How a Zara Coat Went from Design to Fifth Avenue in 25 Days - Case Study Example

BUSS 2065 – Business Operations Study Period 2 - 2017 Assessment Task 2: Business Report How a Zara Coat Went From Design to Fifth Avenue in 25 Days? 1700 words Name: Your Name Student ID: Executive Summary This report explores the case study of Zara “Fast Fashion: How a Zara Coat Went from Design to Fifth Avenue in 25 Days”. The report identifies core competencies of the brand and describes operational management issues that were faced by the company earlier. It further explores how Zara reduced its design to delivery time. It also explores the methods used by company for forecasting and planning for operational improvements. Based on the case study, decision making capabilities, policies and strategies of Zara are evaluated and also compared with other firms in the fashion retail space. Table of Contents Executive Summary 2 Introduction 4 Zara Case Study 4 Core Competencies 4 Operational Management Issues 5 Design to Delivery 5 Forecasting and Planning 6 Conclusions 6 Recommendations 6 References 7 Introduction Zara is a flagship brand of Inditex which is garment organization and it contributes to 80% of the company revenues. This report explores the case of Zara that has a fast design to market business model. For developing a supply chain and operational processes that can allow Zara to research, design, produce and market the new products within a month, Zara has used certain strategies like close proximity of suppliers, smaller lots of supplies, make or buy manufacturing approach and so on. Because of these strategies, the brand has built certain core competencies that are unmatched by competition which is why the company has become a market leader in just a few years. Zara Case Study Core Competencies Zara has some core competencies that keeps it ahead in the fashion market and these cannot be easily replicated which is why Zara has kind of invented the concept of fast fashion with no other competing brand having a capability produce and market fashion products so fast. Key competencies of Zara include: Fast in Responding to Market Demands: Zara is very fast in responding to the market demands. Just as the example given in the case study, it could produce and launch in store the Zara coat within 25 days that included five days of prototyping, 13 days of production of 8000 coats, and 6 days for ironing, labelling, tagging, quality check, and delivery to store from where it was ordered. Vertical Systematization of Designs: Designers of Zara can design new trends in fashion clothing in a fast track manner as a systematic process is used for understanding consumer preferences about design, researching trends and coming up with new designs for latest fashion. Further, the company has cross-functional design teams that include designers, planners, procurement officers, product developers and logistics managers who work together in collaboration to decrease the design lead time. Understanding customer needs: Zara uses real time IT systems for capturing date on customer preferences, attitudes and needs. This data is used by the company to take decisions on new designs, store layout, and service provisions. JIT System: Zara uses Just in time inventory management system such that products are replenished only when they are expected to wipe out fast. With JIT in place, the company could reduce the costs of warehousing a logistics as well as allow the company to move its goods fast such that newer trends can be brought about faster[Fel09]. Operational Management Issues The company majorly operates from one country which makes it easier for the company to manage its operations efficiently and produce fast trends and offer them at affordable costs. However, when expanding globally, the company may not be able to use the same strategies as it uses in Spain. For instance, Zara may not get the required suppliers in any closer proximity which can affect the transportation costs and thus, the final cost. Thus, scalability can become a major operational concern when Zara tries to replicate it new products model[Joh146]. Another operational challenge is development of the multitalented and motivated team without which the company would not be able to produce goods with speed. To bring such close coordination, a company cannot have a very large number of people in teams but smaller teams have to work which would pose the limitations on the capacity[Lil15]. Design to Delivery The time taken from design to delivery for Zara is much lesser than other players in the market. While normal time taken by other manufacturers for one lot design, production and delivery is six months approximately, Zara completes the cycle within a month. This ability to respond faster to the demands is because of the proximity of suppliers of garments. Several factors make the process faster for Zara including: Proximity of suppliers saves on logistics costs when it orders for the garments. Proximity ensures cost saving because of less travel required Smaller lots of products are used in transportation which makes it easier and faster to deliver Zara team finished market research in a single day before the designs are decided A tight control is established over the store inventories such that only the inventory in demand or the new trends are stocked at a time Fast changes are made in designs that keep updating. For the replenishment of stock, 40% of the products are new designs that are launched fast for testing and are produced in Spain and distributed through its two distribution centres - Arteixo and Zaragoza. These distribution centres work at 50% of their capacities and have cross-docking facility that can be used for manipulating 45,000 items in an hour. Most products spend only a few hours in the distribution centre and then they are distributed to retailers twice every week through road transportation or through plane. The remaining 60% of designs that are produced are standard and are outsourced to other manufactures from countries like Turkey, Morocco, and regions in Asia[CLA14]. When compared with other competing brands like H&M and J.C. Penny’s, Zara stands ahead in its ability to offer latest trends in affordable prices. JC Penny;s take eight months to design, produce and distribute its products while H& M takes six months for the same. Despite good presence, these organizations have not been able to replicate the business model of Zara and could not be ahead of Zara in producing and selling latest fashion. Forecasting and Planning 60% of the products manufactured by Zara are based on the forecasting results that are used for making plans for production. The forecasting process is also used for planning new item introductions. Forecasting includes estimation of how long an item should stay in the store before it is sold and how many new items must be stored in the store for a week. The company could reduce forecast errors from 21% to 17% and save lost sales by 24% as compared to the cases of lack of forecasting[Jos14]. Forecasting can be used both for the innovative products and those that are standardized. Conclusions This report explored the case of Zara to understand how it could produce its garments within a month unlike its competitor that take a six month average for a lot to design, manufacture and distribute. It was found that because of the fast to market strategy of Zara, the company was able to become the leader in the segment and grew fast. A number of factors that contributed to the fast pace of Zara included like close proximity of suppliers, smaller lots of supplies, make or buy manufacturing approach, fast changes in design , and so on. It was also found that company used forecasting techniques for determining the need for specific trends of garments as well as for determining the best time and quantity in the lot of new designs when introduced. Recommendations Based on the study of Zara, certain recommendations can be made for achieving operational excellence in the garment industry such as: Core competencies are unique and not easily replicable by competition and with core competencies at forefront; any brand can have a sustainable competitive advantage. Thus, any garment brand may have some core competency which can be built in by strengthening operations in various ways. An organization can work of speed of production, uniqueness of designs, speed to market, quality of production and so on. In either case, a company should be able to identify a unique selling preposition attract buyers. Time between design and distribution can be reduced in various ways such by taking supplies only from the near proximity areas, using just in time inventory system, and having a highly coordinated team that works to execute processes fast. Customer preferences and needs are to be well understood to be able to stay put with latest trends that sell fast. For this, an organization can have a system in place for capturing views of customers that could then be translated into strategies that work well with the consumers. While reducing time to market using the strategies adopted by Zara is feasible in a business model with limited distribution, if the distribution has to be expanded worldwide, the company may not always have the cost advantage and thus, some of the products may use traditional way of manufacturing products based on demand forecasts rather than experimenting. References Fel09: , (Caro, et al., 2009), Joh146: , (Gattorna, 2014), Lil15: , (Cheng, 2015), CLA14: , (LU, 2014), Jos14: , (Oehmen & Perakis, 2014), Read More