ZERO TO ZARA

A case study on Zara’s

Operation Management Strategy

Mohammed Mansur Rashid

MBA
Term –V (weekend batch)

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2
 • Process design
• Product & service design
• Supply network design
• Layout & flow
INPUT • Process technology
• Job design & work
TRANSFORMED
organization
RESOURCES
OPERATIONS
1- MATERIALS STRATEGY
2- INFROMATION
3- CUSTOMERS

CUSTOME
INPUT IMPROVEMENT OUTPUT-

R
DESIGN

Product &
1- FACILITIES PLANNING AND services
2- STAFF CONTROL
INPUT
TRASNFORMING
• Capacity planning & control
RESOURCES • Inventory planning & control
• Supply chain planning & • Operations improvement
control • Failure prevention & recovery
• Enterprise resource planning • TQM approach
• Lean operation & JIT • The operation challenge
• Project planning & control 3
• Quality planning & control
 ZARA
Zara is the flagship brand of the Spanish fashion retail giant, Inditex,
(Industrias de Deseno Texti S. A.)

Founded in 1975, today Zara is one of the world’s successful fashion

retailers operating in 59 countries

Engaged in textile design, manufacturing and distribution .

Operates approximately 1500 stores .

Zara contributes about 2/3 of the company’s sales making it

undoubtedly the firm’s growth engine

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 Vision Statement

“ZARA is committed to satisfying the

desires of our customers. As a result
we pledge to continuously innovate
our business to improve your
experience. We promise to provide
new designs made from quality
materials that are affordable
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Mission Statement​

Through Zara’s business model, we aim to

contribute to the sustainable development
of society and that of the environment
with which we interacts.”

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 Business Strategy
The success story of Zara is based upon its business strategy that fostered
-- creativity,
-- innovation
-- Flexibility ,

This business model is what differentiate Zara from it competitors and provided them
with an edge and competitive advantage both at a local as well as at an international
level.

Zara defines its target market as “Young, educated one that likes fashion and is sensitive
to fashion

The business strategy of Zara focuses on gaining competitive advantage over its rivals
through integration of is production, manufacturing, logistics and customer handling
staff.

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 Competitive Strategy

Low Price Concept –Zara’s prices are affordable for people of different
income class

Target customers of all ages ( upto 55 )

Fast Fashion – Trends moves from the runway to stores within weeks,
as opposed to months
Capabilities – Zara takes two weeks to design a new product & get it
to stores, where as the industry standard is six months
Zara doesn’t need to forecast demand. It can respond to demand as it
develops and changes . Their basic concept is to keep design,
Production and process integrated to react promptly to shifts in
demand of consumers

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 Competitive Strategy
Value Chain of ZARA

Information system
Designers & commercial teams

Production:
Purchase materials,
11,000 items a
production order, set Fulfillment
year
Creation:

prices

unsold

Twice a week

store store store

suppliers
customers

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 Operation Strategy

Supply Chain Management

• Zara as part of the Inditex group has a very strong distribution
network. It’s product design, inventory management, evaluation of
suppliers and vendors, logistics management, material
management, time scheduling, information systems are the main
contributors in allowing Zara to offer cutting edge fashion at
affordable prices.
• Their superior supply chain management enables the retailer to
deliver goods within 24 hours of the receipt of order at its
European stores and 40 hours at its American and Asian
outlets.Inditex’s logistics is carried out from distribution centers
located in Spain.
• This competitive distribution network enables Zara to enhance its
operational efficiencies and thus increase its customer satisfaction

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 Operation Strategy

Design and Production-

• Zara delivers fashionable and trendy cloth addressing all tastes through a
controlled design and integrated process . Designs inspiration is copied
from different sources (trade fairs, catwalks, magazines)
• Zara manufactures 60% of its products. By owning its in-house production
Zara is able to be flexible in the amount, frequency, and variety of new
styled products.
• Zara has outsourced less manufacturing than its peers. It has 22 factories
and runs many of them often only in one shift leaving extra capacity to
respond quickly to seasonality and unforeseen demand.
• Comparing to peers which rely heavily on overseas
suppliers/manufactures which don’t provide same flexibility as these
suppliers could request orders to be placed few months in advance.
• Zara is outsourcing all the labour intensive tasks mainly the sewing, while
the cutting is done in-house. This produces of saving labour cost, flexibility
of meeting deadlines, keeping the designs/fashions strictly controlled

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 Operation Strategy

Information System –
• Zara applies technology in areas that speed up complex tasks, lower
cycle time and reduce error.
• It is technology that helps Zara identify and manufacture the
clothes that customers want, get those products to the market
quickly.
• Zara stores managers carry hand held Casio computers to send
online information to headquarters like selling trends, customers
comments, or placing orders.
• 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.
• 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
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fabrics waste.
 Operation Strategy

Inventory Strategy

• Zara seems fully aware of the adage: “ Inventory =

Death”
• The firm avoids building inventories in any part of its
supply chain from raw materials to end user.
• 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.
• But it also avoids build-up of large quantities of
unpopular stock

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 Operation Strategy

Low marketing / advertising cost

•Fashion retailers spend on average 3.5% of revenue
on advertising their products, while Zara's parent
company Inditex spends just 0-0.3%.
•Zara depends on word of mouth shuning
advertisements. Zara relies on its stores to project
its image.
•Zara has coordinators whose main task is to
change the layout of the shop every week. An item
that you see today at the right side of the shop next
week (if not sold yet) will be displayed at some
other side in some other way.
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 Operation Strategy

Fashion and Variety

• Zara main competency is selling Fashion and Trendy cloth
with high range of variety. Zara designers are on a constant
lookout for new ideas to keep the product line fresh.
• Zara introduces 11000 new garments in a typical year.
Many lines will only be available for a matter of weeks
before being replaced. As per Adel Hassan (Store Manager
at Zara- UAE, Burjuman center), “We do sell fashion. We
ask our customers what they want, and then we give it to
them.”
• Affordability “I can get a fashionable outfit at Zara at a
price which is half the price of a similar design and fabrics
at any branded shop in Dubai”, Daad Jumblat says..
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 Operation Strategy

Speed and quick responsiveness to Market

• Zara is geared around speed and responsiveness providing fresh baked products.
• Store managers communicate customer feedback on what shoppers like, what they don’t
like and what they’re looking for.
• That data is instantly funneled back to Zara’s designers who begin sketching on the spot.
• The responsiveness effects the customer behavior as it plays role in pushing the customer
to buy quickly and have higher visits frequency as new models arrive very frequent.
• This creates an environment of shortage and opportunity in Zara’s retail stores.
• The environment also increases the regularity and quickness, in which consumers visit
the stores and buy the products.
• The usual customers know that new products are introduced every two weeks and most
likely would not be available the next day.
• Therefore, Zara’s scarcity background allows the company to sell more items at full price.
• This strategy minimizes Zara’s total cost because it reduces the percentage of markdown
merchandise compared to its competitor.

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 Operation Strategy

Synergy between Business and operations strategy

• Zara’s strategy is growth through diversification with both horizontal and
vertical integration. Zara copies fashion by adapting couture designs.
• It manufactures, distributes, and retails clothes within 2 weeks of the
original design appearing on catwalks. It owns the entire value added
chain and competes on the basis of speed to market, having invented the
concept “fast fashion”.
• Finally it is important to highlight the smooth integration between Zara
business strategy and it is operation strategy. Zara operations are in line
with the business strategy. Zara manufacturing and distributions systems
enable delivery from concept to store within 14 days. Ownership and
control of manufacturing facilities in Spain allows for quick response.
Ownership of high tech distribution systems that allow for very fast
delivery from factory to stores all over Europe.
• Zara’s use of sales staff for market research purposes allows quick response
to customer preferences and local differences.

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