Company Introduction
Operations management forms the prime activity for any organization in service as well as in manufacturing (Walters, 2007). In every manufacturing or service sector, it is the operations management that develops a product through a series of inputs and then transforms them into finished goods. The scope of the current report evaluates operations processes as followed by Zara, a Spanish clothing brand as well as accessories dealer. Supply chain has emerged to be one of the most critical functions in every organization that provides advantage over rivals. Effective supply chain management adds to customer satisfaction which in turn helps increase profitability and retain customers. The last stage of operations management deals with the logistics and supply chain to deliver final goods to customers (Bayraktar, 2007). The report incorporates the key processes adopted by the Company to transform its raw materials into finished products. The report is focused on two operational processes input and transformation where the Company is facing challenges. It also includes a quality management issue faced by the Company and recommendations to overcome the same.
Zara is a world renowned and leading retailer of men, women and kids clothing as well as accessories. Zara was established in the year 1975 by Amancio Ortega along with his wife Rosalia Mera (www.zara.com, Retrieved on 15th April 2017). The Company is well known for its innovative capability and international retailing for having effective control over its supply chain management. It has a controlled production as well as distribution process that enable products to reach the markets in time to compete in the hyper-competitive market ambience.
Operational processes consist of creation of clothing and accessories of the business by transformation of inputs into outputs such that it can be sold to end consumers. The process requires planning of series of activities, purchasing of inputs, management of inventory, selecting appropriate manufacturing process and developing strategies such that competitive advantage which is sustainable in nature can be attained.
Input Resources: At Zara the strategic operations decisions is aimed on creating innovative clothing as well as accessories. The rapidly changing and dynamic fashion of Zara that keeps transforming at the stores is what attracts customers to the brand name. Each clothing and accessories is made using the finest quality of raw materials such that they can compete in the international environment (Aksin, 2007). As Zara is based all over the world, its size of operations is also quite large hence it bases its manufacturing units world over. Fashion industry is characterized by two key features that sets Zara apart from competitors. Firstly, Zara is trend setter in the industry which targets low to middle income segment in the age group of 25 years to 40 years of age. Secondly, unlike brick and mortar stores, Zara has online platform that reaches out to global customer base by merchandising through online retailing. Zara is present in the fast fashion industry that follows lean manufacturing processes by producing in small batches. Thus, its enjoys economies of scale as it does not allow the products of the firm to pass through wholesalers and retailers (Zurich, 2017).
Figure 1: Operational Process
Source: (drstoney.wikispaces.com, Retrieved on 15th April 2017)
Transforming Activities: The transforming activities involve several influences from external environment. Zara’s operations manager monitors and anticipates changes in global fashion industry which is dynamic in nature (Berry, 2007). Zara adopts technology to transform its products and to reach to its customers by way of online retail stores. As products of Zara do not pass through retailers and wholesalers, the Company is able to deliver its products at low costs compared to the markets and in shorter time periods. At Zara operations managers constantly reviews competitive environment existing and the trends they follow in respect to price. Zara catering to global customer base also constantly evaluates government laws and regulations existing in each country. Recently it has incorporated corporate social responsibility to create unique value proposition for its customers. The Company has heavy reliance on technology and uses Computer Aided Design (CAD) as well as Computer Aided Manufacturing (CAM) for making fashion trends fast to consumers (Brown S. B., 2013). It incorporates the 4Vs into its production as visibility to customers, variation in demand, volume and variation. IT produces apparels in small batches and includes monitoring and controlling activities. Monitoring helps check for quality, speed, costs and capacity such that it can meet the Key Performance Indicators(KPI). It is in this stage that improvement is planned to meet or exceed customer expectations.
Operational Process
Output Products: At the output processes final product through supply chain is delivered to the end customer. Zara maintains an effective and efficient supply chain and logistics processes globally that allows it to reach products to customers in time. It special focus on customer delivery enables it to create value and satisfaction for customers (Talk, 2016). Earlier companies took approximately 40 weeks from transiting products from warehouse and a total of 65 weeks is required in transforming raw materials to finished products, which is almost nearly halved for Zara. It is able to anticipate customer demand and has a customer complaint and enquiry cell that allows steady communication with end customers.
Recent trends and research in fashion industry reflects that logistics and quality will eventually establish itself as a key differentiator offering competitive advantage in the fashion industry (Bernardes, 2009). The scope of this literature review examines the aspect of Quality Management which can deliver customer expectations. There is a predominant believe amongst industry players especially in the fashion industry that logistics in the output process of operations management can deliver high values for the company. It can also enhance competitive advantage and become a key brand differentiator going forward. Strategic importance of quality in operations has been stressed by many researchers including B. Bergman (2010) in his article, “Quality from customer needs to customer satisfaction.” published in Studentlitteratur AB (Bergman, 2010). Earlier researches mainly focussed on supply chain as rendering perfect trade-of amongst inventory and other fucntionality to deliver economies of scale. This function helped businesses increase thir business performances. and trade-of several risks by operating within global supply chain environment. On the other hand quality acts as an imporatnt aspect and a key factor that differentiates amongst various companies. Hence, companies in the fashion industry have established quality management and control to review and monior each steps in its operations processes to achieve customer satisfaction.
Ha(2012) in his article, “Online apparel retailing: roles of e-shopping quality and experiential e-shopping motives.” in the Journal of Service Management, pages 197 to 215 relfected on the effectiveness of supply chain and logistics management(Ha, 2012). As input and transformation forms internal fucntions and is often under control of Company’s operation. However, logistics involves transferring of products from one point to another involving external environmental factors, often crossing national boundaries. Therefore, firms operating in fashion industry needs to have integated and efficient logistics which need sto be internalised and well coordinated to deliver customer satisfaction. The rise of fast fashion and need for reaching markets early have often impacted quality of apparel manufactured. Often larger companies have outsourced their operations to small manufacturers, who tends to compromise of quality of raw materials as well as in their processing units(Sousa, 2008).
Transforming Activities
The global readymade garment industry has grown manifold since 2011 and has now attained a size of USD2.6 trillion. Fast fashion is providing such impetus for growth and development in the fashion industry hence, companies need to exploit on their output processes which can greatly influence customer satisfaction levels. Though supply chain can deliver high levels of effectiveness and efficiency to business growth and development of fashion businesses, there are certain risks involved in the process to (Slack, 2010). Quality is an impending factor that can have severe consequences on the brand name of the Company and can deter sales as well as revenues. Rise of online stores have further impacted quality of goods manufactured as companies often set up manufacturing units near to location of their highest demand points. D. Hee Kwak (2009) article, “Symbolic purchase in sport: the roles of self-image congruence and perceived quality.” in the journal of Management Decision, pages 85 to 99 highlighted the importance that customers attach to quality of goods delivered (Hee Kwak, 2009). Often in online stores the perceived quality might geatly differ from actual delivered material which leads to customer disatisfaction and ultimately leading to loss of brand image.
An onlien survey made of various factors to examine consumer experiences noted that while lowest levels of dissatisfaction in relation to quality, but there is a high amount of importance attached to it. S. Netessine and C.S. Tang (2009) article, “Consumer-Driven Demand and Operations Management Models.” published in Philadelphia,U.S.A: Spinger reflects the consumer perception in regards to oepration processes (Netessine & Tang, 2009). Onlien stores selling apprael generally applied high levels of qualiy controls on their input, manufacturing and output processes, however there might be high levels of dispartity in quality noted especially when apparels are manufactured in places that are outsie the purview of the brand itself.
Kim (2009) article, “The impact of website quality on information quality, value, and loyalty intentions in apparel retailing.” in the Journal of Interactive Marketing, pages 221 to 233 annalyses the improtance customers atatches to quality and the way it transforsm into value for the firm(Kim, 2009).
Major manufacturing processes of apparel have been computerized to deliver high effectiveness. Such Computer aided processes provides effectiveness and efficiency to manufacture and create fast paced productions. Quality control is in-built in these systems to provide effectiveness and efficient performance levels. P.G. Ipeirotis (2010) article, :Quality management on amazon mechanical turk.” in the journal “In Proceedings of the ACM SIGKDD workshop on human computation.ACM” pages 64 to 67 reflects on the pertinent quality quality control that is included in processes of manufacturing (Ipeirotis, 2010).
Output Products
M.N. Swink (2007) article, “Managing beyond the factory walls: effects of four types of strategic integration on manufacturing plant performance.” In the Journal of Operations Management, volume 25(1), pages 148 to 164 descrivbes the various intgerated startegic manufacturing plants that render effective and efficeint performance (Swink, 2007).
Yeung (2008) article, “Strategic supply management, quality initiatives, and organizational performance.” In the Journal of Operations Management, volume 26(4), pages 490 to 502 reflects on the various organziational initiatives that are taken in industries to maintain high qulaity levels(Yeung, 2008). Quality can direclt ybe related to customer satisfaction and higher the quality better the brand name and brand performnace. Thus, companies competing in the apprel sector have a high focus on the quality of materials manufactured and delivered to client. There packaging is done to the highest effective quality which can create customer value.
Zara has implemented a highly professional and technical method in order to deliver high value products to its customers (Barratt, 2011). The Company has integrated the entire operations in such a way that latest trend in fashion can easily be brought to the market in a fast manner. The organization due to its designing and quality products have expanded beyond boundaries and become a globalized organization. Due to globalization of its operations it had to spread its manufacturing and production of apparels as well as accessories to various parts of the world. The Company adheres to stringent methods of production focused on high quality and customer satisfaction.
Figure 2: Online Apparel Stores Experience
Source: (news-quality.com, Retreived on 15th April 2017)
Analysis of various factors that affect customer satisfaction levels reveals that while quality is an important constituent for online apparel stores, most customers experience high levels of satisfaction in regards to it (Krajewski, 2013). Zara has been trend setter and leading apparel and accessory designed due to the existing focus on quality in is manufacturing processes. However, the outsources manufacturers of Zara often excludes quality as a part of their preference. This has resulted din high disparity of quality in final products delivered to consumers in various pats of the world. The variety in quality experienced by consumers across the world has led to several customer complaints and dissatisfaction over the brand name. In this competitive fashion world, un-adhering to quality standards has resulted in high loss of sales for the Company. It has been estimated that the company in the year 2016 lost USD 1.2 billion alone to quality apart from competition.
Literature Review
Quality issues examined within the Company and outsourced one revealed high amounts of disparity in raw materials (Heizer, 2016). While Zara manufactures its products with highest linen and cotton quality and boast about it, the outsourced firms especially those located in the Asian continent uses cheap alternative quality of the same product. The raw material alone resulted in high dissatisfaction amongst consumers, feedback from many reveals shocking feedback.
Secondly, in transformation phase where various machinery, equipment and human resources are made to convert raw materials into finished products greatly differ (Brown S. B., 2013). The personnel required to manufactured trend setting apparels often lack training and proper skills resulting in finished products not being up to industry standards. The outsourced units of the Company has high focus on low cost products which has resulted in hiring personnel without proper training and skills, which lowers manufacturing costs but raises defects in the apparels. Further, the outsourced companies often manufacture linen and cotton products on old and outdated machineries leading to low quality products. Lack of quality management and control has further mad the challenge escalate.
Inspite of all these pertinent challenges the Company however has high levels of logistics and supply chain management processes to render them efficiently. All order s are delivered to customers within the deadline assured and in properly packed packages to avoid any misplacement or loss to the apparel (Udo, 2010). The efficient logistic systems have been effective in delivering value to the Company and its operational processes. Though output process is highly effective but the input and transformation processes needs to be analyzed and corrective actions have to be taken such that it can remerge to be a leader in the market.
Recommendation and Conclusion
Analysis of literature and problems of Zara reflects that apart from fast delivery times, quality plays a predominant role in fast fashion industry. While Zara has already adopted lean manufacturing processes and batch production techniques coupled with highly integrated supply chain management, it is experiencing some customer problems in regards to quality issues. In order to cater to globalized customer base, it has manufacturing units based world over where the head office instructs to adopt quality control. But in absence of proper monitoring and control there has been lag in quality control issue leading to customer dissatisfaction levels. The following recommendations are developed for Zara which can be implemented by the company in order to achieve high levels of performance.
- Zara needs to adopt focus on quality control system. While the Company eyes to be a trend setter in the market, it needs to also incorporate quality control as one of its vision to build new customers and retain old ones.
- The company has to accommodate total quality control systems in all its operational processes across all manufacturing units. The company has manufacturing units set up at various locations across the globe where apparels as accessories under the same brand name are manufactured. The Company needs to provide processes and regulations for implementing total quality control in all its manufacturing units.
- Zara needs to establish a constant monitoring system across all its production units. While all production units are spread across various locations, implementing a quality control will enable them to manufactured similar quality products world over.
- The Company will need to establish a dynamic customer feedback system. While each product is delivered across to homes of millions of customers based across the world the Company needs to have a feedback form wherein customer grievances can be noted and necessary actions can be taken.
- Zara needs to adopt an ERP system with all its manufacturing units to enable them to manufacture highest possible levels of quality. An integrated ERP system will allow to develop and create similar input, output and transformation processes thus, enabling an enhanced production system.
- The Company needs to adopt a centralized training and skill development process and system for all its manufacturing units to deliver highest levels in quality.
Reference Lists
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Bayraktar, E. J. 2007. Evolution of operations management: past, present and future. . Management Research News, 843-871.
Bergman, B. &. 2010. Quality from customer needs to customer satisfaction. Studentlitteratur AB.
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Ha, S. &. 2012. Online apparel retailing: roles of e-shopping quality and experiential e-shopping motives. Journal of Service Management, 197-215.
Hee Kwak, D. &. 2009. Symbolic purchase in sport: the roles of self-image congruence and perceived quality. Management Decision, 85-99.
Heizer, J. R. 2016. Principles of operations management: sustainability and supply chain management. Pearson Higher Ed.
Ipeirotis, P. G. 2010. Quality management on amazon mechanical turk. In Proceedings of the ACM SIGKDD workshop on human computation.ACM, 64-67.
Kim, H. &. 2009. The impact of website quality on information quality, value, and loyalty intentions in apparel retailing. . Journal of Interactive Marketing, 221-233.
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Netessine, S., & Tang, C. S. 2009. Consumer-Driven Demand and Operations Management Models. Philadelphia,U.S.A: Spinger.
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