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Operations Management

Introduction to Zara Research Report

Zara is known to be one of the greatest global fashion organization and it is a part of the Inditex group, which is biggest team of suppliers. The customer lies at the center of the key business framework of the organization, including, designing, producing, distributing and selling via the large-scale retail platform of the organization.

Product Overview

Zara is specialist in quick fashion, consisting of commodities like dresses, adornments, footwear, swimsuit as well as deodorants.

Mission Statement

The key mission of the Zara company is to meet the requirements of its customers and also to connect with them at a speed which can’t be achieved by any other organization. The company is associated with paying heed to the needs and preferences of their customers and not only in the process of enforcing a particular style or a trend into the market.

Aim

The key goal of the organization is to enhance the level of contentment as well as the requirements of their clients. The company aims to do so by providing opportunities to the clients to enjoy latest as well as special designs on a weekly basis.

Market Position

The key objective of Zara is to position its brand in a market by means of emulating a particular trend or style. In this context, the concerned organization aims towards offering stylish and highly fashionable products to the customers at a reasonable price and thereby the company adjusts with the demands of their customers.

Zara has established its shops in 96 nations under the Inditex group and it has its largest business is in Spain with a total of 547 retail outlets.

Key Process of Zara- Order Fulfillment

The key to the success of Zara has been its concentrated order fulfillment procedure, wherein the concerned organization can take their decisions in a very organized manner. In this context, the concerned organization has embraced a core, foreseeable and quick flow of delivery of products to its retail outlets. Moreover, each of the shops of the Zara two orders every week on certain days only. The trucks of the concerned organization have a particular range of timings for their delivery process and the package reaches the outlet at particular period of time only. Furthermore, when the clothing reaches the stores, they already have a price tag attached, hence they are ready to be sold immediately.

Due to the specific pattern followed by Zara, every member of the workforce of the organization is engaged in the distribution network of the company, ranging from the team of the designers, to the purchasing team, manufacturing, distribution as well as the retail team. In this way every member of the organization has proper knowledge of the time range that would be required to execute a particular task and also the way in which their operations are going to create an influence on the other operations of the concerned organization. Furthermore, it also includes the consumers of the concerned organization who is also aware of the time, when they would require to come to the shop to buy latest fashionable outfits.

Process Map

Source: https://www.scmglobe.com/zara-clothing-company-supply-chain/

Value Creation

The dependence of Zara on the concentrated order fulfilment procedure is the only element that will allow the organization to manage the exceptionally excellent work procedures of the organization. This includes the very first designs created by the designing team of the organization to process of delivering the designed products to its retail outlets and finally to the customers of the organization. Moreover, the perspective embraced by the concerned organization is an evidence of the fact that both smooth functions as well as the distributors network administration are vital to the profit generating ability of an organization and also for the measurement of its achievement (Amarkhil, 2018). In this way only Zara creates a value for their organization.

Furthermore, it has been determined that the success of Zara is due to the effectiveness of its various functions. The multi-operational functioning plan of the organization has been paired with its upended network of the distributors and it also paved way for bulk production in the context of compelled regulations which in turn resulted to a properly-maintained stock of the company. This was the reason due to which the concerned organization was able to generate high profits and generated value for its investors both on a permanent as well as temporary basis.

The concerned organization responds at a very high-speed to the changing requirements of their customers. Zara dominates a major part of its network of distributors as it manufactures its own materials, they have their own designing team for designing their outfits, manufacturing it and also in terms of supplying the same.

Due to its successful order-fulfilment procedure, the customers of Zara will always have an access to latest commodities but these products will only be available for a limited period of time and this will play a significant part in terms of creating value for the customers of the organization. The company competes with high-standard fashion companies and provides the same type of products using less costly materials and at an affordable cost to its customers, making its products more valuable for its customers. Furthermore, in order to ensure a smooth order fulfilment procedure, the concerned organization maintains a smooth process of communication among the various components of its network of suppliers, shop manager designers and customers. The functional procedures of the organization along with its performance appraisal technique is designed in a way such that it supports a fast and simple transmission of information across the various departments of the organization. The different departments of the organization know the quantity of products they are required to deliver and what they are required to deliver (Tantalo et al. 2016). This eliminates any scope of misunderstanding on the part of the organization; hence the customers get timely delivery of the products and they are always delivered with the latest stocks.

Inventory Management

The concerned organization Zara is engaged in the process of designing numerous commodities on a yearly basis and ensure the delivery of its commodities two times in a week to their different retail outlets. The company has embraced a stock management technique that makes it simple for them to find out which of their products are needed to be delivered to their retail outlets (Macmillan, 2016). Moreover, they will also be able to determine the quantity as well as the measurement of the commodities they are required to deliver to a particular retail outlet of them.

It is appropriate for Zara to use a stock management technique because the concerned mechanism will help the organization to make sure that all of its retail outlets is receiving only those commodities that is needed by them. In this way the concerned organization can eliminate any scope of having excessive products that is not relevant anymore for the organization.

By having a proper inventory management tool in place, the concerned organization can reap the following benefits:

  • Through the application of inventory management plan, the concerned organization Zara will be in a position to sell a greater number of commodities at its whole price.
  • There will be no question of excessive products both in the context of its raw materials as well as its complete range of products.
  • There will be no wastage of the stock of the concerned organization and hence their will be no loss for the concerned organization. In this way, Zara is successful in terms of providing latest commodities to its customers and also there is no question for outdated stocks.

It is due to a proper inventory management system adopted by the organization that it never runs out of stock and is always in a position to fulfil the orders of their customers at a very high speed. In this way, their stocks are sold at a very limited period of time and generates profit for their organization (Bell et al. 2018).

Technology, Lean & Quality Management

Zara is known to be top organization in the market and the credit of the same lies in being a pioneer in the field of technology. The concerned organization has engaged in embracing latest mechanism like that of big data and it had emerged to be successful in outperforming the immediate rival organizations. Zara operates in the market like any other technological organization. Arteixo is a place in Galicia, where the concerned organization has its serviceable nerve centre. Arteixo, is where the most significant resolutions of the company are made and where the most important procedures of the organization are executed. This also includes the technology related procedures of the organization for the purpose of which the concerned organization has even developed a unique provision. In regards to these central stations, the employees working at Zara takes help of the technology to keep a track of the ambience of its outlets, usage of energy and many more concerns.

Moreover, the use of big data technology is known to be a major reason for the prosperity of the concerned organization Zara. It is due to the use of the data technology, that the concerned organization can even determine the mean magnitude of the dwellers of the surrounding areas of each of their outlets. Furthermore, the organization takes the help of these statistics to find out the measurement of the clothing they are required to transport to all their retail outlets. Hence, it can be said that Zara has the potential to forecast and to find out about the type of commodities they are required to sell. The direct consequences of the application of technology can be seen in any kind of a saving made in the stock of the organization, which is known to be a great expense for any fashion-based organization.

It is the use of technologies that assists Zara in the process of determining as well as producing the products that is required by their target audience. Moreover, they even make use of technologies to bring the commodities into the market at a very great speed and take proper steps to cut-off any expenses in relation to advertisements, wrong steps in case of managing stocks as well as in the process of devaluation. Additionally, Zara is aware of the fact that they require an adequate software to aim at those aspects of its supply chain, wherein it will be able to create a critical impact. In this context, there is no requirement for the concerned technology to be stylish instead it is needed to be operational and should have the potential to resolve issues faced by the concerned organization.

Lean Manufacturing Module

It is very difficult to determine any additional stock or even outdated inventory in the repository of Zara. All the over the network of the distributors, the term lean plays an important role, starting from the raw resources of the company to the complete product on the racks of the concerned organization.

In this context, the stock escalation model is adopted by Zara, with an attempt to find out the total amount of products they are required to deliver to each of their retail outlets all across the globe through the process of consignment which is executed two days in a week. The range of inventories provided to each of its retail outlet is rigorously constrained, making sure that every retail outlet of the concerned company receives only the products they need and not anything additional. This provides a benefit of enhancing the goodwill of the organization and its picture of providing unique product and services to its target customers. Furthermore, it even prevents any scope for the organization to accumulate stocks that is not considered to be popular among the target audience of the company. Such a fast directly seasonal cancellation, in terms of the manufacturing provisions situated near to the supplier’s nerve centre in Spain, allows the concerned organization to transport their commodities very frequently and also in small groups. Furthermore, if the designs developed by the designing team of Zara speedily works towards competing with the new trending styles and fashion, it does not incur an appropriate amount of sale and hence a certain level of loss is caused to the company. Additionally, since the batches are not big, a huge number of unsold products will not exist for the company. In this context, since the experience of failure is over instantly, sufficient amount of time will be there to attempt other unique fashion one after the other.

Supply Chain Management

Sourcing Strategy

Zara sources its commodities and raw resources by adhering to a highly strict societal, environmental as health and wellness related regulations. The concerned organization is known to function with numerous distributers over 44 nations across the globe to obtain majority of their commodities. Around 54% of the repositories of Zara is located near to its nerve station in Artiexo, mostly in Spain, Turkey, Portugal and Morocco. It has been determined to be a complicated procedure for Zara, however the organization adheres to specific norms and they always engage in the process of sourcing in an accountable as well as in an environmental-friendly manner. Zara is constantly working towards determining a highly effective eco-friendly as well as renewable means to obtain their raw resources and also to use a much more hygienic technique to convert the raw resources into the outfits that is required by their target audience. For instance, the concerned organization is dedicated towards assisting in the renewable means of developing cotton, moreover, even the wood-driven materials used by Zara is never obtained from fundamental or even immensely eco-friendly forests (Chu, 2016). The company has also taken an initiative to put an end to any chain that encourages the building of a product cycle wherein the materials would be used in an effective manner and no part of it would be wasted. In this context, the concerned organization has the plan to shift their attention towards a round economy-oriented framework.

Zara has even established the Code of Conduct for their business, which is required to be followed by all their distributors as well as their producers across the globe. These norms and principles consist of the greatest level of protection in terms of the rights of an individual, it promotes the authority of the global workers of the company, their health and well being as well as environment related concerns (Ivanov, 2017).

Trade off

In the context of it being environmentally friendly, Zara doesn’t have a comprehensive perspective. Thus, it is unable to explain to its target audience the key reason of the company using this particular approach in terms of its commercial activities. They have explained their cost-reduction module in terms of being sustainable, however they don’t have a detailed approach to explain the same to its customers. Hence it has the potential to be great trade off for the concerned organization.

Ethical Issues

A viable sweatshirt produced by Zara created a bothersome issue in terms fashion related ethics for the company. In this context, a scrutiny was executed by the Public Eye, which is known to be an investigative team of Switzerland, who concentrated on aspects related to the authority of a human being as well as exploitation. They found a glimpse of such behaviours on a commodity of Zara that is its $29.50 hoodie, which the company was selling as a sustainable commodity and also accepting the same to be produced by the distributors occupying a leading position in its accounting (QUARTZ, 2019). While anticipating the expenses that had incurred in the production of this particular product, it was determined that the salary earned by the labours at all levels is not sufficient to meet their basic requirements and this was against Code of Conducts established by the organization. Moreover, the investigating team claims that the salary which was paid to the distributors needs to be increased twice or even thrice to meet the requirements mentioned in the Code of Conducts of the company.

The norms and principles of Zara in the context of its distributors states that the salary paid to its distributors should be sufficient enough to satisfy the fundamental requirements of their labours as well as their family members or any other requirements of the labours which can considered to be vital for their living. The same as been debated by the Public Eye, that the salary, Zara is paying to their distributors should be increased twice or even thrice to meet these basic requirements.

It's impact on the company’s management was such that one of its representatives stated that such a situation will never be accepted in their organization and if any such issue is determined it would be resolved by the organization. However, the Public Eye anticipates that in order to provide the relevant wages to the distributors as well as their workers, only an amount of $3.52 should be increased for each of the product that is hoodie in this context. The management of Zara was also not very open about its accounting procedures, they never disclosed the accurate calculations for which they had been accused. Furthermore, the concerned organization was not even ready to accept any kinds of calculation by the Public Eye as a part of their investigation (QUARTZ, 2019).

Conclusion on Zara Research Report

Through this report it can be concluded that Zara’s key objective is to offer highly fashionable commodities at a feasible rate to its customers and also to increase the satisfaction level of its customers. The order fulfilment procedure has been selected as a key process of Zara in the context of going ahead with this research and a process map has also been established for the same. In this context, it has been determined that Zara provides the delivery of its orders twice a week to its different retail outlets. Furthermore, it has been determined that Zara has adopted an efficient stock management process and, in this way, they were able to achieve success with their limited stocks. Stock escalation framework was also embraced by the company to be able to provide right size and right quantity of products to its retail outlets.

References for Zara Research Report

Amarkhil, H., 2018. Brand management that creates value to customer: the case of Zara brand. Retrieved from https://vdu.lt/cris/handle/20.500.12259/36241

Bell, D.R., Gallino, S. and Moreno, A., 2018. Offline showrooms in omnichannel retail: Demand and operational benefits. Management Science, 64(4), pp.1629-1651. Retrieved from https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2016.2684

Chu, P., 2016. Excellence in European Apparel Supply Chains: Zara (Doctoral dissertation). Retrieved from https://dspace.mit.edu/bitstream/handle/1721.1/101918/2005_2_Chu.pdf?sequence=1

Macmillan, M.R., 2016. Network methods for inventory management in capacity constrained retail stores (Doctoral dissertation, Massachusetts Institute of Technology). Retrieved from http://oastats.mit.edu/handle/1721.1/104395

Ivanov, D., 2017. Simulation-based single vs. dual sourcing analysis in the supply chain with consideration of capacity disruptions, big data and demand patterns. International Journal of Integrated Supply Management, 11(1), pp.24-43. Retrieved from https://www.inderscienceonline.com/doi/abs/10.1504/IJISM.2017.083005

Tantalo, C. and Priem, R.L., 2016. Value creation through stakeholder synergy. Strategic Management Journal, 37(2), pp.314-329. Retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.2337

QUARTZ. 2019. Zara’s sustainable sweatshirt raises troubling fashion ethics issues. Retrieved from https://qz.com/quartzy/1752597/how-a-zara-shirt-raises-ethical-issues-in-sustainable-fashion/

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