This system ultimately means Zara earn more profit compared to other retailers, while industry average for the amount you get back on full price clothing is 60-70%, Zara get back 85%. Unsold items amount for less that 10% of stock which is significantly less than the average of 17-20%.
This is because of the approach Zara have to stock management, inventory optimisation models are used to determine the quantity of each garment that should be sent out to every store twice per week, this system determines the least amount the store needs in order to keep unsold stock to a minimum so less damage is done if certain garments don't sell well and adds towards the brands image of being exclusive.
The vertically integrated supply chain enables controlled mass production which leads to well-managed inventories, lower markdowns, more profits and more value for shareholders.
Some companies may opt for a non-integrated supply chain for a number of reasons. The biggest reason some retailers will reject an integrated supply chain is because it can they be difficult to integrate and can take a long time to achieve as well as the costs involved.
Another big factor is an integrated supply chain can often leave companies vulnerable as they are sharing sensitive company information as well as the fact that the company could become too dependant on one source for their production and transport which could cause problems across the whole supply chain if they fail. These supply chains can often be easy to manage as well as cost effective as there is no need for new technology.