Operational Management of Zara - Case Study Example

Operational Management of Zara  Contents Introduction 2 Discussion 3 Facilities 3 Design and Order Administration 4 Zara’s Supply chain management 5 Production 7 Functions 10 Conclusion 11 Work Cited 13 Introduction The changing conditions in the global market place with increasing amount of completion in the global world more efficient output from the organization and their members in the supply chain is been expected. The trend has changed and now companies manufacturing process concentrates not only the quality and reducing the price by cheap labour but also the major requirement taken into consideration is the time. Companies try to come out with innovative products in less time and also with good quality at the minimum cost. Still for having the most efficient supply chain management the selection of the right supplier is the major factor. In the fashion world customers needs have changed and they are looking to get new styles and fashions in the market at frequent rates. The supply chain management in the fast fashion business deals with the movement of goods from the suppliers where the raw material is originated to the end customer who consumes the particular end product. In this fashion world there is a he competition among the companies for coming up with new styles and also in quick time. Thus agility in the whole operation process is a very important factor which helps the company to respond quickly to the changing demand of the customers. In 1975, Inditex a Spanish group which was been owned by Amancio Ortega established Zara as a fashion label and value chain store. In the last two decades Zara has grown in huge numbers and its profit has gone up by three times and has become the third largest fashion retail store in world. The other brands which Inditex has are Uterque, Oysho, Zara Home, Bershka, Pull and Bear, Zara kinds, Stradivarius and Massimo Dutti. Zara has around 300 designers in its headquarters in Spain where approximately 40,000 designs are made from where only 10,000 designs are selected for production. By Dec 2010, Inditex had approximately 5000 stores worldwide becoming the worldwide leader in fast fashion chain network. Zara has a strategy of maintaining a policy of generating a huge variety of products every year. Discussion Zara being n the fashion business and being the worldwide leader in 5this business the overall operations process including the supply chain management, design process, production process and procurement is very efficient and also agile. Each of the process included in the overall operations management process is been discussed below one after the other. Facilities Zara has a huge number of faculties and a huge infrastructure. The company reaches to its target market and the customers by having their store in the important locations of different target location cities and towns. Zara uses a strategy of producing less quantity for each design and creates a scarcity in the market which indirectly gives the company an additional advantage and also prevents the company from the waste of overproduction and also over stock in its stores. The stores of Zara are also made based on the dress material categories to prevent it from cannibalization and the stores are well designed internally by having a particular city and its culture in mind. The visual display in the stores play a major role and they are well planned in a way such that they can display all the designs in a proper way and the consumers find it easy in choosing among the variety of designs and also find it easy and spacious to move in the stores. Zara has selected to have its stores in the major locations of every city where the visibility to the customers will be more and also increase the foot falls (Schroeder 34-56). Design and Order Administration The design department of Zara has 300 designers and market specialist who design both next seasons’ and also continue making design’s for the present season of about 40,000 designs from which only 10,000 of the designs are selected and the production is done for the selected designs apparels. The average age of all the designers is 26 in the company and tries to encourage the environment by making it more dynamic. Feedback is obtained from the stores from the customers which helps the company to improve and come up with new designs. All the designer men’s, women’s and children’s sit in different halls and are given full freedom to think out of the box designs. In these halls the views cover around everything and each room have market specialist in the middle and the buyers at one end and designers on one side with round tables in the centre of the room for conducting meetings (Rother 65-54). The designs are made by the designers by hand and then it is been discussed with the market specialists, planning people and procurement people in the organization. The designs are been made by the designers using the CAD software’s which helps them to make the required changes as and when required. After making the designs the samples are been made by the skilled employees in the same hall and they do review with the designers with any doubt in the design. The market specialist are experienced earlier store managers of various stores who are responsible to be in contact with the store managers and collect information from them regarding the demand of quantity and also the demand of the new styles from the customers and is also responsible to push the store managers to increase the sales volume (Delavigne 97-113). The decision been made about which design is been selected it is then the duty of the buyer to take charge of fulfilment process of the order, Planning, production, procurement and also has to keep track of the shortages or oversupply of a particular product. Zara’s Supply chain management The overall supply chain network of Zara includes different members who are involved in the whole operational process. It includes the point from which the raw materials are been taken by the company till the products reach the end consumers through the retail outlets. The entire supply chain network for the company is been shown in the below diagram. The supply of the flow of the materials is in the forward direction where the materials which are the raw materials are taken from various suppliers who give material like fabric, threads, CAD software etc. from the selected suppliers across the globe and the best suppliers are been selected based on the quality and time of supply. Local suppliers are generally preferred to have less lead time. The raw materials comes to the warehouse and the order assembly and stock maintenance is been done (Slack 78-86). This whole materials goes to the manufacturing department which covers the designing after which the raw fabric is been cut as per the CAD design and then been send to outside sewing factories where the cut fabric is been stitched and the dress is been made from where it is been brought back to ZARA factory where the quality inspection is been done in the time of ironing and complete inspection is done by checking each dress. The ready materials are been packed and been send to the retail outlets across the particular city as per the demand been made and from there the materials are been brought by the consumers. The movements of the items are done by using trucks. The products are been send even through flights to different parts and retail outlets when the distance is more (Schilling 45-52). In the inventory management the company follows the principle of Just-In-Time, as a result of which there stock level maintained is very low2 and the company brings and s4nds the material exactly based on the demand forecast and data been send by the retail stores. The flow of information in case of Zara is also very important as because the data is been send form the customers through the retails stores by the store manager to the marketing specialist in the headquarters through phones. This information helps a lot to the company to know the exact demand of the customers and also get many ideas about the new designs and styles of the dress materials (Meindl 127-132). The flow of information from the customers to the company helps a lot top the companies two improve. For a company like Zara which is into fashion business needs the feedback from the customers and also feedback about the stock and requirement based on the demand is very important for it to maintain the just-in-time system in its inventory system. Production The company makes nearly 50% of the selected designs in the 22 factories in Spain which are owned by the company itself; it uses subcontractors and other small companies for the whole sewing process. Where in the sewing process is been outsourced to independent companies who have their own profit making factories. The other parts of the designs are made by outsourcing in the 400 outside suppliers of which 70% are from Europe and rest from Asia. The European suppliers are mostly in Spain and from Portugal. Zara looks to have geographical advantage to make sure that they get quick response about the designs mainly for the fashionable products. Most of the fabric is brought without dyeing form so that the company can change the colours as a when required as per the demand and the seasonal changes. Zara produces fashion outfits which have low complexity but the certainty of failure is very high. Zara does makes the effort to minimize the uncertainty by focusing more on providing a limited range of basic shapes and send limited range in the market so that if a particular product doesn’t gets sold properly than it will have a less impact and the product rage will also be low. The company also has runners and repeaters who are allotted to make the required changes when it arises based on the changes in the design. The subcontractors who are given the duty for the sewing of the apparels after sewing they bring the items back to the company where each of the item is been in been inspected during the ironing process of the apparels. The production process for the company is very well designed where the designs are been made very carefully by skilled designer’s and then are selected after a very strict scrutiny and then the fabric is been dyed as per the required colour and cut as per the cad diagram after which the cut pieces are been outsourced to other sewing factories where the whole fabric is been converted into fashionable dress items and them the quality inspection for each individual; item is done during the time of ironing the dress items. The diagram for the overall operation process of the company is been shown in the below diagram, which includes all the stages and explains the function of each member in the operations process for the company. The major activities are been numbered using the numbers 1, 2,3,4,5. In the design process the product specification, colours and the style is been made by using CAD software. The Order administration takes care of the procurement process and keeps in mind the principle of just in time for the inventory management. In the production process the planning, control and coordination is done where the sewing part is been outsourced, apart from this the quality control is also a part of this. (Source: Gustafson and Korff 33) The distribution network creates the value for the customers and also for the company. It takes care to the fact that the orders are been delivered within 24-48 hours to all the retail stores to maintain the low level stock in the stores and the retail stores are meant to maintain and provide the best possible service to customers and gain maximum customer satisfaction. The response from the customers helps the company to build more tips for internet service, different ideas about the display system in the stores and also them to get younger, innovative and creative staff members. This backward supply chain network helps the company to take care about the refunds and exchanges in a successful manner (Slack 89-95). Functions The function of the demand chain profile is to get up to date information about the changing trend in fashion and it is within the budget conscious. The information about the latest trends is obtained from the young generation. The factors which drive the customer values are the current fashion trends, the choice of colours, the size ranges, the interest created by the ambience of the store and also the price. In apparel industry all these factors are to be kept in mind and these factors are been done properly by the company are has always kept the top moment and has became such a big and large brand in the global environment. The value proposition of the company is by positioning it in the selective market, the variety of items been given by the company to the customers in different geographical locations and also at an affordable prices which gives it a competitive advantage over other brands. The implications of all these functions been performed properly by the company gives a lot of advantage to the company. It gets advantage from the market by getting updated information about the changing trends in fashion style. It allows the company to come up with new products and that to at a faster rate and with good quality and also by less cost expense. This process helps the company to maintain short operating cycles and thus the lead time and also the cycle time of the company reduces to a huge extent. It also helps the company to maintain a good quality check for the final products and also the materials from the suppliers, thus maintaining an efficient supply chain system in the whole process. The company’s old model of operations was in the way where it followed the Push strategy and company used to manufacture the goods which were first designed, then manufactured and then were send to the retail stores to give the customers but later on it improved its style of process and started to follow the Pull strategy as per which it started making products based on the customers requirement and demand and based on the feedback obtained from the store managers by the market specialist in the headquarters the design is been selected and then based on that the company makes the dress materials and is then send to the stores. The company also creates a scarcity of stock in the market to get an additional advantage and to prevent itself from overstock in the stores. This process gives a lot of other advantage to the company like the space in the store and the way the space is been utilized is very good, the transportation cost is been reduced and also the cost of maintaining stock in the inventory is also been prevented. This way the company is able to keep its expense of production low. Conclusion Zara been one of the world’s largest retail store has grown in a huge way in the last few decade and has shown continuous growth in its profit margin. The company has been able to keep such a continuous growth because of its strong operations management in the whole process. The apparel and the fashion industry is a fast growing industry and has a he market in the global world. This industry needs to get efficient supply network, along with a good and creative design team. Zara has got an agile supply chain network management system which helps the company to change with the changing demand and requirement of the customers. The supplier management system of the company helps the company to have local suppliers and maintain a good relation with the suppliers which enable them to procure good quality products at good rates. By using the agile supply chain network the company is able to reduce the excess stock and also has lowered the risk of forecasting to a lot extent. This efficient way of having the supply chain and also a good operations management the company has been able to launch with the latest and creative designs in the market, with the help of the feedback from the store managers and also the variety of the skilled designers. Work Cited Schroeder, Roger. Operations Management: Contemporary Concepts and Cases. 2007. Australia. McGraw-Hill. Print. Rother, Mike . Toyota Kata: Managing People for Improvement, Adaptiveness, and Superior Results. 2010. China. McGraw-Hill. Print. Delavigne, Kenneth and Daniel Robertson. Deming’s Profound Changes. 1994. Canada. Prentice Hall. Print. Slack, Nigel, Stuart Chambers and Robert Johnston. Operations Management. 2007. Canada. Prentice Hall. Print. Schilling Melissa.. Strategic management of technological innovation. 2008. New York. McGraw-Hill. Print. Meindl, Michael and Sunl Chopra. Supply Chain Management. 2006. Canada. Prentice Hall. Print. Slack, Nigel and Michael Lewis. Operations Strategy. 2002. France. Financial Times Prentice Hall. Print. Read More