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 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 companys 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 head office in Spain, where they test different types of store layouts on a regular basis. Zara remodels 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 usually 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 competitive advantage over other retailers is it technique of forecasting. Unlike, other retailers, Zara has developed its business model around reacting promptly. 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 rectify mistakes on raw fabric as compared to a finished product. It also uses the same fabric to produce something else (Render & Heizer, 2005). Zara usually buys un-processed fabric and colors it according to the season based on markets immediate 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 Zaras Customer Segment LOW COST FASHION FOR THE 16 TO 24 YEAR OLDS LOW COST FASHION
y y y y

Get it approximately right want create a demand chain Eliminate creative design Fast-response supply chain including design Finalise design knowing material supply constrain

Respond to what customers Copy trendy fashion fast Create a sto re experience Create a network / brand

y y y

Optimise the supply process for speed and cost Manage follow-up (next batch) and customer flows

Zaras Customer offer Fresh fast Fast copying of leading styles Fast deliveries in own stores Limited editions

Quality Raw material: Medium Knit: Poor Look: grand Customer satisfaction

Cost Low monetary cost Low time cost The Zara experience

FLEXIBILITY
y y

Limited customer variety: only what is on display and in limited choices But every customer is participating in the process: helps determine the next batch
SUPPLY CHAIN PRACTICES OF ZARA ] August 31, 2009

Zaras Product Offer Product

Supply Process Flexible Process Rigid process

High customization Low volume High unit margin High quality High fashion: out of Price ZARA

High standardization High volume Low unit margin Low quality

M&S: out of fashion

Zaras Product Life Cycle Curve

Generally, a typical Product Life Cycle Curve looks like the one given in the diagram where Sales decreases as the product moves over the time line. But as Zara is in a high fashion industry and its product offering are the latest trends and designs with a life of maximum 5-6 weeks so its Product Life Cycle Curve becomes like the one given in next diagram.

Information Systems
Information systems at Zara are one of the drivers of the quick response communication

strategy at Zara. - Zara stores managers carry handheld 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 fabrics waste. (J. Hammond, April 2001)

Centralized Logistics and Distribution

Zara controls and optimizes across different steps of the supply chain, not within them, even though it may increase costs at some steps, Zara sticks to a deep, predictable and fast rhythm, based around order fulfillment to stores. says Professor Ferdows. There are two orders per week from each store on specific days and hours, with shipments in La Coruna usually prepared overnight. Trucks leave at specific times (like a bus schedule) and shipments arrive in stores at specific times. Garments (even those shipped by air), are pre-hung, already labeled and priced. As a result of this clearly defi ned rhythm, not only every stage of the supply chain from design to procurement, production, distribution, and retail know their activities, but even the regular customers know to visit stores more often on shipment days for the fresh designs. This large and high -tech facility also has extra capacity on hand to enable Zara to react to weekly and monthly demand fluctuations. For example, it operates typically 4.5 days per week, around the clock on full capacity, and extra shifts and temporary personnel a re added when needed. It is interesting to know that ZARA can get the product from the sketch to the store in 2 weeks time, where the industry standard is 6 months, the design and production process is very efficient and harmonized due to the use of the d ifferent methods that suites their line of business and set new model to look for. See chart below. In addition to the analysis of the supply chain, it is important to look at other competitive advantages of Zara such as people and marketing strategy. Integration between Business strategy and operations Zara 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 we eks 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 strategy. - Zara manufacturing and distributions systems enable delivery from concept to store within 14 days. - Ownership and control of manufacturing facilities in Spain al lows for quick response. - Ownership of high tech distribution systems allow for very fast delivery from factory to stores all over Europe. - Zaras use of sales staff for market research purposes allows quick response to customer preferences and local dif ferences.

Just in time
Just-in-time (JIT) is a strategy that is used for inventory 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 push from the designer. This helps Zara to have a competitive advantage over the competition since it has a very low inventory to sales ratio.

Vertical Integration
Zara is a very vertically integrated company 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).

Product Design and Supply Chain Management

The entire 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 received. All the raw materials are distributed for assembly to a network of small family owned businesses that are mostly in Glacia and in Northern Portugal. Unlike its competitors, Zaras high-tech distribution services system ensures that there is no style lying around at the head office. The finished products are quickly cleared through 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 gives Zara a huge edge over its competitors.

Conclusion
Zara, a big name in the mid-priced fashion retail industry, started as one store and then grew to 1395 stores world-wide is very unique compared to the other names out there in many different ways. It is the only company that introduces a new line in its stores every two weeks. It uses a number of different techniques as mentioned above in this report that helps it to do so. By using those strategies, it is also able to avoid out sourcing to the developing nations as most of the companies in the industry do. This report has mentioned few strategies that Zara uses in order to achieve this and to become one of the biggest names in the retail industry.