Operation Strategies Standing behind Success of Zara Fashion Brand

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Fashion Retail in industry Canada profile provides excellent qualitative and quantitative summary information including market size (value 2013-17, and forecast to 2022). The profile also contains descriptions of the leading players including key financial metrics and analysis of competitive brands within the market. Crucial resources for data and analysis covering the Canada fashion retail market that includes market size and segmentation data, textual and graphical analysis of market growth trends, leading companies and macroeconomic information.

The attire retail showcase incorporates infant apparel, baby garments and easygoing wear, fundamentals, formalwear, formalwear-event, and outerwear for men, ladies, young men and young ladies; avoids sports-explicit garments. The Canadian clothing retail industry had complete incomes of $22.6 bn in 2017, speaking to a compound yearly development rate (CAGR) of 3.2% somewhere in the range of 2013 and 2017. The women’s wear section was the business’ generally worthwhile in 2017, with all out incomes of $12.5 bn, proportionate to 55.2% of the business’ general worth. Later on, center estimated attire retail organizations are probably going to battle as the scene turns out to be progressively serious and buyers show an inclination for things which are high caliber however lower in cost.

Scope:

Spare time completing passage level examination by recognizing the size, development, significant portions, and driving parts in the clothing retail showcase in Canada. Utilize the Five Forces investigation to decide the serious power and in this way allure of the clothing retail advertise in Canada. Driving organization profiles uncover subtleties of key clothing retail advertise players’ worldwide tasks and budgetary execution. Add weight to introductions and pitches by understanding the future development possibilities of the Canada attire retail advertise with multiyear estimates

Role Product/brand: ZARA

What are the operations strategies of Zara and how these strategies are being managed effectively to make Zara a successful Brand?

Operations Management

Operations management is in regard to all operations within the organization responsible for creating goods and services that organizations pass to their customers. This includes:

Managing Purchases
Inventory control
Quality control
Storage
Logistics and supply chain

Zara’s philosophy goes by “Give customers what they want and get it to them faster than anyone else.” To achieve this goal, Zara has developed certain operational strategies. We will be discussing about Zara’s Operations Strategy and how Zara has implemented these strategies to become world’s leading apparel company and made its founder, Amancio Ortego, the world’s second wealthiest person.

Operations Strategy

Zara employs more than 20000 people, distributed across 23 factories around La Coruna, Spain. Ortego believes in short lived fashion trends that require speedy designs and decision. Hence, Zara makes millions of its most time-and fashion –sensitive products in its own factories on its own schedule based on its own market data that are then fed into its own logistic system to quickly deliver them into its own storefronts.

Order Qualifying Attributes of Zara : Trendy clothes with a better quality fabrics
Order Winning Attributes of Zara : It is often said “Zara is Armani at moderate prices”, or “Banana Republic priced like Old Navy”

We will discuss about certain operational excellence performance measurements of Zara in terms of quality, cost, delivery and flexibility.

Forecasting

Zara introduces 10,000 new designs every year to a network over 1925 stores in more than 86 countries. The vast global network makes demand forecasting a challenge for Zara. They seek out to study the effects from seasonality, product life-cycle and cannibalization into a long term aggregate demand forecast.

For seasonality they study

Macro patterns, which are the year to year sales patterns that remain fairly consistent, such as rising sales in spring
Specific Events, which refers to events that have an impact on demand but shifts dates from one year to the next, such as Christmas or Diwali.

These two factors are used to forecast short and long term store demand by using regression that leverages historical demand. Majority of the sales are experienced in the first few weeks in the store and due to this when forecasting demand for replenishment purposes, it is crucial to understand: “How long the item has been in the store?”, and “How many new items are being displayed for the first time at the store on the week in question?”

Product Design

Designers send their design suggestions to factory and to distribution department by scanning a design into a computer and electronically transmit to factory computers including computers controlled cutting equipment. How do they do it?

Zara’s designers gather information from store managers, internet, films and industry publications. Designers sift the data, quickly converting the latest look into affordable, hot fashion for the masses. It often translates a fashion trend in as little as two weeks whereas its competitors take months to do the same. It does not adapt products to a particular country’s preferences, but looks to standardize its designs for the global market.
Designers input the designs patterns into CAD systems which automatically feed into the cutting machines in the factories ensuring the required quality of outputs and having a minimum fabrics waste.
Zara has always been using the technology in its manufacturing plants, in the areas where there is a requirement of simplifying the complex processes.
Zara rejects the idea of conventional spring and fall clothing collections in favor of “live collections”.

Design For Environment

Zara is also one of the rare clothing brands, which produces 100% toxic free clothing. Within the product they use:

Ecological fabrics
Organic cotton
Manufacture PVC free footwear
It is also been awarded with LEED (Leadership in Energy and Environmental Design)

Process Analysis

Zara works with the concept of offering a variety of latest trend of good quality in small quantity for a shorter period of time at lower prices, which instigates the customers to purchase what they like right away without waiting for any sort of sales. It has attained the main objective of ensuring timely delivery of products to end user at affordable prices and complete customer satisfaction. Zara applies technology in areas that speed up complex tasks, lower cycle time and reduce error. Zara stores managers carry handheld Casio computers to send online information to headquarters like selling trends, customers comments, or placing orders.

Make To Order

The firm therefore avoids building inventories in any part of its supply chain from raw materials to end user. Inventory optimization models are in place to help the firm determine how many of which items in which sizes should be delivered to stores during the twice a week shipment ensuring sores stock just what they want.

Productivity/efficiency

Zara designs around 10,000 new models every year and replenishes ranges within every one of its 650 retail stores twice per week, but in strictly limited quantities of stock. This ensures Zara’s brand promise to customers of exclusivity, and also of design freshness. It also avoids build-up of large quantities of unpopular stock.

Flexibility

Zara has a quick turnaround on fashion trends many items we see in store will not exist in next few weeks. Zara aggressively prices its products and adjusts pricing for the international market, making customers in foreign markets bear the costs of shipping products from Spain. If the product line fails to excite customers, Zara can scrap an entire production line if it is not selling. Also, they can dye collection in in new colors. Can create new fashion line in days. Even though it manufactures products as per market’s daily changing trends, it has developed a system by which it has a low manufacturing cost enabling it to provide great latest designs at lower prices to the customers.

Assembling

Assembly of different components is done at the headquarters of Zara in Spain; it has outrightly rejected the concept of cheap outsourcing. Zara has slashed the cycle time to a phenomenal two weeks. It continues to beat the competitors by introducing new designs into the stores within a week or two. While it takes a cycle of six months for other fashion brands to penetrate new designs into the market. They want customers to understand that they must buy it now because it won’t be in the shops following week. They create a climate of scarcity and opportunity. Zara undergoes Flow method in its process selection. Zara voluntarily keeps up to 85%of its plants idle in order to optimize the response to demand changes all around the world.

Facility Decision And Facility Layout

Zara presents a drastically different approach than its competitors. Instead of outsourcing its production in Asia or Eastern Europe, it decided to manufacture its products in Galicia. While lower cost production could be achieved in other regions, the faster time to market, reduced transportation costs and low exposure to changing tariffs and politics outweigh that one factor. Their Headquarter is situated in Spain, which give it a prime location for Zara to operate. They invest in prime locations. They place great care in the presentation of our storefronts. This is how they project their image. Zara’s stores command high profile slots in premier shopping venues. Its location strategy has created interesting tensions. Attractive stores both inside and out, are vital to Zara’s mystique. They want their customers to enter a beautiful store where they are offered the latest fashions. Retail specialists roam the globe, adjusting window displays, testing store ambience and rethinking presentation schemes. Their layouts are always changing.

Supply Chain Management

It has developed a fast shipment system that satisfies the existing needs. The key to Zara’s ability to establish an agile supply chain results on the following unique approaches:

Procurement methodology: Zara‘s procurement team works on the quantity of raw materials needed to manufacture the clothes. This helps reduce waste, as they re-use fabric but not resell a piece of clothing that didn’t meet the expectation.
Proximity of supply: Suppliers are all close to Zara factories and collaborate tightly, so Zara can order on and everyday need basis.
Production feedback: Every day, store managers can give customer feedback to the market specialist, who then pass the information along to production and design teams. This rapid feedback loop enables a quick and agile response to the market.

Manufacturing

Zara makes millions of its most time and fashion sensitive products in its own state of the art factories on its own schedule based on its own market data that are then fed into its own logistic system to quickly deliver them to its storefronts.

The story begins in the heart of Zara’s headquarters, where its 300 person design team is leafing through trend-forecasting books and putting together mood boards for the store’s next collection. Once a design is created, it is taken to a team of pattern cutters just meters away, who put together the first prototypes. Once the prototype has been signed off, on a digitized pattern is sent to one of its factories.

The first step of the process is to set the patterns to the fabric. The pattern layout is then sent to a machine that prints a life-size copy, using the relevant information about what part of the garment each piece is. The fabric is laid out under large cutting machines, and the paper is placed on top. Both materials are held in place with a tight plastic sheet. The machine slices through the material, cutting out the individual pieces of fabric. Once they have been cut, the paper and fabric pieces are boxed up together. The paper has all the details for the factory workers to see where these pieces need to be sent next, and which part of the garment they will make. These pieces are sent to external factories to be sewn together, along with a prototype of the item so that the factories can copy the exact design. Once the item is sewn together, it returns to Zara’s headquarters. After quality check , boxes are with newly together clothing are unpacked from trucks and immediately passes through a sensor machine. The boxes are placed on a conveyor belt and stocked in groups. These can be stored for several days in the distribution center before being shipped out. The full boxes are then placed on another conveyor belt to be sent out for delivery.

Source: Mary Hanbury from Business Insider, 28 Oct, 2018

Logistics

Garments flow through Zara’s distribution center in La Coruna. In La Coruna, garments travel along 125 miles of underground rails that links its factories. Along the way, they are sorted in carousels capable of processing 45000 folded garments per hour. Zara ships more than 2.5 million items per week to its store worldwide. Custom orders reach its stores in Europe, the middle east and much of the United States in 24 hours and 48 hours for Asia and Latin America.

Inventory Management

Zara rejects the idea of conventional spring and fall clothing collections in favor of “live collections” that are designed, manufactured and sold almost as quickly as customer’s fleeting tastes-no style lasts more than four weeks. Hence, just as their layouts their look of the inventory mix also keeps changing.
Highly deals in just- in- time inventory process.
Zara reaps the benefits of very efficient inventory management models that help them determine the exact quantity of items needed for every store. They ship very small batches twice a week.
Zara‘s procurement team works on the quantity of raw materials needed to manufacture the clothes. This helps reduce waste.

Total Quality Management

Zara’s items and its key products are sent back to factory after it is sewn together for individual quality checks.
Pressing machines are used to flatten out the material
Sleeves are blasted with hot air to shape the fabric and stretch the stitching
Each item is individually ironed
The clothing is then checked piece by piece to ensure there are no faulty stitches. Items that pass the checks are given a security tag
If any issues are spotted in this process, the clothing is put to one side and any small faults are fixed on sewing machines.

SOURCE: Mary Hanbury from Business Insider, 28 Oct, 2020

Sustainable Operations Management

Zara is recognized as one of the most eco-friendly companies. It’s headquarter is in Spain, and is known for using solar panels and wind turbines. Zara at all it’s stores

Save energy
Have eco-friendly shops
Produce less waste and recycle

Their commitment extends to all staff, they have an environmentally aware team for distribution channels. The transportation of finished goods (from the point of production to point of sale) it is termed as environmentally friendly. In transportation, they use bio-diesel.

Analysis

The only marketing tactic ever being used by Zara is displaying. Zara spends just 0.3% of sales on advertising, compared with 3-4 percent for most fashion retailers. Hence, there is no doubt, in the absence of marketing strategy it is the Operation Strategy and its efficient management that is responsible behind Zara’s success story.

It reflects that a company can still thrive without a handsome marketing budget but not without an efficient operational strategy being efficiently managed at a right place and at a right time.

Conclusion:

Managing Purchases
Inventory control
Quality control
Storage
Logistics and supply chain

Zara’s philosophy goes by “Give customers what they want and get it to them faster than anyone else”. To achieve this goal, Zara has developed certain operational strategies.

Hence, Zara makes millions of its most time-and fashion – sensitive products in its own factories on its own schedule based on its own market data that are then fed into its own logistic system to quickly deliver them into its own storefronts. Highly deals in just-in-time inventory process Zara reaps the benefits of very efficient inventory management models that help them determine the exact quantity of items needed for every store.

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