Solution
Anju Lata answered on
Feb 26 2020
Zara’s Operating Model 18
SUPPLY CHAIN MANAGEMENT/ OPERATIONS MANAGEMENT
CASE STUDY
ZARA’S OPERATING MODEL
Author:_____________________
Class:____________________
Professor:______________________________
University, and State____________________________
Date:___________________________
TABLE OF CONTENT
1. Introduction 3
2. Retailing 4
i. Core Competencies
ii. Operational Management Issues
iii. Operations Strategy
3. Design 6
i. Zara Vs. Other firms
ii. Forecasting & Planning for other firms
iii. Product Development Strategy of Zara
4. Production/Sourcing 10
i. Performance Objective
ii. Capacity Strategy
iii. Quality Management Strategy
iv. SWOT Analysis
5. Distribution 13
i. Speed
ii. Operations Resources
iii. Supply Chain Risk Issues
6. Zara Online & the Future 15
i. Comparison with other firms
ii. Technology Strategy for future
7. Conclusion 18
8. References 19
INTRODUCTION
Zara is a leading cloth retailer having more than 2200 stores spread across 93 countries. The Company is known for its efficient production and making available the new product within 2 weeks in stores. In 2015, Zara added 65 stores and 50 Home locations in its network. Spain is biggest host to its 436 stores, next coming China with 193 stores, France (129), Japan (100),Asia (553 stores and 105 Zara homes), Europe (1351 stores and 390 Zara homes), Italy (100) and US (309 stores and 57 Zara homes). Zara also launched its online platform in 2017 for Singapore, Thailand, Malaysia, and India (Inditex Annual Reports,2016).
Source: www.fo
es.com/companies/zara
RETAILING
Core Competencies
i. The Products satisfy the demand of Fast changing Fashion Trends. Zara is the fastest
and producing latest design pattern just within two weeks.
ii. Stores are opened at the main locations, chosen after thorough market research.
iii. Pleasant and spacious internal retail store environment.
iv. Emphasize on the training of sale staff and internal promotions rather than advertisements.
v. Stores have a low level of inventory storage, involving regular updating of new designs.
The VRIO Analysis of Zara illustrates its products as Valuable, Rare, In-imitable and utilized by Organizations, extensively. The performance is above average and the company is expected to maintain its Competitive Advantage in years to come.
Operational Management Issues
They manage their accounts, finance, and other related operations through ERP (Enterprise Resources Planning) and implement CRM (Customer Relationship Management) to control its performance in the market. The company emphasizes a great deal on training its sale executives. Improvements in the day to day sales are compared to the last year sales on the same day (Badia, 2009).
Operations Strategy
i. Active Utilization of Stores: The Company utilizes its stores actively offering spacious environment inside. Zara changes the layout of stores every two weeks. Mostly the stores are located at the main central location of the cities. They do not spend huge amounts on advertisements but rather use their stores as a means of
and publicity. They use IT to collect customer data and feedback in the stores.
ii. Fast designing and Production: The Company produces new trendy women and men fashion within 2 weeks time starting from market research to the sale in stores while others take 2 months. The choice of latest trend is based on market research which takes around 1 day. They design the product according to the needs and transport smaller fractions to its various stores.
iii. Limited Quantity Production: The Company designs products in small quantity so they don’t need large inventories. It increases product scarcity and demand. Due to this, all the clothes are sold off immediately as the customers know they might not be able to get that product again. It increases the frequency of customer’s visit to the stores to keep a check on the latest trend. The low production leaves the Company with very few unsold items that could be sold on discount at the end of season sale. Items that remain in the stores unsold for more than two weeks are taken off and sent to other stores nea
y (Oshea,2012).
iv. Product Differentiation Strategy: The Company designs different products like Shirts, Jeans, Jackets, Skirts, Dresses, Bags, Perfumes, Belts, and Shoes for Men, Women, and kids. The Company produces women products to the two third quantity and rest of one-third quantity composed of kids and men products. The products are relatively low cost.
v. Stores at Prime locations: The Company utilizes maximum benefit out of the geographical prime location of the store, to sell their popular products fastest possible way. They generally keep the Production and Designing facility close to each other. Moreover, all the stores are also not far off from each other. They hire the staff according to the geographical location of the store, to utilize the advantage of attracting local community.
DESIGN
Zara Vs Other Firms
Other firms emphasize only on the cu
ent season’s designs whereas Zara works simultaneously on next season’s and cu
ent season’s outfits. It coordinates with research & development and feedback from other stores to analyze buying behavior and newer trends. Other firms collect feedback from customers through online surveys and other modes while Zara collects feedback from its own stores. Other companies may have designers and producers from other locations and countries. They may outsource the dresses and clothes. Zara has its own dedicated designers, production houses, CAD Robotic designers who work 24x7 in cutting and dying the cloths. Semi-stitched clothes are
ought for Sewing to Subcontractors who are located nea
y. Market specialists remain in constant contact with Store Managers through Skype or telephones, discussing sales, orders, and newlines. Store...