Zaras Efficient Business Processes - Essay Example

Business Case Study Introduction Zara is an internationally recognised clothing retail line that is headquartered in Spain. The corporation, which was launched in 1975, is the third largest cloth manufacturing firm in the world today. There are definite factors that Zara has used to its advantage over the years; and succeeded in launching it as one of the most recognised fashion labels in the world. Zara’s particular business processes as well as strategic plans have propelled the company to the forefront. One of the company’s most innovative scheme concerns its system of inventory. Zara’s Efficient Business Processes Zara has inspired the creation of relationships with its customers that allow it to benefit in all seasons (Craig, Jones and Nieto 2004). For example, if a cloth item is popular with clients, executives can make a decision to discontinue its production so as to generate an unsatisfied demand which will benefit the firm. This means that once a trendy outfit is released, customers will immediately consider purchasing it as soon as possible so that it does not go out of stock or cease being created (Slack, Chambers and Johnston 2010). In addition, Zara has developed the rare ability to be able to cater to in-season demands. This immediately puts Zara ahead of most of its business competitors. In having an inventory system that is flexible and responsive, Zara is capable of functioning with a high close-to-sale-time production system. This results in short lead times that are unparalleled when compared to other providers of apparel. The innovative plan to produce only the trendiest product lines has generated for Zara the ability to offer clients trending apparel that is more in demand than any other items that are offered by business rivals.  Inventory Control Today, most of the important fashion firms are based in America, Europe, Japan, and China (Taplin 2006). The fashion industry is extremely competitive. For even experienced firms such as Zara to survive, there is a need for them to keep making significant changes that will allow them to be more aligned with the best conditions in the global market. Zara strives to ensure that it reaches potential customers from different geographical areas around the world with its products. This is quite necessary as the fashion industry tends to be chaotic in nature in that it is constantly experiencing change (De La Cruz 2013). Trends can last for months or even days. Zara has to take into account this uncertainty when coming up with business policies. Some of the business strategies favoured by Zara are unlike those in other fashion firms. For example, Zara favours a vertical integration plan which allows Zara to put into practice management techniques that benefit it along with its different branches (Lopez and Fan 2009). Using a vertical integration strategy also allows for Zara to be able to save on time and financial resources as it does not need to invest in subcontractors. Vertical integration also avoids the possibility of conflicts arising due to the expression of different opinions among same level managers (Badia 2009). Zara tends to produce and distributes its merchandise in small consignments. This makes it easier to oversee the logistics, design, and circulation of products in the absence of an outsourcing partner. This also allows the firm to be able to easily identify any changes in the preferences of customers as well as the emergence of new trends (Cuc and Tripa 2007). Zara’s technique of vertical integration is probably one of its more successful sources of competitiveness. In as far as expansion to foreign branches is concerned, Zara picks on markets that are easy to expand into, but that are also attuned to its strategic plans. For example, the firm ensures that it spreads into areas in which it can easily transport goods to other Zara outlets in case this becomes necessary. Inventory Control Zara executives have ensured that the company has high-tech equipment which can help their factories to adapt to potential unforeseen changes in production increase (Caro, Gallien, Torralbo, Corras, Vazquez and Calamonte 2009). Zara utilises a pull system in its technique of inventory management. The company does not invest in large productions of different rends but only invests in small quantities of clothes on a monthly basis. This is quite advantageous for the firm as its turnover is swift and easy. Zara can easily keep its website informed on any adaptations or changes in clothing styles that are available. Zara employs the just-in-time methods of production which can pre-empt many threats (Ketchen and Giunipero 2004). Any changes in manufacturing which are caused by factory concerns or weather will not really slow down production in a firm that does not invest in processing many clothing items at once (Sarasvathy and Dew 2005). At Zara, the main activities have to do with the ordering, designing, manufacturing, and fulfillment of different resources and objectives in organisational operations. Zara always makes use of short supply chain policies that control the different phases of the supply chain. Zara has a flexible organisational structure that can meet different types of customer demand over a short period. When a company is able to deal in weeks rather than months in the execution of sophisticated stages such as planning, designing, and production of fashion, it has the opportunity to pre-empt a huge amount of potential risk from the business while still being able to benefit from numerous opportunities to ensure that its numerous stores have the right products on display (Rungtunsanatham 2003). Zara’s most important achievement has to do with the fact that it has a relatively short manufacturing process and that it is mainly directed by the customer. Since most of its products are created or manufactured in European nations, there is usually no delay between when the orders for new products are made and when the finished products are delivered. This means that Zara always has the current items of fashion on sale. Conclusion Zara is a successful firm because it has been able to cut on costs with its short supply chain process. In addition, due to the fact that it does not make orders that are as large as those of its competitors also helps in keeping expenses down. Zara’s vertical integration structure enables it to be able to benefit from having products created over a short period of time than would be the case if there was a structure that discouraged rapid decision making from single authorities on every level. Zara also has a system that allows for Zara’s managers to be able to report back to the firm’s designers about the popular products that were sold immediately and those that are still remaining. This allows the designers to know which product lines to maintain and which designs to alter. Reducing the time-period between the manufacturing of clothes and their appearance in stores keeps down the costs. It also allows the firm to understand the current trends and the clothes that have to be produced en mass, as well as those whose production has to be ceased. References Badia, E. (2009) Zara and her sisters: the story of the worlds largest clothing retailer, Palgrave Macmillan, New York. Caro, F., Gallien, J., Torralbo, J., Corras, J.M., Vazquez, M. & Calamonte, J.A. (2009) ‘Zara uses its operations research to re-engineer its global distribution process’, Operations Research, vol. 1, pp. 201-222. Craig, A., Jones, C., & Nieto, M. (2004) ‘ZARA: fashion follower, industry leader- Business of Philadelphia University’, Fashion Case Study Competition, April. Cuc, S., & Tripa, S. (2007) ‘Strategy and sustainable competitive advantage: the case of Zara fashion chain’, Fascicle of Management and Technological Engineering, vol. 6, pp. 2521-2524. De La Cruz, C. (2013) Zara: an analysis of market-orientated supply chain management in the retail fashion industry. New York: GRIN Verlag. Ketchen, D.J. Jr., & Giunipero, L.C. (2004) ‘The intersection of strategic management and supply chain management’, Industrial marketing management, vol. 33, pp. 51-56. Lopez, C. & Fan, Y. (2009) ‘Internationalisation of the Spanish fashion brand Zara’, Journal of Fashion Marketing and Management, vol. 13, no. 2, pp. 279-296. Rungtunsanatham, M. (2003) ‘Supply chain linkages and operational performance: A resource-based-view perspective’, International Journal of operations & Procustion management, vol. 23, no. 9, pp. 1084-1099. Sarasvathy, S. & Dew, N. (2005) ‘New market creation through transformation’, Journal of Evolutionary Economics, vol. 15, pp. 533-565. Slack, N., Chambers, S. & Johnston, R. (2010) Operations management, Pearson Education, New York. Taplin, I.M. (2006) ‘Restructuring and reconfiguration - the EU textile and clothing industry adapts to changes’, European Business Review, vol. 16, no. 1, pp. 71-84. Read More