Inditex: A strenuous supply chain

Firm Infrastructure

It was Ortega’s, the founder of Inditex, visionary management style which led Inditex towards success. It was his concept to deliver fashion quick because he was interested in revolutionalizing the apparel industry where the customers must regard clothing as a perishable commodity. To serve his viewpoint integration of designing, manufacturing & distributions were integral to the fast-fashion concept. Most of Inditex’s competitors adopt an outsourcing strategy by outsourcing all production to the external suppliers whereas Inditex maintains its production processes in house. The supply chain structure is vertically integrated.

Brands which make Inditex

Human Resources Management (HRM)

Inditex is an employer to more than hundred thousand individuals coming from 150 nationalities.Many of the Inditex’s current managers began their careers as store employees or other entry level positions. There performance was recorded and talented employees were promoted.Orientation of new employees & training of existing employees adapting to their needs is given importance in the organization.

Technology Development

Inditex achieved a competitive edge over its competitors by developing a quick response system to fashion trends & for this it had to develop state-of-the-art IT system which is integrated throughout the supply chain.

There is constant exchange of information through every part of supply chain which includes shop managers, designers, production staff, and external clothing manufacturers. Sales data, from different geographical locations, is processed & passed along to designers. This helps the designers to cater their designs to the preferences of the customers. The effective use of IT makes Inditex capable to produce very fast turnaround for its fashion designs.

Procurement

Inditex outsources less production than its competitors. Inditex outsources some of its standardardized products like cotton T-shirts which are price-sensitive to Asia as these products have longer shelf lives.

Majority of the Inditex’s supplier factories are in Spain and Portugal and these factories specialize in fashion-customised sewing. The proximity of these factories, specializing in the manufacture of fashionable garments, to the distribution facility saves time and transportation costs. This allows Inditex to respond quickly to fashion trends hence reducing its product risk.

Design

The demand in the fashion apparel industry keeps on fluctuating and any failure to meet the latest demands can be very risky and deteriorate the customer loyalty. Products may become out of fashion even before reach shelves. This can undermine the entire value chain. Hence, to avoid such a risk Inditex encourages continuous exchange of information between the store managers, designers, procurement teams and marketing specialists to ensure that the designs are exclusive & customer driven.

One of the most successful fast-fashion concept chain

Outbound Logistics

The aim is to immediately transfer the products rather than storing them. The schedule is clearly defined which focuses on deadlines on every stage in the supply chain. This helps to save costs and time by eliminating the need of intermediary warehouses to store inventory. This effective way of distribution helps Inditex maintain a strong position in the market.

 

Marketing and Sales

Inditex’s marketing budget compared to its competitiors is very less. It infact prefers to entice customers by selecting prime locations & having its new clothing displayed in its shop windows.

Exclusive clothing on display

There are reasons for this. Firstly, the clothings range changes frequently, hence any advertising activity has to be in line with the latest clothing ranges and this might be expensive. Secondly, Inditex avoids over-exposure of its limited clothing ranges & focusses on the presentation of the stores. It is interested in creating a climate of exclusivity and scarcity so that customers are encouraged to buy. 

Once upon a time in Greece

Battered Greece witnessed  its budget deficit fall to 9.1% of GDP in 2011. When George Papandreou took charge of office in 2006, the budget deficit was around 13% of GDP, way higher than the falsified figure of 5% stated by Karamanlis's government. The country currently has a debt of around USD 485 bn. There is immense pressure on the government to raise finance to pay off the debt which seems never-lasting (looking at the figure! but hope lives).

To continue to remain a member of the Euro Zone, members are required to maintain a budget deficit of no more than 3% of GDP and the debt to GDP must not exceed 60%. The current budget deficit is more than 9% of GDP and the debt is more than 120% of GDP!!! Greece is an unusual member of the Euro Zone which in the past had a two digit budget deficit and continues to have a three digit debt to GDP%.

The new coalition government, under Lucas Papademos, like the previous government plans to cut deficits, but we need to analyze how realistic these plans are fiscally and politically. The government is bound to raise taxes and cut spending on pensions, healthcare and welfare of the public. This comes at the expense of the turmoils in the form of protests and strikes campaigned by the strong labor unions in Greece. Any government in Greece is closely linked to the trade unions for political reasons and hence these unions are in a strong position to force governments to satisfy their expectations and demands. Any changes in the austerity measures will have both economic and political repercussions.

So what is the way out ? What options do we have ? Will Greece be forced out of the Euro Zone or will Greece be bailed out by the fellow EU members (mainly Germany and France). Let's analyze both the scenarios.

In the first case, we need to understand that there was no exit clause at the time of setting/joining the Euro Zone. Greece might approach the IMF like Hungary, but additional austerity measures will be required. The costs involved in switching back to the drachma from the Euro will be excessively high. The drachma would depreciate and the debt would surge as it is denominated in Euros. Hence, this is not a feasible option. Now, we are left with the second option, i.e. Plan: Bailout Greece!. It can be depicted from the chart above that France and Germany (the two leading Euro Zone countries) are most exposed to the Greek debt, hence if Greece falls, it will definitely have a knock-on effect and these countries will use all their muscles to save it. We have observed the significance of the Greek debt issue in the politics of France and Germany. The French and German banks have held significant amounts of the Greek debt and hence are a big support to its survival. 

Conclusively, I believe that the Greeks will be bailed out by their fellow EU members. We have to wait for the elections to get over in France and see the approach of the newly elected government towards this highly critical issue.