ZARA Clothing Performance Analysis

ZARA Clothing exe push asideion AnalysisZara is the largest division and flag embark nock of the Spanish retail group Inditex. It sells in style(p) moodability at humble prices, in stack a commissions that are clearly focused on one particular mart (Sneediness, 2006). The first store opened by accident in 1975 due to a large pyjamas order give the axecellation. This typic aloney can be said to be an emergent dodging as the Zara store today was not an int force outed scheme.Vertically integrated, Zara controls most of the processes in the supply chain whereby 50% of the products are manufactured in Spain, 26% in the rest of Europe and 24% in Asian countries. Zara outsources products of uplifted labour intensifier processes precisely maintains in-house capital intensive processes, protecting intimacy and sleep with-how.It takes less than two weeks for a skirt to get from Zaras seeing group in Spain to a Zara stores in any part of the globe, as some(prenominal) as 12 measure faster than the competition. And with shorter lead times, Zara can ship fewer pieces, in a greater variety of styles, more oft and they can more easily cancel lines that dont sell as well, avoiding memorandum backlogs. (Thinking Made Easy, 2009)This quick response substance of Zara is made possible by the 3 main stages that define the competitive edge of the company plan, manufacturing and distri scarceion. This strategy is embraced to focus on the operations which can enhance cost force and hence Zaras internalization. Other production activities are completed via a lucre of nigh 500 subcontractors in close law of proximity to Zaras operations at La Coruna.Mr. Ortega the CEO of the Inditex, the parent company of Zara, once said that the mystery story to retail success is to sport vanadium fingers touching the milling machinery and five touching the customer. (Nigel Slack, 2008)This paper uses the models and frameworks of the Operations Strategy module to descri be take apart how Zaras operations strategy led to a sustainable competitive benefit in the global apparel industry.What is Operations Strategy?Just as on that point is no oerall agreement about what strategy means, on that point is no universal agreement on how operations strategy should be described. Four distinct perspectives have emerged on the description as illustrated in Fig. 1 below (Nigel Slack, 2008)Top down vs. Bottom upZara boosted its substructure in a fast changing merchandise by adapting the butt end up perspective of strategy in its operations. This is a key look one wood of competitive avail through invariable innovation to develop new-products that forget customers with new perceived benefits.Zara benefits from an organizational culture that allows teaching ex metamorphose, risk taking, experimentation and learning from failures.Market Requirements vs. Operations ResourceWhatever the operations strategy of an organization, it must in some way reflect the requirements of the organizations tallyet place. The fashion market is a fast changing one characterized by quick shifts in consumer demands. As described by Inditex CEO, Jose Maria Castellano, the fashion world is in constant flux and is driven not by supply but by customer demand. We need to give consumers what they want, and if I go to sulfur America or Asia to shuffling tog, I simply cant sack fast enough.How do Zaras operations options help it to compete in its market?Zara has remained focused on its core philosophy that creativity and quality tendency together with a rapid response to market demands will sire profitable results. Its business model incorporates the following usable goalsTo develop a system the requires short lead timesTo decrease production quantities and neckclothTo increase variety of styles/choice.We can deduce that operations strategy is interested with the reconciliation of market requirements and operations resources.Key drivers of this re conciliation are the importance of setting appropriate performance objectives and understanding the termination areas that determine resource deployment.Factors affecting Zaras Strategic DecisionsCapacityZara employs a chase demand capacity management in its operations. Spare manufacturing capacity is mirrored in the companys depot function, where up to 400 extra staff can be drafted in during busty periods. As new stock delivery schedules are regimented, customers know when new stock is due and traffic in stores is heavier at much(prenominal) times. As a result, the company is able to array its resources to match the demands as appropriate. Procurement and production planners make preliminary, but crucial, estimates of manufacturing be and available capacity. The cross-functional teams can examine prototypes in the hall, choose a design, and commit resources for its production and innovation in a few hours, if necessary. (Ferdows Kasra, 2005)A small change in retail orders, for example, can result in wide fluctuations in factory orders after its transmitted through livelongsalers and distributors. In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, Zara lets them adjust 40 percent to 50 percent. In this way, Zara avoids costly overproduction and the consequent gross r up to nowue and discounting prevalent in the industry.Supply NetworksThe vertical Integration advantage can be seen in Zaras centralized logistics and distribution.Zara designs roughly 10,000 new models each year and replenishes ranges within every one of its 650 retail stores twice per week, but in strictly limited quantities of stock. This sees Zaras brand promise to customers of exclusivity, and also of design freshness. But it also avoids build-up of large quantities of unpopular stock. Zaras system has to deal with something in the realm of 300,000 new stock-keeping units (SKUs), on average, every year . (Ferdows Kasra, 2005). It outsources less manufacturing (only labour intensive tasks mainly the sewing) than its competitors hence can react quickly to seasonality and unforeseen demand. Zara avoids make inventories in any part of its supply chain from raw materials to end user.Process TechnologyZaras communication and coordination through high technology information systems is one of Zaras success factors relative to its competitors. Its customized handheld computers support the connection mingled with the retail stores and supply. These PDAs transmit all kinds of information (hard data as orders and sales trends and such soft data as customer reactions and the buzz around a new style). The constant flow of updated data mitigates the so-called bullwhip effect-the purpose of supply chains (and all open-loop information systems) to amplify small disturbances. learning and OrganizationThis fast fashion system depends on a constant exchange of information throughout every part of Zaras supply chain-from customers to store managers, from store managers to market specialists and designers, from designers to production staff, from buyers to subcontractors, from warehouse managers to distributors, and so on Zaras organization, operative procedures, performance measures, and even its office layouts are all designed to make information transfer easy.By having operations in close- proximity to its headquarters allowed for better and faster communication between functional areas for faster determination making.Key success objectives for Zaras PerformanceSpeed Speed and responsiveness to Market, Zara has changed the way clothing industry works where deigning, production and delivery to the retailers requires period of half dozen months. The design and distribution cycle of the company takes just 10-15days in the whole process. Zaras speed to market in product development exceeds the capabilities of its competitors. This in itself provides special value to stakeh olders, customers, and stores in producing quality clothing at affordable prices. The proximity of their manufacturing and operational processes allows Zara to maintain the flexibility necessary to design and produce over 12000 new items annually. This capability allows Zara to achieve their strategy of expedited response to consumer demand. The process of obtaining market information and relaying it to design and production teams expedites product development by trim down the throughput time of their products from design to store.Dependability Due to Zaras ownership and control of production, they ensure timely delivery and service. Although most of their stores run out of stock, signifying that they have low reliableness in terms of product availability, another perspective of dependability in terms of keeping to date with fashion is achieved.Quality Zara brand is synonymous with the cutting edge of fashion at affordable prices. some other Quality advantage is the added sense of quality to the product as the tags would be labelled with made in Europe rather than made in China due to Zaras trade-off between Low labour costs in Asia and operational efficiency.Flexibility Designers (of average age 26) draw the design sketches then discuss it with market specials and planning procurement staff illustrating a flexibility of ideas generation and on the other hand the huge number of designs reflects the ability to meet almost all the fashion requirements by customers of all ages (up to 55). This adaptive model rather than traditional merchandising is very dissimilar from its competitors. Many competitors rely on a small elite design team that plans both design and production needs well in advance. Stores have curt autonomy in deciding which products to display or put on sale because Headquarters plans accordingly and ships quantities as forecasted.Zara possess many of the fabric dying, processing and cutting equipment that provided Zara added control and flex ibility to cod new trends on demand. The added flexibility helped Zara on two fronts shorter lead times and fewer inventories. (OPPapers.com, 2010)Cost Zara produces most of its products in Europe. Compared to their competitors, they outsource very little to Asia. Though the cost of production in Spain is 17-20% more expensive than Asia, Zara does have a competitive advantage over its competitors in regards to operations. Though there is a cost advantage in their approach in regards to labour, the lack of flexibility in changing orders based on current trends hinders their operational efficiencies. Inventory costs are higher for competitors because orders are placed for a whole season well in advance and then held in distribution facilities until periodic shipment to stores. Lower inventory cost is a key sustainable advantage as it enables Zara to manufacture and sell its products at cheaper prices.ConclusionThe smooth integration between Zara business strategy and it is operation strategy as illustrated in the strategic matrix below brought about a promotion of innovativeness through a blending of its performance objectives and decision areas. This aligned Zara operations with its business strategy, ensuring comprehensiveness, correspondence and coherence to achieve its mark in the garment industry as a world attracter today.Zara has demonstrated that market flexibility and lean inventories may be even more important than cheap labour, an insight that just might reversal the and its success is based on controlling all the steps of manufacturing clothes from design to fabric to manufacturing, distribution and sales in order to cut costs and make huge gains in speed and flexibility. In the fashion industry, where trends change daily, Getting a good strategic mix in operations is key to a retailers survival.