Supply Chain Management and Zara

Zara Case Analysis Operations Management MBM1110 T open of Contents executive Summary3 Introduction3 Outstanding Operational strategiesLayout4 Forecasting5 Product demeanor calendar method of birth control5 Product Design and Supply Chain ManagementMarketing5 Just in cadence6 Vertical Integration6 Incorporation of Bershka refinement7 Bibliography8 Executive Summary Zara, a flagship chain fund of the Inditex group owned by Spanish business superpower Amancio Ortega is one of the top names in the mid- setd room persistence. Zara was established in 1975 in Acoruna, Galicia, Spain and has expanded to 1395 stores only across the globe.It is said that Zara, un bid any other sell organization in the c kettle of fishhing manufacturing takes just two weeks to design, develop and get a new product into the stores. However, the sell industry has a six month average to do so. By using its operational strategies in a genuinely successful manner, Zara is able to launch 10,000 new produ cts e precise year. This report impart discuss the operational strategies that Zara uses which whole kit and boodle as graze winners and order qualifiers. It also discusses the strategies that they use which put to works them one of the top names in the fashion industry.Introduction Zara uses very innovative strategies for its business. By doing so, Zara is able to avoid outsourcing its manufacturing process to low cost and developing countries like most of the other companies in the industry. Zara does not even expend a lot of money on foodstuffing, hence increases its profit margin. It however does spend on the layout of its stores. Unlike many of its competitors, Zara is a vertically merged retail merchant since it controls most of the step in it submit chain by designing, producing and distributing itself.This ridiculous business cast has resulted in the emergence of one of the most successful retailers in the fashion industry. Terry Hill in 1993 came up with the term s ? order qualifiers? and ? order winners? , against which it is believed that manufacturing outline should be determined (Add Reff. Hill, T. (1993), Manufacturing Strategy Text and Cases, second ed. , Macmillan Press, London. ). Order Winners be characteristics that serve as a competitive advantage for one firm all everywhere others.Order winners enable the customers to choose a particular firms goods and services over the competitors. Order winners in this case for Zara be y High-end fashion at a reasonable price Even though Zaras products are highly fashionable, they comparatively cost guidance less compared to other big names in the fashion industry Supply Chain Management y As discussed below in the report, due to Zaras outstanding SCM, it is able to order order the latest in fashion every two weeks for a reasonable price. Thus, are able to offer something to their clients that none of their competitors can.Order qualifiers are the competitive characteristics that a firm moldiness take advantage of in order to be a viable competitor in the market place. To earmark order qualifiers, companies need only to be in par with the competitors, however, in order to provide with order winners, companies need to be way better than its competition. Having said that, order qualifiers are in no way less important than the order winners, in fact, they both complement each other. In Zaras case the order qualifiers are y Quality They offer good quality products at comparatively cheaper price compared to the competition.Outstanding Operational strategies While Zara maybe a very successful high end retailer, the main facet of Zara that has got academics buzzing is its completely novel approach to its trading operations and supply chain for a retailer in high-end fashion. Layout The main intention of a layout strategy is to develop an economically viable layout that will be in line with the beau mondes Competitive requirements (Render & Heizer, 2005). Zara invests a lot in their store layouts to make sure that their store maintains the fresh and trendy look.They have a testing facility close to their qualifying office in Spain, where they test different types of store layouts on a regular basis. Zara re mannikins each of its stores every five years in order to keep up with the current trends (Zaras Business Model, 2010). The entire layout, including the furniture and the window displays are all designed at the testing facility in order to maintain a standardized image globally. A flying team from the head office ordinarily flies down to a new location to set up the store. Their motto is that they want the store managers to focus more on sales than anything else.Zara can afford to do this since they do not spend lot advertising and marketing campaigns. Forecasting One of Zaras major(ip) competitive advantage over other retailers is it technique of forecasting. Unlike, other retailers, Zara has developed its business model around reacting pr omptly. Zara focuses heavily on its forecasting effort on the amount and the type of fabric it will purchase. Zara tends to do this since its usually cheaper to determine mistakes on raw fabric as compared to a sinless product. It also uses the same fabric to turn something else (Render & Heizer, 2005).Zara usually buys un-processed fabric and colors it according to the season based on markets agile need. By doing that, and by combining it with a high-speed garment design & production process, its able to the deliver what the market is actually looking for at that time. Product life cycle In a typical Product Life Cycle Curve of the fashion retail industry, sales decreases as products make a motion across the times line. However, Zaras Product Life Cycle Curve is totally the other way round since it is in a high fashion industry and it offers products that are of the latest trends and designs with a life of maximum 5-6 weeks.Product Design and Supply Chain Management The entir e process of product design is very unique compared to its competitors. Commercial managers and designers at Zara start working on the design of the fabric, the costs, raw material, selling price etc as soon as they receive the instructions from the Zara stores. Instructions are issued to cut appropriate fabric as soon as approvals are receive. All the raw materials are distributed for assembly to a mesh of small family owned businesses that are mostly in Glacia and in Northern Portugal.Unlike its competitors, Zaras high-tech dispersion services system ensures that there is no style lying around at the head office. The finished products are quickly cleared with the distribution centers and are shipped to the stores within 48 hours. Deliveries are received twice a week by each store. This entire process of product design and supply chain management ease ups Zara a huge edge over its competitors. Marketing Zara has a very unique approach to marketing compared to the other big pla yers in the industry.Unlike its competition, which spends 3-4 % of total revenues on marketing and advertising campaigns, Zara spends 0. 3%. This is a major competitive advantage over its competitors. Zara strategically locates all of their stores in prime retail districts for visibility marketing. As mentioned earlier about the product development cycles, customers are rendered immune to bawl out Zara stores very often since new items are stocked weekly and are often not re-stocked. Zara creates a feeling of scarcity within the customers, and this makes them come back to the store frequently and make purchases.Just in time Just-in-time (JIT) is a strategy that is apply for roll management in such a way that it helps a business improve its return on investment by reducing in-process inventory and the associated carrying costs (Shingo, 1989). Zara follows a true JIT inventory system. Its inventory system is influenced by the pull of the customer instead of a repel from the design er. This helps Zara to have a competitive advantage over the competition since it has a very low inventory to sales ratio. Vertical IntegrationZara is a very vertically integrated go with by working through the whole value chain and is highly capital intensive. This is a unique model that let the company develop a strong merchandising strategy that led it to create a unique model of fast fashion system (Craig, Jones, & Nieto, 2004). Incorporation of Bershka Most big brands in the world regardless of the industry they are in usually have more than one brand name. In the fashion retail industry, Gap Inc. Owns few big names as Gap itself, Old Navy, Club Monaco, etc. It is a strategy used to penetrate different segments of a market and to increase the market share.It also tries to give consumers an impression that different brand names have something different about them. Companies also use the is strategy to create a specific brand for each and every market they try to target. Inditex has also used the strategy of penetrating different segments of the market by creating a different brand name for each segment (Inditex Annual Report, 2008). Inditex owns different brands such as Zara, Massimo Dutti, Pull and Bear and Bershka which tends to cater to different markets. coming together all of these brands or any two brands into one name would not make a lot of business sense for Bershka.The brand Bershka was launched by Inditex in the year 1998 with an aim of targeting the unfledged fashion-conscious crowd. Incorporating Bershka into Zaras operations would not be a very good strategic move for Inditex. Bershka currently owns 638 stores in 41 different countries, hence incorporating that in to Zaras operations would raise lot of challenges for Inditex. Since Bershka and Zara both have a very different target market, formulating strategies for both of these firms combined will definitely effect the operations of the company in whole. Both brand names have established different clientele for themselves.Bershka currently targets the young and fashionable and Zara targets the fashionable crowd as well, however it has different demographics for it. Combining these two brands into one will result in loss of loyal customers and susceptibility also impact the company negatively. Theres no guarantee that Bershkas existing clientele will shift to Zara, in fact they might just end up losing majority of that segment. Zaras market share might increase by a very small percentage however Bershka might end up losing a major chunk of its current clientele, which in turn will not be good for Inditex in whole. ConclusionRead also Advantages and Disadvantages of Administrative Management