Zara and Ready Meals Case Study Individual Report - Essay Example

? MARKETING: INDIVIDUAL REPORT School: Table of Contents Page Introduction to Ready Meals Case 3 Before and after status of Ready Meals case 3 Cause effect relationships 5 Guidance to similar retail organizations 6 Introduction to Zara 8 What underpins Zara’s Stores in its chosen markets 8 Zara’s Design and Production Systems. 9 Strategic choices Zara management has made. 10 References 12 Ready Meals Case Introduction to Ready Meals Case Ready meals is a company which supplies fresh foods to Strutt which is a grocery retail chain operating six distribution centers and several retail stores. The system of ordering and delivering the inventory at first is cumbersome and results into losses for all companies and lack of end customer satisfaction. The problem arose mainly because of centralized stock ordering system, which was being practiced by Strutt. There is a change in the stock ordering and delivery system, which sees the losses tremendously reduced, and a significant improvement in customer satisfaction. Before and after Status of Ready Meals Case The initial system is flawed with extensive variations of the orders demanded. Strutt provided a provision all week long order and a final order the day before the intended deliveries. These two orders varied a lot at times even by over 50% and this resulted in an inconvenience to Ready Meals. There were also penalties associated with lateness of delivering the orders by Ready Meals. The Strutt demand of the food was also very uncertain. Ready Meals could not plan itself on what it would deliver more than a day before. This coupled with the fact that Ready Meals had to make small packaging led to an extended lead-time and this in turn led to creation of wastage. Ready Meals set up stock buffering mechanisms to counter this effect of fluctuation of orders by Strutt. Buffering mechanisms was used in the supply of the sauces. This helped in mainstreaming the supply; however, the sauces have a life span of only five days and the keeping of excess stock led to wastage losses. Another buffer mechanism used by ready Meals to counter the uncertainty in supplying Strutt with food was the buffering of employee working hours. Employees could work for an extra 2 hours without notice and this led to an increased discontentment in the employee fraternity leading to turnovers. Wastage losses were also contributed to by Ready Meals computer system. On reception of provisional orders, Ready Meal would feed this information into their system. When this information was already in the system and the final order comes along, if the final order was less, the computer could not reduce the provisional order to meet the required order. If the final order was more than the provisional order, the computer could not requisition for the excess rather it requisitioned for the final order in addition to the provisional order. This led to a great variation on the ordered quantity and the produced order. If Ready Meals also failed to deliver a day’s order, the computer would assume that the order was lost and make another order, which it would compensate for, by a lower order the following day. In the new system, a weekly schedule was set on Fridays with fixed daily deliveries for the following week. This was also found to not need changing from week to week apart from gradual seasonal adjustments. Threat of penalties was also removed and Strutt’s shelf life was increased by RM promising to dispatch on the day of production and supply the early rather than late delivery into the depots. Finally, the depot location was specified on the same day rather than 2 days before delivery, thereby enabling the packaging quantities to be in line with store requirements and, therefore, avoiding depot delays in trans-shipment. This new system removed the variation in the quantities ordered and those delivered thereby reducing wastage for Ready Meals to zero. The uncertainty, which had earlier been created by the two orders placed by Strutt, was also removed. This is because only one order was placed on Friday with fixed deliveries. There was also no need or Ready Meals to keep buffer stock or work time since there was certainty for orders to be produced and delivered. Earlier on, Ready Meals preferred to trade off penalties imposed by Strutt for late deliveries by overproducing the stock. However since these penalties had been done away with there was no need for any more tradeoffs by Ready Meals. Strut also benefited from this arrangement noting from the reduced stock outs and associated lost sales. Cause effect relationships Apart from the visual merchandising and inventory control, retail management also requires the execution of other additional things to ensure a smooth running of the supplier customer relationship. There should be a central system of authority in the two systems, which communicate from time to time with each other to determine the amount of specifications of the goods required and any other structural deliberation necessary. It is not convenient that any personnel from these entities be charged with such a function. This will also improve the issue of accountability because this way it can be determined with certainty the person who was to do something and did not do and thus ought to be held accountable. The lack of a central system of authority may cause confusion on who is to be answerable for the shortcomings of the operations. This will negatively influence the buyer in that it will not be possible for them to determine with certainty that to direct individual complains. Another issue is that there should be a distinct division of labor and this will facilitate the smooth running of operations in knowing who is to do what. The central system of authority established above is responsible for division of labor. In this present example of Ready Meals, it should be certain who monitors the computer programs and this is the person who will cancel any excess orders or make additional orders proportionate to the goods ordered. In the case of Strutt, there should be a person assigned with the task of placing orders. This person would be responsible for making the provisional and the final orders and will thus be answerable on why there is a fluctuation on the amount of goods ordered. This division of labor will ensure that there is smooth running of operations between the two entities. This is because if such a system is put up on one entity and not on the other there is the possibility that the weakness of one system will result in the inefficiency of the other system. An example here would be that the inefficiency of the computer system in Ready Meals would affect negatively on Strutt by supplying excess or less orders. Guidance to similar retail organizations My theoretical understanding of retail organization may be of help to other retail organization. My understanding is that a retail organization, despite its size must have a chain of command. The officials on the top of the chain of command will be instrumental in the day-to-day running of the retail organization. There should also be a clear division of duties within a retail organization. This is because a retail organization has two sets of organizations directly connected with it being the suppliers and the customers. It should be clear whom deals with the suppliers demand and who deals with customer satisfaction. A retail entity must also have a strong stock holding regulatory mechanisms. This is because there is a delicate balance to be kept between holding excess stock and holding less stock. Holding excess stock may lead to expiry or obsoleteness of the stock while ensuring that there is no stock outs periods. On the other hand, holding less stock will eliminate the chances of stock outs and obsoleteness and reduce on storage costs but may lead to stock outs resulting to loss of customers. There is therefore the need to ensure that the stock held does not result in high storage costs, obsoleteness, or spoilage of the stock on one hand and ensuring adequate availability of the stock on the other hand. Zara Case Introduction to Zara Zara is a company, which specializes in making and distributing clothing and accessories. It is a Spanish company but it has branches all over the world. Its products are made in more than three places around the world. Bulk of its products are made in Europe, the most of it from Spain, the rest are manufactured from African and Asian markets. What underpins Zara’s Stores in its chosen markets A unique characteristic of Zara outlets is their ability to deliver the taste of the customer. When one enters a Zara outlet there is a very high probability that they will get what they want. One can also deliver a specification of the accessories or cloth they want to Zara and they will custom make it in no time. They take time to specialize in what their customers may want rather than what the market predicts. At times, the two coincide but they will still stick to its customer specifications. Another touching characteristic of Zara outlets is the way they treat their customers. Courteousness prevails in all customer stores. Their employees will serve a customer depending on the specialty of the shopping one wants to buy. At times one can find that there is more than one employee helping them out despite the enormous number of customers they receive. This means that Zara also employs a sufficient number of employees depending on its expected customer base. Zara also controls most of its manufacturing processes because it is vertically structured. It does not outsource bulk of its materials they way their competitors outsource from the Asian markets. It gathers its own materials, manufactures, and then distributes its products across the world, just in time. This just in time technique is a technique, which allows the manufacturer to deliver its goods just in time for their sales. This technique ensures that minimal storage costs are incurred; hence, minimizes the risk of obsoleteness. This technique also ensures that clothing is delivered when their design market is still hot. This is because clothing have been known to reduce in value once some time lapses after its production or after another new design is invented(Mclachlin 1990). Zara’s clothing and accessories are unique compared to its competitors. They are also of high quality and affordable. This is another factor, which attracts a high customer base. Zara ensures this by manufacturing their clothing using cheap quality materials. This is further enabled by the fact that Zara manages most of its processes and this ensures that quality is input at every stage. Zara has defied other manufacturer’s strategy of relocating their factories to places whereby they can get cheap labor and instead opting to continue its operations in the same place only expanding it when there is need to do so (Madonsela 2004). Zara is also an entity whereby there is a constant flow of information from the customers to the entity. Within the entity, information moves quite freely between the various departments. This has contributed to most of Zara’s success in that it ensures that its customers’ needs reach them on time and then those needs are then met immediately if possible. This is another distinctive factor of Zara as compared to other organizations where many bottlenecks exist to the free flow of information. Through this Zara is able to get information about what their customers want and deliver specifications about the information received. Zara’s Design and Production Systems. By reducing the quantity of clothing manufactured for a certain fashion, Zara is insulating itself against any possible risk. This is because clothing can go out of fashion very fast and if that happens when there is much stock, which then becomes obsolete making the company to incur losses. This system has a disadvantage in that it may lead to stock outs. This also means that if Zara gets an immediate bulk order for a certain design, they will not satisfy it because of this system of inventory. Zara also produces the most styles annually compared to its competitors. This ensures that the customers have a variety of styles to choose from them. Over 10,000 styles are produced annually and out of this about a third work out in the market. This also contributes to the uniqueness f Zara’s fashions. A disadvantage this may have is that overproduction of styles lead to high operational costs. More money is spent on styles, which may or may not work. There is so much speculation and uncertainty involved. Zara has also put in place a strategy, which has resulted in its costs being the lowest, compared to its competitors. Zara employs low-income persons in their industries, like mothers who are focused on supplementing other incomes they may have. Zara does not also run advertisement on their products rather preferring to increase its retail openings. The disadvantage this may have in future is that in those countries where Zara have no retail outlets people may fail to know about it. Advertisement is a very important marketing strategy especially in very dynamic markets like the one Zara is. An entity brings its unique features to consumers’ notice by an avenue. It is not enough for consumers to depend on experience because some may not have that past experience. Strategic choices Zara management has made. A strategy, which Zara uses to ensure that it manages high sales, is ensuring that there are always new clothes in their outlets. Despite the availability of the new cloth, ware at their factory the clothing present is usually very few. This is a selling strategy in that a customer will not give himself time to decide whether to purchase it or not because they are not sure whether they will get the garment when they come next. This is because it could be only one on the racks and there is a chance that it will be taken before the customer comes back for it. A theory, which Zara uses in its strategy to success, is the law of supply and demand. This law is based on the premise that when the supply of a commodity is low in the market it will be able to satisfy its demand even at relatively high prices. Zara reduces the supply of their commodities to the market and customers will purchase base on the premise that if they do not they may not find them when they come next. In conclusion, therefore, Zara is one of the successful entities in the clothing and accessories industry. I have detailed their strategy above and how it conducts its operations and the same can be summarized in the following sentence; Zara is a company, which produces small quantities of numerous high quality styles affordably, and in a very short span of time. References and Bibliography: Billesbach, T. and Schniederjans, M.J. (1989), “Applicability of just-in-time techniques in administration,” Production and Inventory Management Journal, Vol. 30, pp. 40-5. Chase, R.B. and Aquilano, N.J. 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