Introduction to Zara Company
Question:
Select one Company of your choice (or a business part of a company) and explain what is its way of managing operations.
The main aim of the company is to explain the operation management, and supply chain management of the company. Zara Company has been selected in the report to understand and evaluate the operation strategy and lean management. Zara is the biggest brand well-known clothing brand in the world. The firm uses unique strategies and policies to gain a competitive edge over its competitors. On the other hand, the paper explains process analysis and quality process of the organization. In addition, it explains supply chain management of Zara that helps to beat the competitors across the world.
Zara is a Spanish fast fashion company which provides stylish and fashionable clothing, accessories and apparel to the customers. The company was incorporated in 1975 by Rosalia Mera and Amancio Ortega. It is the biggest apparel retailer in the world. The firm manages and controls up to 20 clothing collections a year. The organization has approx 2169 stores in the world. It is one of the biggest international fashion corporations in the world. It belongs to Inditex, which is largest fashion group in the world. In today’s era, the firm is expanding and exploring its business across the world.
Operation management: The operation management refers to the management and administration of business practices in order to create the highest level of efficiency and effectiveness within an organization. It is the process of converting raw material and labor into good and services to maximize and increase profitability and returns of the firm. Zara is one of the biggest brands of Inditex (Choi, 2013). In today’s competitive business, buyers want to see a new trend quickly. Thus, the strategy of fast fashion makes the company successfully and their supply chain management and operation management are their competitive benefits. In the operation management, Zara has to manage and control 3 criteria: 1. Reducing inventory, 2. increasing resources that the company used 3. Time overtaking. Their operation management and supply chain comprise 4 stages: First, the firm purchases fabrics in 4 different colors and they can order from suppliers which are nearby the factory. In the second stage, clothes are ironed and packed. Finally, products are ready to sell in the market (Qrunfleh & Tarafdar, 2014). Vertical integration system is followed by the company to deliver the products to the customers in the global market. In terms of managing inventory, Zara figures out the quantity and quality that must be sold to one shop in the market. Thus, it allows to the company to deliver more clothes but in small amounts. In addition, delivery time affects the image of the organization. The company uses effective and dynamic just-in-time strategy (Terwiesch, Diwas & Kahn, 2011). Along with this, Zara focuses and monitors the changeable demands of the customers, also it analyzes weather conditions and sales forecasting. Zara distribution process is quite expensive and costly rather than other retailers. The organization also sells its products online. The organization must focus on E-commerce to increase the number of customers in the market. Zara proved a powerful and successful operation management and supply chain in a fast fashion company. The firm maintains effective and unique communication between customers and designers as well. By using dynamic and effective operation management, the firm has been able to increase market opportunity and eliminate the risk that is associated with forecasting and sales. Now it is assumed that the firm uses unique operation management to attract more customers in the competitive market (Hill & Hill, 2012).
Operation Management
Operation strategy: Zara is gaining growth and success through diversification with vertical integration. It adopts manufactures, couture designs, retails clothes, distributes within twice a week of the original design and fabric first appearing on catwalks. The firm maintains own supply chain and logistics management to attain long-term goals and objectives. The company operations are in line with business and operational strategy. Furthermore, the firm uses effective distribution system to deliver products and services to the customers. Under operation strategy, the organization uses two strategies such as vertical integration strategy and product replacement strategy to increase and maximize the revenue and returns. Apart from this, Zara uses just in time production strategy to attain long-term mission and vision. By using this concept, the firm is focusing on the elimination and reduction of waste in production and management system. The company designs its clothes itself. Zara’s operation strategy focuses on speed to market, product variety and store location (McColl & Moore, 2011).
Process analysis is an organization process of defining its strategy and policy. It helps to make effective and dynamic decisions in the market. It also helps to control the structure and mechanism for directing and guiding the implementation of the strategy (Hill, Jones & Schilling, 2014). Process analysis is also called strategic planning strategy that helps to gain competitive advantages in the global market. Various analysis is done by the firm to evaluate and analyze the plans, policies, and strategies of the competitors. The firm uses porter five forces model, SWOT analysis, and PESTEL analysis to stand out against the competitors in the world. The SWOT analysis has been discussed below (Vu & Medina, 2014).
Strengths
- Strong supply chain management is one the biggest strengths of Zara which helps to meet its long-term targets and goals. It is the biggest success factors of the company. It also helps to provide end to end management and control.
- Furthermore, Zara uses unique just in time production process to overcome the competitors.
- The firm manages unique information system and inventory management system to build a good image in the market.
- Centralized distribution and logistics management is the strength of the firm. In addition, the firm does not believe in advertisement and promotion, thus, it saves time and cost of the firm.
Weaknesses
- Zara’s success and growth depend upon the European market that may cause disruptions in the terrorism, region, labor strike, natural disaster and political unrest.
- Although vertical integration is a benefit to Zara, but it also has some limitations. As a result, the firm has not been able to acquire economies of scale.
- Frequent and quick introduction of new products and services is also another weakness of Zara.
Opportunities
- Zara is planning to expand and flourish its business activities globally.
- It is growing online sales in the UK. Furthermore, the company has set Asia as a top priority for its development and expansion with plans to open its stores in different nations.
Threats
- The exchange rate fluctuates regularly which may have a direct impact on the sale of the firm.
- High and immense competitors also affect the long-term mission and vision of the firm.
Zara is the biggest division of the Spanish retail Inditex group. The firm sells fashionable and stylish clothes to the customers at low prices. In addition, they focus on the specific market. Zara uses effective strategies to improve and enhance the performance of the employees as well as the organization. The company has changed the manner where production, designing, and delivery to the retailers require six months. The distribution and design cycle of the firm takes approx 10-15 days in the entire process. The firm is focusing on the quality and designs of the products to increase the demand for the products in the market. The company produces most of its products in Europe to gain the competitive advantages in the market. The firm outsources very little to Asia compared to the competitors. Lower inventory cost and the price is a key success factor to produce innovative and new products and sell its products at the lowest price in the market. Furthermore, Zara uses unique and dynamic supply chain, logistics and lean management to attain competitive advantages in the market.
Supply chain management: Zara uses effective supply chain management to build and develop a unique position in the global market. Supply chain management is one of the biggest strengths of the company (Christopher, 2016). It is the key success factor for the firm. Zara is able to carry approx 11,000 products per year compared to 3000 by competitors. The company includes following factors in supply chain management (Blanchard, 2010):
Operation Strategy
Demand forecast: Demand forecasting is important to gain competitive advantages in the market. Zara business model revolves and measures forecasting demand to produce products and services. The firm analyzes and evaluates demands, needs, requirements, and desires of the customers throughout the effective and unique supply chain management. The demand forecasting provides useful insights to manage and handle their stock levels which fix standards and rules to replenish and fulfill their stores (Fernie & Sparks, 2014).
RFID: Zara uses dynamic RFID technology to increase and maximize the returns in the competitive market. The company maintains the advanced system in order to track the locations of the clothes, accessories right way. RFID technology helps to capture the data in an effective and right way. This technology provides support to stay in the competitive market (De Marco, Cagliano, Nervo & Rafele, 2012).
Agility: It is important factor of Zara’s supply chain which helps to beat the competitors in the global market. Stores take two deliveries per week and receive their orders within two days of placement. However, making a supply chain and logistics agile is not an easy task. To attain agility, the firm should focus supply chain visibility. By using unique supply chain management, Zara has been able to make a strong position in the market.
Lean management: Lean management is a strategy to running an organization which supports the concept of continuous enhancement and improvement. It is considered a long-term strategy to attain the goals and objectives of the firm (Chu, 2016). Furthermore, it increases and improves quality and efficiency of the workers. In lean management, there are five techniques used by the firm to attain its global growth and success.
Just in time production: The firm uses just in time process to deliver fast fashion products to customers. By using just in time production process, Zara breaks the fashion supply chain standards and rules by updating new collections and minimizing the cost of the products (O’Marah, 2016).
Agile: By using agility, the firm is able to provide products and services quickly to the customers in the international market. It also helps to monitor and focus whether how much money consumers spend in store to understand and evaluate which designs are being bought from the market (?iarnien? & Vienažindien?, 2014).
Customer value: By using lean management, Zara focuses and measures needs, requirements, and values of the customers. The firm collects feedback from customers to satisfy the demand and needs of the customers.
One piece flow: It is the way of manufacturing and producing small qualities of products and services to match the pace of customer’s requirements and demand.
The firm uses unique and unique distribution management to increase and expand the business activities and operations of the firm. It is one of the biggest success factors of the company. Along with this, the firm uses vertical supply chain management to introduce and launch new products and services in the global market. In addition, the company uses innovative and dynamic procurement and manufacturing strategy to gain success in the market. Moreover, Zara maintains favorable working environment and culture in the workplace (Deogratias, & Harorimana, 2009). It also uses unique and dynamic communication strategy to build and develop a good and reciprocal relationship with customers (Rao, 2014).
Conclusion
On the above discussion, it has been concluded that Zara uses unique and dynamic supply chain and logistics management to increase and maximize returns and revenue. It also uses successful operation strategy to conduct business activities and operations effectively. Apart from this, the company focuses and monitors on quality and designs of garments to maximize sale and revenue in the competitive market. Moreover, the organization uses SWOT analysis, porter five force models, and Pestle analysis to stay in the competitive market. Now it is recommended that the firm should focus the advertisement and promotion strategies to promote the products and services of the organization.
References
Blanchard, D., (2010). Supply chain management best practices. John Wiley & SonsChristopher, M., 2016. Logistics & supply chain management. Pearson UK.
Choi, T. M. (Ed.). (2013). Fast fashion systems: Theories and applications. CRC Press.
Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Chu, P. (2016). Excellence in European Apparel Supply Chains: Zara (Doctoral dissertation).
?iarnien?, R., & Vienažindien?, M. (2014). Agility and responsiveness managing fashion supply chain. Procedia-Social and Behavioral Sciences, 150, 1012-1019.
De Marco, A., Cagliano, A. C., Nervo, M. L., & Rafele, C. (2012). Using System Dynamics to assess the impact of RFID technology on retail operations. International journal of production economics, 135(1), 333-344.
Deogratias, & Harorimana., (2009). Cultural Implications of Knowledge Sharing, Management and Transfer: Identifying Competitive Advantage: Identifying Competitive Advantage, IGI Global, Pg 144
Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Hill, A., & Hill, T. (2012). Operations management. Palgrave Macmillan.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
McColl, J., & Moore, C. (2011). An exploration of fashion retailer own brand strategies. Journal of Fashion Marketing and Management: An International Journal, 15(1), 91-107.
O’Marah, K., (2016). Zara Uses Supply Chain To Win Again, accessed on 8th December 2016 from https://www.forbes.com/sites/kevinomarah/2016/03/09/zara-uses-supply-chain-to-win-again/#3032002b63ae
Qrunfleh, S., & Tarafdar, M. (2014). Supply chain information systems strategy: Impacts on supply chain performance and firm performance. International Journal of Production Economics, 147, 340-350.
Rao, K. G. (2014). Successful International Expansion of a Fashion Retailer: A Case Study of Zara. BS Publications, 245.
Terwiesch, C., Diwas, K. C., & Kahn, J. M. (2011). Working with capacity limitations: operations management in critical care. Critical Care, 15(4), 308.
Vu, T., & Medina, S. (2014). Storytelling marketing and its impact on developing company brand identity, case company Zara.
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