than 5000 data scientists (including Ph.D’s and even M.D.’s) using all of the available business intelligence tools to provide clients with highly advanced analytics including predictive and prescriptive analytics and insights. TCS’ Engineering and Industrial Services supports customized engineering services such as 3D printing assessments, design, and implementation as well as robotics and advanced manufacturing and material handling systems. Business Process Services provides outsourced operations across the enterprise and supply chain.

As always, it was intriguing to speak with Rich on the transformation of the supply chain into the “connected commerce” age and the maturing of digital technologies. It was also interesting to hear about the TCS that I didn’t know about and hope that now you also know.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Updated Research Advisory- The New Phase of Online and Omni-Channel Customer Fulfillment


From time-to-time as developments warrant throughout the year, we have published various succinct but brief research advisories to clients and blog readers focused on specific industry, line-of-business, functional or technology trending that warrant specific attention for both management teams and supply chain management professionals.  hands-typing-4

There have been several phases related to the ongoing explosion of online commerce and its impact on traditional retail and B2C focused industry supply chains. In August of 2016, we published the research advisory: The Beginning of a New Phase of Online and Omni-Channel Fulfillment for B2C and Retail Supply Chains, where we cited the beginning of the newest phase, namely impacting the long-term presence of brick and mortar retail and the accelerated need for more agility from supporting supply chains.

Our August 2016 Advisory outlined the tenets and impacts for the beginning of a new phase of an omni-channel driven retail business model. With the increasing results and implications from traditional retailers throughout 2016, we have now updated our advisory to reflect evidence that indeed, a new phase is underway and comes with many implications for the industry’s supply chains.

Consumer preferences and desires have permanently changed in retail, and online platforms and consumer loyalty programs such as that of Amazon are rapidly garnering consumer loyalty and dependence.

Supply Chain Matters and Ferrari Consulting and Research Group clients can now download our updated March 2017 advisory: The New Phase of Online and Omni-channel Fulfillment for B2C and Retail Supply Chains. This report is now available for complimentary downloading in our Research Center by providing basic user registration information.

We reiterate that all research download information is utilized solely for our internal tracking needs and will not be sold or made available to third parties.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Report that Alibaba Has Taken Majority Control of India’s Paytm


One of our 2017 Predictions for Industry and Global Supply Chains called for Amazon and Alibaba to continue to position for global online platform dominance, and we further predicted that both would remain cautious to perceptions of outright head-to-head competition. We concurred with Asia based business observers that one of the primary battle grounds this year will be India and Southeast Asia.  Alibaba_sized

Today, Business Standard indicates that Alibaba has taken a reported 60 percent control of India’s E-commerce platform provider Paytm. While this online platform provider has not acknowledged such an investment, Business Standard cites documents submitted to India’s registrar of companies as indicating that Alibaba will invest $177 million in Paytm, while SAIF partners will invest an additional $23 million. According to this report, the investment puts Alibaba closer to a formal entry into India’s expanding online marketplace and could cause additional competition for existing online players, Flipkart, Snapdeal and Amazon India.

This investment comes nearly a year after Alibaba initiated a controlling stake in Lazada, an online marketplace for Southeast Asia.

The report further notes: “With Alibaba committing to India with more funds, it could be a straight war between Amazon and the Chinese company.”

Further reported was that this week, Paytm launched its Paytm Mall which features over 140,000 sellers which is a similar concept to Alibaba’s Tmall in China.

The stakes are indeed high and the investment money is obviously flowing.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


UPS Holiday Quarter Performance Provides Added Evidence of B2C Online Fulfillment Implications


Supply Chain Matters provides added insights to recent financial and operational performance reports from major companies. We begin with United Parcel Service (UPS) which recently reported results for the December-ending holiday quarter which generally disappointed Wall Street. UPS_Natural_Gas_Van

The headlines included a 5.5 percent increase in top-line revenues yet falling profit margins for the global parcel delivery firm. While revenues grew 5.5 percent, the transportation firm reported a loss of $239 million compared to $1.33 billion in profitability in the year-prior quarter. Total operating profit climbed more than 13 percent to over $700 million but during the quarter, UPS recorded a non-cash after-tax mark-to-market pension charge of $1.7 billion.

During Q4, UPS delivered more than 712 million packages globally, a 16 percent increase over the same period last year. The record volume was reportedly driven by strong and steady e-commerce demand throughout the period. B2C shipments grew at 11.5 percent in the quarter. Despite completing nearly 200 facility projects and announcing 7 million square feet of new capacity during the year, volume levels obviously taxed the overall network. Average delivery stops reportedly increased 4.6 percent and average daily volume was up 5 percent. The carrier’s ORION delivery management system managed to hold daily package miles to only a 0.3 percent increase, a testament to technology’s contribution to the bottom line.

Management indicated that the expansion of e-commerce is expected to continue, with another year of double-digit growth.

Since UPS and FedEx are often viewed as the bellwether of the economy as well as the trending of logistics and transportation it is important to dwell on management’s observations regarding the latest holiday fulfillment quarter.

In the case of UPS, the takeaway from our lens, are twofold. First, as noted in our 2017 predictions, the tide for more consumers to opt toward online buying continues but the implications for increased parcel volumes and logistics costs continue evident as well. UPS indicated that 55 percent of shipments handled in Q4 involved deliveries to residential addresses. That number peaked to 63 percent in December, a month that included its usual share of winter weather disruptions. As a result, the global parcel carrier has now announced plans to invest another $4 billion, a 33 percent increase from 2016, in increased automation. UPS CEO David Abney indicated to analysts: “If this quarter taught us anything, we’ve got to quicken the pace.

The other takeaway reflects on top-line revenue growth. Despite significant rate increases in both 2015 and 2016, UPS’s cost structure continued to increase. Having one of the more automated and technology savvy transportation providers experience such cost pressures is a further indication, from our lens, for the potential for increased rates and surcharges for large or smaller volumes shippers in the months to come. Such increases will likely also target peak shipment periods that adds to network stress. A hint to that possibility was a further statement from Abney: “We have put more emphasis on making sure that we pass on to our customers the increase in costs that e-commerce deliveries can bring.” Further added was a comment that actions from larger shippers relative to rate increases have not reflected the usual pushback garnered in any year of rate negotiations. We imply the latter to indicate that online consumers paying for shipping charges are likely to be the biggest target of rate increases in the coming months, especially during peak customer fulfillment periods.

With every passing quarter, the implications of online and Omni-channel commerce from operational and cost perspectives continue to become more visible, and so are the realities for supply chain team efforts at responding to such needs.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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