European Union And Its Application In Zara Commerce Essay Example

total cost of finished goods in terms of storage and transportation. According to the European Commission (2011), most corporations allocate around 13.2% of their budget to ensure efficient transportation of goods and services. The European Union market relies on a well-integrated transportation system to function smoothly, promoting regional coherence and long-term economic growth by facilitating the free movement of goods within its boundaries. To achieve an effective logistics and supply chain system, it is crucial to have a transportation network that guarantees interoperability and harmonization of regulations.

European Conveyance Policy

The European Commission is working towards establishing a comprehensive policy for transportation in the European Union. Their aim is to overcome current obstacles that impede the development of an efficient transportation system. According to the European Commission (2012) and Harps (2002), having accurate logistics and supply chain systems are crucial for companies' market performance, especially in this region which plays a significant role in manufacturing. The primary modes of transportation used in this area include air, sea, road, and rail. However, there is an increasing trend towards intermodality – utilizing different modes of transportation throughout the entire transport chain. This approach ensures effectiveness in the overall supply chain system and helps achieve efficient logistics objectives (Tseng, Yue & Taylor, 2005).

The European Conveyance Policy has been created to provide guidance to businesses on building an effective logistics and supply chain system to deliver goods and services globally with precision (Cooper, Browne & Peters, 1994). Both the European Union markets and the European Conveyance Policy have been adjusted extensively to meet the demands of diverse industries ().

Changes in the European Market for Improved Growth of Logistics and Supply Chain

System

The European Union market has evolved from a national focus to a regional focus, and now it is moving towards a more customer-oriented approach. The introduction of the Single Market, also known as the Common Market, has led to the development of logistics networks within companies to align with current market trends (EIU, 1999). Organizations are restructuring their distribution strategies in Europe and even reconsidering their networks to facilitate internationalization by sourcing products from various fields and ensuring centralized product supply ().
The development of the single market can be divided into three stages:

The text discusses the periods of pre-1993, 1993-present, and future in European logistics. In the pre-1993 period, there was no specific European logistics scheme because the European Union did not exist at that time. Each company had a national setup and a distribution center in each major country where they operated. Sourcing was done directly from manufacturing plants in Europe, and the logistics scheme varied across countries. Supply chain services were largely similar as most providers followed a one-size-fits-all approach.

According to Harps (2002), the main sources of transportation were domestic carriers, while most third-party logistics providers were regional or local companies. Larsen (2000) explains that since the formation of the European Union, member states have experienced strong economic growth and have taken advantage of global expansion opportunities. The demand for global outsourcing led to the opening of internal borders within the European Union after 1993. This shift in logistics strategy prompted organizations to restructure their supply chain management systems to align with the European Logistics and Supply Chain Business Operations System. Pan-European Distribution Centers played a significant role in the development of the

region, integrating various processes essential for an effective logistics and supply chain system. These centers expanded their importance by combining traditional activities such as receiving raw materials, inventory transportation, and shipping finished goods with value-added activities.

The implementation of Pan-European Distribution Centres enabled companies to transfer their transportation needs to planimeters, who could directly transport cargo from a central location (McDonald & Deardsen, 1994). This centralized and Pan-European distribution network allowed for easy shipment of products to customers in distant areas, resulting in significant time and cost savings for companies. However, companies are now modifying their logistics and supply chain systems to achieve a balanced combination of decentralized and centralized distribution facilities in order to strategically meet their business goals. As the market rapidly evolves, these developments will greatly enhance the efficiency and effectiveness of the entire logistics and supply chain system for organizations (Cousins, Lawson & Squire, 2006).

The European Commission has developed the European Transport Policy as transportation plays a crucial role in the logistics and supply chain system. This policy ensures that companies adhere to transportation-related laws (EU Article). Political Developments are identified by Walker and Jones (2012) as the main driving forces influencing the European Transportation Policy. These developments include liberalization within the transportation sector, such as the US-EU Open Skies Initiative.The anticipated outcome of this situation is that Europe will experience a notable influence, as there will be an upsurge in traffic and promotion of competition within the region.

The increase in global trade has resulted in a greater demand for transporting goods and services, primarily due to the rise of outsourcing. As a result, there is now an increased emphasis on environmental

concerns and the significance of sustainability. Additionally, Europe's economy has been affected by economic factors such as rising oil prices and heightened transportation levels, which have had a significant impact on its overall growth.

As people's income increases, the number of car ownerships and the state GDP also rise. The environment is a significant concern globally, with transportation contributing approximately 28% of carbon dioxide emissions in the European Union. Policymakers are exploring various strategies to control road transportation's carbon dioxide emissions. The growth in transportation has resulted in road congestion, which adversely affects both commercial and passenger travel.

Technological Drivers - The search for better transportation technologies has intensified due to the rising fuel costs and environmental concerns. Researchers are currently exploring various options, such as implementing advanced technologies like RFID, to enhance the efficiency of goods transportation.

Socio-demographic Changes - Europe is witnessing both an aging workforce and a substantial decline in labor force. Consequently, companies must increase their hiring of women in manufacturing and logistics sectors. Additionally, organizations are obliged to offer additional training programs to improve employee skills, leading to higher recruitment costs for more experienced and qualified workers.

ZARA - Leading Fashion Retailer in Europe

ZARA is a Spanish retail merchant of clothing and accessories that is headquartered in Artexio, Galicio. It was founded by Rosalia Mera and Amancio Ortega in 1975 and is the flagship store of the Inditex group. ZARA has differentiated itself from its competitors by following a distinct strategy. According to Zhelyazkov ( 2011 ) , ZARA employs a differentiation strategy based on Porter's generic strategies. The company focuses on enhancing the value chain through efficient logistics,

distribution, and supply chain systems. Before the formation of the European Union, ZARA used to compete by emphasizing time-to-market strategy (Cook, Heiser and Sengupta, 2011).

After 1993, ZARA changed its policy to an agile supply chain approach, which involved making every step in logistics and supply chain visible and well-coordinated. The company is known for being able to develop unique products and deliver them to stores within just two weeks, launching over ten thousand new designs annually (About US, 2012). ZARA's success is attributed to three key factors: short lead times, a limited number of products, and a wide range of styles.

Agile Supply Chain of ZARA

ZARA utilizes an agile supply chain to gain a competitive advantage in the market, making effective use of the Quick-Response System. An agile supply chain involves all elements working together as a cross-functional team to eliminate unnecessary steps and anticipate customer demands in advance, ensuring that products are available in the market (Zhelyazkov, 2011).

ZARA's success in the market can be attributed to its focus on the design of an excellent and efficient logistics and supply chain system. The entire process of supplying goods to ZARA stores begins with cross-functional teams in the design department based at the company's headquarters in La Coruna. The designs are mostly contemporary, and inspiration is drawn from various market research conducted at university campuses, bars, fashion shows, competitors' offerings, cafes, and other places where target customers can be found. Additionally, information about customers is collected from EPOS data and online sources from different websites.

When the proposed design is accepted, the commercial section specialists proceed with their tasks. They communicate with providers and negotiate purchasing prices. They

carefully analyze costs and margins and then determine the appropriate cross-currency pricing for garments. ZARA has a global sourcing policy managed by purchasing offices in the Netherlands, China, and the UK. This wide provider base allows them to select the best fabric and minimize reliance on a single provider. Over 40% of garments with less demand are imported as finished goods from affordable manufacturing centers in the Far East. The remainder are produced quickly in Spain using ZARA's automated mills and a small network of contractors (Godsell et al., 2011).

Value Chain Analysis of ZARA

ZARA maintains a balanced approach to in-house and outsourcing operations to enhance cost-efficiency through economies of scale. In-house operations include packaging, labeling, cutting, and dyeing.

The labor-intensive tasks involved in the coating phases are typically carried out by subcontractors' web, consisting of over 300 houses specializing in specific garment types or production procedures. To meet client demands swiftly, the process is flexible and production levels are intentionally kept slightly below expected sales levels to ensure inventory is always moving. The company prefers to maintain an under-supply of stock rather than holding a large amount of inventory. Once the finished goods are labeled, packaged, and price-tagged, they are transported to their destinations by a third-party contractor via road or air. The company's headquarters in La Coruna serves as the sole distribution center.

Each ZARA shop receives new stock twice a week, which is selected by the company's design department (Zhelyazkov, 2011). The entire process of designing, producing, and selling has been reduced to 22-30 days, significantly shorter than the industry average of nine months. This efficiency is largely due to investments in information technology. The

company's logistics and supply chain system has benefited from this technology and is supported by a 500,000 sq m facility.

and five floors Centre of logistics comprises of about 200 kilometers of traveling tracks along with an automated routing system that delivers all electronically tagged garments at the proper bays of lading for dispersion through the 3rd party distributers. About all the merchandises can be dispatched within eight hours of their reaching and it has been found that about 98.9 % perfect and the shrinking degree is even less than 0.5 %.

Deductions of alterations in Europium Policy

With the alterations in EU Policy particularly transport policy, ZARA has been able to develop a extremely competent logistics and supply concatenation system. It has been able to use all available options within European states to a maximal degree. With the aid of development of a good logistics system within the part, the transit of goods, stuffs and stock list has become speedy and reacting to the client alterations on fast gait has become convenient for the companies. The biggest advantage for ZARA has been that it has been able to spread out into European states strategically and has even exploited all available chances so that it can keep its nucleus competences in the production and operations country.

Future of Logistics and Supply Chain System in European Union

The European Union is constantly working towards developing an efficient logistics and supply chain system. There are great opportunities for member states to benefit from advancements in the transportation and logistics industry. In the coming years, there will be revolutions such as increased global trade, the information age, and changing customer

preferences. To provide excellent logistics and transportation services to businesses, governments should take certain steps. The European Commission (2012) has suggested improving interoperability by standardizing loading unit procedures, establishing a network of transportation nodes across Europe, eliminating national regulations that hinder interoperability, and using information technology to enhance the performance of key participants in the supply chain.

Conclusion

In today's ever-changing business environment, organizations must have a well-coordinated and highly integrated transportation and logistics system to meet customer demands. The use of e-commerce and RFID technology is becoming increasingly popular, and it is expected that every supply chain will need to adopt these technologies for efficient inventory management, effective storage facilities, strong supplier relationships, and optimized production locations for the proper deployment of finished goods.

Third party logistics service providers have become an integral part of the entire logistics and supply chain systems, making it crucial for companies to establish a suitable logistics management strategy. In Europe, all companies have great potential for growth due to the elimination of trade barriers and numerous opportunities to improve their production and operations within the region. As a result, the European Union offers extensive opportunities for organizations to develop a cost-effective and adaptable logistics and supply chain system for effectively managing their business operations.