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Operations Management at ZARA. Challenges and Recommendations

Term Paper 2011 9 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Table of Contents

Table of Figures

1. Introduction

2. Operations Management
2.1. Definition of Operations Management
2.2. Meaning of Operations Management

3. About ZARA

4. ZARA Vertical Integrated Supply Chain
4.1. Design and Production
4.2. Procurement
4.3. ZARA’s Vertically Integrated Supply Chain
4.4. Inventory Management
4.5. Low marketing/ advertising cost
4.6. Low marketing/ advertising cost

5. Combination of Strategy and Operations

6. Financial performance indicators

7. ZARA Challenges

8. Recommendations

9. Conclusion

List of References

Table of Figures

Figure 1: Operations Management, Input-Output

Figure 2: Improvement, Design, Planning and Control

Figure 3: Summary of business and operation strategies

1. Introduction

The present essay deals with the operations management of ZARA, a Spanish chain store. Also, it will be shown how the ideas of operations management are put into action at ZARA. Finally, the recommendation and conclusion summarizes the results of the essay and offer suggestions for improvement.

2. Operations Management

2.1. Definition Operations Management

“Operations management is about the way organizations produce goods and services. Everything you wear, eat, sit on, use, read or knock about on the sports field comes to you courtesy of the operations managers who organized its production. Every book you borrow from the library, every treatment you receive at the hospital, every service you expect in the shops and every lecture you attend at university - all have been produced.” (Slack/ Chambers/ Johnston, 2010:2)

2.2. Meaning of Operations Management

The definition of Operations Management is a direct reflection of how it has become a key factor in overall organization, as the main function of organizational maintenance. An operation is essentially a series of transformations.

illustration not visible in this excerpt

Figure 1: Operations Management, Input-Output.

http://www.sussex.ac.uk/Users/dt31/TOMI/images/in-out.gif

The functionality of Operations are:

- Creation, design, and actual products
- Effective control of operations systems and management
- Continually searching for chances to advance operations.

illustration not visible in this excerpt

Figure 2: Improvement, Design, Planning and Control.

http://www.sussex.ac.uk/Users/dt31/TOMI/images/om-model.gif

3. About ZARA

The Spanish retail company, Inditex SA, has chosen ZARA, who has had an exceptional performance record in recent years, as it’s forerunner in the soft retail market. (Armstrong/ Kotler, 2010: 390).

The creator and founder, Amancio Ortega Gaona, built the foundations of ZARA in Galicia, Spain and it is now internationally recognized as the second largest clothing chain world-wide. The franchise is owned by Inditex, INdustrias de DIseño TEXtil (Textile Design Industries, Inc.).

4. ZARA’s Vertically Integrated Supply Chain

Having a well operated chain of supply has increasingly become a critical element for companies to possess.

“As defined by the world famous, Institute of Supply Management Inc., USA, SCM is the design and management of seamless, value added process across organizational boundaries to meet the real needs of the end customer.” (Shina, 2009:13).

In order to properly analyze the chain of supply for ZARA, for ascertaining the keys to success, certain aspects must be dissected, for example: timing schedules, information about suppliers, inventory management, management of logistics, information systems, and management of materials. This information, along with other considerations, will reveal how ZARA has the ability to produce high-quality products, at such competitive prices, in comparison to it’s competitors. (Basu/ Wright, 2008:158).

4.1. Design and Production

ZARA has the ability to maintain and push the boundaries of fashion trends, and yet still adhere to all demands within an integrated system of a controlled design program. Because ZARA is solely responsible for the design process of its own products, the concurrent method of designing, therefore, involves all of the designers, market specialists, commercial teams, designers, market specialists, procurement teams, and the entire staffing, with regularly updated assessments from store management.

4.2. Procurement

ZARA has not participated in majority outsourcing, in comparison to its peers, and, therefore, 63% of their own products are self-manufactured. ZARA directly benefits from in-house productions simply because of the freedom to choose the frequency, overall amount, and the different varieties of styles that are selected for new products.

4.3. Information Systems

The information systems at ZARA are essential, with expediency and efficiency as the major components, to their communication strategies.

4.4. Inventory Management

Inditex, ZARA’s holding company, avoids stocking up of inventories, from raw materials to the final customer, as a means to reduce any unnecessary costs as a percentage of annual sales. In comparison to its global competition, e.g. H&M and Benetton, ZARA maintains the lowest inventory.

4.5. Centralized Logistics and Distribution

Throughout varied steps in the chain of supply, ZARA regulates and re-evaluates for optimal results across individual steps of the supply chain, which can occasionally result in extra costs.

4.6. Low marketing / advertising cost

An average fashion retailer will spend a base percentage of 3.5 of revenue just on advertising alone, in contrast to Inditexs spending of 0-0.3% based on spoken recommendations.

Because of this natural rhythmic progression on every level of the chain of supply, this process of predictability has even affected ZARAs regular customer base. As a result, frequent customers have become aware of how to take advantage of new shipments to guarantee themselves the opportunity to select from the newest and latest of designs.

[...]

Details

Pages
9
Year
2011
ISBN (eBook)
9783668174085
File size
1011 KB
Language
English
Catalog Number
v316105
Institution / College
Prifysgol Cymru University of Wales
Grade
B
Tags
operations management zara challenges recommendations

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Title: Operations Management at ZARA. Challenges and Recommendations