Module Code: ILP 305
Module Title: Strategic Operations Management
Date Due: 12th January 2009
1.0 Target market
According to Zara (2008) and Mintel (2008) Zara core customers’ group is 20 to 40 years old. The target market that Zara is women swear, men swear, children swear and TRF (Trafaluc) teenage range. Generally women swear is very well though through and cohesive, aiming at a 20 to 45 years old female. Men swear customer age group is 28 to 40 years old. Children swear is a bright, colourful, in particular, and very determined to boys and girls. TRF (Trafaluc) is a very bright, colourful, interesting, it is interesting to young girls (10 to 16 years old) focused on the scope of casual / urban streets and casual wear.
Along with e-Works (2006) women accounted for about 58 percent of sales, 22 percent of men's, children's wear 20 percent.
2.0 Critical success factor
Consistent with Wikipedia, the free encyclopedia (2008) critical success factor is an integral part of a mandatory organization or project to complete its mission. They are the key factors or activities so as to ensure the success of the business.
The critical success factors of Zara are:
1. Low cost
Along with Cable News Network (2001) the other fashionable clothing retail merchant expenditure average 3.5% income propagandize its product, but Zara's parent company Inditex expenditure is only 0.3%. Zara established a large-scale brand is wanted to satisfy the market demand. Zara in
2. High fashion
In proportion to Hill, T. (2005) Zara is able to forecast the styles and colours will be in demand for the upcoming season. Zara store managers to exercise these trends and changes in the type of integrating them into their laptop computers last Saturday in the state of knowledge, they will arrive early next week. Guest made a journey of a Zara store in the rain Saturday morning to see what new and exciting style in this week.
3. Fast moving operation
Along with Cable News Network (2001) Zara can react quickly to market changes. Zara only need two to three weeks of the new time line, but their competitors, such as the Gap and H & M needs to take nine months.
Consistent with Hill, T. (2005) that is because Zara is one very formidable between relation, store manager and the central design team is located in A Coruna in its headquarters. They were responsible for the e-store, so that they can analyze and assess real-time basis. This allows them to ensure that they are capable of adapting quickly to customer needs and aspirations. It can be the latest trend of the product in less than 15 days and delivered them to the stores twice a week. Zara can get the new store design, and as soon as possible in order to ensure that our customers come back to see what new content.
Along with Bokee (2006) by Zara transporting velocity, stores in Europe can receive the cargo within 24 hours, stores in
4. Rapid expansion
According to Hill, T. (2005) growth retail business Zara quickly in world. Zara opened the first shop in 1975 in Lakeluniya. In 1989, Zara started its international expansion. Zara already successfully sold it to the overseas when the global formula, in many other clothing enterprises, the low jobbing market already discovered the global economic growth difficulty. For instant, Next is extraordinary, but the struggle to export their specific format. Zara has creating a simple and singular message for all their customers. For example, the price tag stored in a huge and rich and varied, with the registration of the ribbon more than a dozen countries, each accompanied by the local currency is the same as the price of the project all over the world, from
5. Vertical integration
Along with Cable News Network (2001) and According to Hill, T. (2005) Zara complete control over every part of the business. Zara designs, manufactures and sells itself. This vertical integration let Zara become successful to achieve low cost, high fashion and fast moving operation.
6. Dependability
According to Hill, T. (2005) Zara can perform high dependability. For example Zara store managers received information through the notebook computer display images of products, can be ordered. Based on sales in the past few days and the trend appear to be, they decide which products, as well as how many people have ordered. In the Corporation, a special section for each country and store managers would usually talk to them once or twice a day, 3-5 days, and times of orders. The company's commercial section, and then with the designers and factories to ensure that the products meet the needs of local customers each store. Although there is a trend to set up the initial framework at the beginning of each season, is continually modified to respond to the response of the scope of each customer.
7. Flexibility
Consistent with e-work (2006) based on the characteristics of the product, products running the length of time, product demand and the number of speed and etc requirement to decide whether production or outsourcing. Along with Hill, T. (2005) Zara buy a lot of fabric but cut and dyeing it in last minute.
3.0 The business model
Consistent with Pressdossier (2007) Inditex and its business model is characterized by a high degree of vertical integration. It covers all stages of the fashion process: design, manufacturing, logistics and distribution management of their own stores. It has a flexible structure and strong customer focus in all its business areas.
The key factor of Zara is the organization's stores, a well-designed space to ensure customers feel comfortable and found that the concept of fashion. This is where we obtain the necessary information in order to adapt to meet customer demand.
The key factor of this method is able to satisfy customers’ desire in shortest time possible. For Inditex, time is a major consideration, far outstripping the production costs. Vertical integration will enable us to shorten turnaround time and achieve greater flexibility and reduce the stock at a minimum, and reduce the risk of the way to the maximum extent possible.
3.1 Design
In relation to Business world (2008) Zara is a fashion imitator. It focuses the attention in the understanding fashionable commodity, its customer need, then provides them, but promotes the forecast season tendency fashion clothing show, and adopts the similar channel influence this is the fashion industry tradition.
Along with Hill, T. (2005) and e-work (2006) the Zara designer's primary mission is not to create a product but rather to guide the decision-making level in the arts under the guidance of re-combination of off-the-shelf products, even design it same but change the colour and patterns. The way that Zara mainly uses to search new fashion trend will show are:
1. According to Hill, T. (2005) and e-work (2006) the upscale brand fashionable clothing company will promulgate vogue information in the first 6 months before sales season. Generally the autumn and winter fashion will release in at March, and the spring and summer fashion will released in at September. The fashionable clothing company will promulgate their new style clothing in the Milan, Florence, New York, London, Tokyo and etc world fashionable centre, Zara designers will get the afflatus from this top designers and top brands through attending the fashion show.
2. As said by e-work (2006) Zara has a lot of purchasers who are fashionable sense of smell in the round the world, they are responsible to purchase the season popular products from the top brand or competitors, and then they will rapidly sent the sample to the head office to do the ‘reverse engineering’.
3. According to Hill, T. (2005) Zara designers will search new fashion trend from fashion magazines, fashion show, cafes, restaurant, bars and etc. for example, along with India Supply Chain Council (2006) Zara can quickly copied Madonna’s outfit in her first concert in
4. As said by e-work (2006) Zara global retail through information system to return to sales and inventory information, provide the information to head office about the sales volume of the product. Beside that according to Cable News Network (2001) Zara customers have direct input to what stores sell their feedback back to the designer. According to Hill, T. (2005) the store managers also will provide suggestion.
Consistent with e-work (2006) Zara head office has a team (including designers, purchasers and market analysts) to discuss about future fashion trend, pattern, colour and selling price and etc after receive the information. The designers will design the new clothing after the team reaches a consensus. After depth discussion and revision the team will discuss the selling price and decide whether to produce the clothing or not.
3.2 Just in time manufacturing and sourcing
According to Slack, N., Chambers, S. & Johnston, R. (2007) just in time is a methods continue to focus and far-fetched to solve the problem in the production and reduce inventory. In the following we can understanding how Zara achieve just in time strategy.
Consistent with e-work (2006) Zara will based on the characteristics of the product, products running the length of time, product demand and the number of speed and etc requirement to decide whether production or outsourcing. Zara in Spain has 22 factories, about 50% of the product through its own factory to be completed, other 50% of the product through 400 external cooperation suppliers to complete, these suppliers have 70% to be located at Europe, the remaining are mainly located in Asia.
Zara will decide to outsourcing if they cannot obtain effective transport and quality assurance or production capacity limited. If decide to produce themselves, Zara will direct produce it if have ready-made fabrics. If do not have ready-made fabrics they can decide whether purchase fabrics which has been stained or has not been stained. General Zara will produce only the next quarter is expected to sales of 15%; it can reserve a lot of capacity for the current best-selling product replenishment.
According to Hill, T. (2005) Zara will hold 50% fabric which has not been stained in stock and dyeing it at last minute to respond quickly to suit changing market trends.
Along with e-work (2006) all sews works is sewn completely by the outsourcing to the local external cooperation the factory. Zara for these plants to provided the instruction which a series of easy to carry out, generally at a period of time a factory focus on makes a model of clothing to reduce the mistake. This operate model let Zara complete their produce in a few days but other company need a few months. Zara head office in A Coruña approximately some 500 such external co operations sew the factory, they are nearly specially for Zara work, Zara Corporation closely supervises their work flow to ensure product quality. After external cooperation the factory complete sewing the clothing they will sent it back to Zara to ironing, labelling, packaging and inspecting.
3.3 Centralization distribution and high speech logistics
According to Inditex (2008) and Pressdossier (2007) quick response is one of the success factors of Zara.
Along with Bokee (2006) in order to guarantee that each order form punctual arrives at its destination accurately, Zara has not taken more time-consuming and error-prone manual sorting methods but use laser bar code reading tools (error ratio less than 0.5%). Concrete skill which needs besides and the current post, staffs also accepted the IT skills, English language and etc training to upgrade their skills and experience.
In order to speed up the flow of logistics, Zara head office has two-lane highway through distribution centres. Usually after receive the order form the cargo will be moved away within 8 hours, according to Inditex (2008) and Pressdossier (2007) Zara logistics centre provide it with goods stores twice a week.
Consistent with Bokee (2006) by Zara transporting velocity, stores in Europe can receive the cargo within 24 hours, stores in
The different between Zara and other competitor in product distribution stage are Zara is more emphasis on speed, because if the clothing is delaying arrive to the stores, the clothing will be outdate, other clothing enterprise pays great attention is the cost. The main function of Zara logistics centre is cargo turnover not cargo storage. Most of the clothing company accumulation of large quantities of goods. Zara stores all basically straight from the distribution centre allocation model. Most of the clothing enterprise will build a subsidiary and warehouse, it lead them accumulation of large quantities of goods. The high frequency, high speed, low volume, various styles was ensured Zara stores can achieve high sales volume and low inventory.
Consistent with Inditex (2008) in order to raises the efficiency each chain has its own logistical centre are：
- Zara Logistical Centre in Arteixo, A Coruña (Zara Logistical) and
- Pull and Bear Logistical Centre in Narón, A Coruña.
- Massimo Dutti, Bershka and Oysho Logistical Centre in Tordera,
- Stradivarius Logistical Centre in Sallent de Llobregat,
-
3.4 Retail sales
Consistent with Hill, T. (2005) each Zara store managers will send sales report to head office. According to Bokee (2006) and the store managers will issued two times replenishment orders to head office based on current inventory and within the near two weeks sales expect.
Along with Bokee (2006) after the head office attain the stores sales, inventory and orders and other information, it will determine whether the products are in great demand or overstocking. If the products is unsalable Zara will cancelled the original planned production. Zara able to predict the risk control at the lowest level because Zara only produce expected production volume of about 15% before the quarter sales. Other clothing companies unable to predict the risk control at lowest level like Zara because they were produced the next quarter shipments of 45-60%. If the products have more than 2-3 weeks can not selling out, it will be delivered to a country to carry on the centralized processing. After a sales season, Zara has a maximum of not more than 18% of the clothing is not in line with consumer tastes, Zara industry average standard about 35%. In 2001, Gap's discount merchandise sales accounted for 14%; H & M for 13%, Zara is only 7%. In one year Zara only in two specific limited period of time price-cutting sales, is generally more than 15 percent, but is not the clothing industry commonly used method of continuous price cuts, finally an average only 30 to 40 percent. If the product sells well and the head office has the extant fabric, Zara will rapidly through highly effective supply chain system supplement production and rapid replenishment in order to capture sales opportunities. Zara will stop production if do not has the extant fabric. Generally the largest-selling products will only replenishment for twice. It can reduce the homogenization of products production and meet the market fashion, the demand for personalized. According to Hill, T. (2005) the customer possibly makes the decision which in the scene purchases, but not hesitates next time will again be buying, because they know that they may be can not find out it in the retailer.
Along with Cable News Network (2001) the other fashionable clothing retail merchant expenditure average 3.5% income propagandize its product, but Zara's parent company Inditex expenditure is only 0.3%. Zara believe that their stores are the best advertising.
According to Bokee (2006) in shop selected location aspect, Zara is generally the choice high-end commercial and busy transport hub, such as Paris Champs-Elysees,
Along with Bokee (2006) Zara is fastidious in display window design and shop commodity combination exhibition aspect; these are won a lot for its positive image. Zara storekeeper will always re-display the products to maintain the freshness. They put the jacket, trousers and luggage together, so that customers can easily tempted to buy a set of, it also can let customers experience the purchase joyfulness of one-stop shop style. Each of the Zara clothing production is very small, in the shop very little saw is redundant the type, it is easy stimulates customer's purchase desire. That is because customers know if they do not buy it at the moment they loss this opportunity. The Zara superior geographical position, distinctive window design and particular store display, these causes Zara not to have the advertisement also to have the huge attraction.
Some of the peoples were summed up Zara is "first-class image, the second-rate production, and third-rate price". First-class image is because the superior geographical position, distinctive window design and particular store display. Second-rate production is because has not used the most apex brand such upscale surface supplementary material. Third-rate price is because Zara no expensive design, advertising and etc cost, raw material cost is also quite low, its product fixed price only then the designer brand clothing one-sixth to one quarter are even less.
Zara it has broken the traditional clothing brand operation pattern completely, it take a completely different type of damage to the road of innovation, Zara use highly efficient in its operation in order to brand as the core operation of collaborative supply chain system. Zara duplicates the fashion through the fast product organization and the design system，it will according to the sales situation to dyes the white fabric, produce and delivery delays manufacturing strategy, concurrent engineering strategy, reduce the volume of production, part of the outsourcing and other strategy to speed up the procurement and production process. Zara use tacit understanding with efficient logistics to speed up the distribution process. Through timely and accurate sales message rapid feedback adjustment actuates the entire supply chain's each link to coordination “fast” the operation, thus greatly reducing the entire supply chain bullwhip effect and projections are not allowed and high inventories. Zara Chief Executive officer Castellano believe that in the fashion industry, inventory is like food will soon turn bad, everything we do is to reduce the reaction time.
Zara take the consumer as a centre, shorten the lead time, to the supply chain at various links "squeezing" time and eliminate potential bottlenecks, reduce or eliminate of those who can not bring value-added component, small quantities and more varieties to create a "scarce", an inter-departmental communication and coordination to respond quickly to meet market demand, so as to enhance the brand value and competitiveness.
4.0 Lean strategy
According to Slack, N., Chambers, S. & Johnston, R. (2007) lean strategy is towards the elimination of all waste in order to develop an action is faster and more reliable, the production of higher quality products and services, first of all operating costs low.
Consistent with e-work (2006) in order to maintain the quality, speech and waste Zara will decide to outsourcing if they can not obtain effective transport and quality assurance or production capacity limited. General Zara will produce only the next quarter is expected to sales of 15% and according to Hill, T. (2005) Zara will hold 50% fabric which has not been stained in stock and dyeing it at last minute to respond quickly to suit changing market trends.
According to Bokee (2006) Zara invest more than 100 million euros in its logistics centre and related facilities to raise the speech. Zara also prevent storage of large quantities of goods to reduce the overstocking risk and warehouse cost.
Consistent with Hill, T. (2005) each Zara store managers will send sales report to head office. According to Bokee (2006) and the store managers will issued two times replenishment orders to head office based on current inventory and within the near two weeks sales expect. Zara able to predict the risk control at the lowest level because Zara only produce expected production volume of about 15% before the quarter sales. After a sales season, Zara has a maximum of not more than 18% of the clothing is not in line with consumer tastes, Zara industry average standard about 35%.
5.0 Conclusion
According to Business world (2008) the Zara model in the customer has in the fashion appetite market a as if better operation, such as,
Along with Journal of Textile and Apparel, Technology and Management (2006) and Amanda Craig, Charlese Jones and Martha Nieto (2004) Zara is unable to seep to US's clothing market. This possibly is because
According to Amanda Craig, Charlese Jones and Martha Nieto (2004) Zara's strategy has also created some weakness. Its vertical conformity has more merits to compare the shortcoming, what is important must acknowledge its limitation. The longitudinal integration often causes to be unable to obtain the economies of scale, this means that they are unable the superiority which obtains, produces the massive cargos the discount rate. The high cost, then causes Inditex Company. Inditex also supports their high capital spending chain, and can, in the finance returns to them “outside the technology and the skill, existing organization” (David 145). Zara rapid and promotes the expense which the new product brings to increase frequently as well as. They have the high research and the development cost. They also have the elevation cost, because transforms unceasingly the production technology, creates the different clothing series. This also means that the staff must undergo training, with the aim of using the new technique of manufacture, but this causes the expense to increase. The traditional retail merchant will not meet the high cost in all these domains.
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