Zara Case Study free essay sample

This can give competitive advantage for operations effectiveness of the company. There can be failure in the company’s productivity due to lack in the operations management which could be negative part of the company’s part in this competitive world. Defining Fashion: Fashion can be defined differently due to difference in the point of views. So in general, Fashion can be looked as showing the way of acting differently than the society around us. If society appreciates it then they accept the same and it results in the development of the fashion trend. It can also be observed in the meanwhile that if society comes across the new trend then they accepts it and follows the same as looking different from the group is the priority of everyone in the society. â€Å"Fashion expires, much the same way yogurt does†, The Inditex Chief executive Jose Maria Catellano comments. (Wall street Journal, 2001). We will write a custom essay sample on Zara Case Study or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Zara has smartly understood the fashion trends and picked it up way smarter than others by creation of such a supply chain which reacts to the faster changing and developing fashion in the society. This reasoned for the popularity of the brand Zara across different continents like Europe, Asia and Africa etc. Zara has achieved they competitive advantage by developing distinctiveness in their supply chain management which inspired me to present the case study of Zara in operations management point of view. This case study of Zara will navigate through different aspect of operations management. It will cover topics like total quality management though company’s structure, inventory management techniques like JIT, Kanban, Push-Pull System etc. Zara as Company: The relatively biggest and famous fashion distributor Inditex is parent company of Zara. In august 2008, Inditex acquired another famous brand GAP. This resulted in making Inditex as world’s biggest retailer (The Guardian, 2008). Zara has a contribution of 2/3 of the sales in the parent company which makes them the important brand of the company. According to the data acquired by the company’s website, evolution and origin of Zara can be seen as follows, In 1963, textile manufacturer Inditex is formed by Amancio Ortega Gaona. In the next decade of 1963 – 1974, it distributed many products to the different countries in Europe by setting up number of manufacturing units. In 1975, A Coruna witnessed First store of Zara on Central Street. Over the period of 8 years starting from 1976, business of Zara has grown tremendously and by the end of 8 years in 1984, it has almost acquired Spanish market by attracting majority of the society. Around December 1988, Zara crossed the borders of Spain and started their international store in Portugal (Oporto). Zara opened their international store in USA on the streets of New York in 1989 which was considered to be the next step of Zara of going international and considered to be the second international opening. In 1990, they opened their third store in France (Paris). Inditex planned their growth by opening Pull and Bear Chain as a sister company of Zara which almost acquired 65% of the capital from Massimo Dutti. In the further years, Inditex kept it pace of growth constant and capturing majority of the international Market. It opened most of the stores almost every year e. . 1992 (Mexico), 1993 (Greece) and 1994 (Sweden Belgium). By opening their stores in Malta in 1995 and in Cyprus in 1996 which helped them to acquire almost entire shares of Massimo Dutti. In the period of 1996 – 2008, Zara has grown tremendously by acquiring markets of almost 73 countries by giving their major locations and prime cities opening to 1292 stores which helped them to prove countries border cannot limit single fashion trends. But it was important to the Inditex and their subsidiary Zara to consider some important dates. The most important date of all these dates is 23rd May 2001 as it gave opening to Inditex to Spanish share market by registering their listing. In 2002, new Zara’s logistics Centre has undergone its construction in Zaragoza (Spain). In 2003, Zara got their home stores in Slovenia, Malaysia, Slovakia and Russia by Inditex. In the same year, 2nd distribution centre of Zara got opened in Zaragoza in Spain which helped its first distribution centre situated at A Coruna, Spain (Arteixo). In 2007, 1000th store of Zara got opened in Italy (Florence). Inditex opened around 4000 stores in 73 countries for Zara and its sister concerns. Zara’s Model of Operation: It is most attractive to study Zara’s Operational Model due to its shift from â€Å"mass standardization† to â€Å"customization† on global scale. Zara has developed very unique approach towards fashion which was highlighted by its founder. Its approach compares fashion with food and gives a view that fashion should also be consumed immediately like food rather than deteriorate in cupboard. Thus consumer’s preference is considered to be the important factor in the production of new clothes (Dutta, 2002). Zara’s operations became very successful due to its business model (See Appendix 3) and it also helps them in achieving the aim customers’ satisfaction. Zara’s operational model comprises of many elements like Just in Time, Company Structure, and Vertical Integration etc. All these elements help to achieve Total Quality Management (TQM) for the company. Company’s Structure: Flat Structure in the organization represents Chairman as its head and other directors to follow below him. The managers or directors will the Cell head of the cell below. All the member of cell report to leader of the cell and then eventually leader of the cell reports to the head i. e Chairman of the company. The same organization structure is adopted by Inditex group (See Appendix 1). This organizational structure has been led by Amancio Ortega as a Chairman in the group. He acts as Head of all the cells below him and other directors will be the leader of cells below them like CEO and deputy Chairman will be the leader for management control, finance and tax advisory etc. This process helps the company to follow its processes easily. The same organizational structure helps Inditex to track its processes and quality by keeping close watch on it. Vertical Integration: When two businesses which are at the different level of the production get merged then it is called as Vertical Integration (Hindle, T. , 2009. economist. com). This brings customer closer to the business. It gives controlled access to the costs and input, its delivery time and quality. Vertical integration is hard to reverse and expensive makes it very hard for the organization. Specially designed fabric will then manufacture by Zara and sent out for sewing to the external suppliers; it will then come back to Zara for labeling and quality will be checked will be done in the Zara’s Unit. After all the manufacturing process is done, all the clothes will be sent to the central warehouse and which then distributed to the store. Vertically integrated system has its disadvantage for Zara is increased cost for lack in moving plant of manufacturing unit in Europe to different location. Push and Pull System: â€Å"When a new designs being pushed in the market based on fashion market trend is referred as PUSH system and when design changes has been done on the customers feedback, but at a lightning fast speed, which emphasizes on customer satisfaction then its referred as PULL system† (Urugray, M. , 2005). When manufacturer’s designer team creates new design and then manufactured in bulk which will then sent out in the market and store, is generally part of the push system. This raises the demand from the market and attracts more consumers to the store to buy the product. The season collection of Zara is generally launched late in the market by the designer team (Appendix 4) which helps them to understand more about the designs which will be going to launch in the market by the manufacturers and accordingly the demand as well as the designers attain the fashion shows cloths available in the market which gives them an idea of the product coming in the market and helps them to decide their designs for the market (Ghemawat, 2001). Sometimes the designer team forecasts the new collection’s demand and then they launch it in the market e. g. â€Å"when Madonna visited Spain for the stage show, Zara launched the new collection of design which was replicating the design used by Madonna in the past which distinctively increased the demand of the product†. When Consumers demand drives the market and transmits its requirement to the designer team of the company which demands for the design to be created and sent back in the marketplace to satisfy the need of the market, is generally part of Pull system. There is another method under pull system adopted by the manufacturer and that is advertising the design on major level which results in increase in demand for the product and then it can increase the sales of the product (Anon, 2007). Just in Time (JIT): Japan is the land of Just in Time’s invention. This concept has been introduced by the Japanese ship builders which actually implemented by them by reducing the volume of inventory for steel to three days stock from months stock. This concept is further conceptualized and developed by ‘Toyota’s Vice President Taiichi Ohno’. All this work was presented in the Japanese language making it difficult to understand by the most of the countries. This is reasoned for the conversion of it in English. â€Å"Excessive inventory storage is wasteful in the current manufacturing scenario causes JIT philosophy† (Mejabi, O. et al, 2001). In addition to that JIT inspires the acceptance of methodologies to create the demand of intermediate products and materials only when required. â€Å"The transformation to JIT is not instantaneous, but rather it occurs in steps over the time† (Schroer et al, 1985). Waste removal is the important factor in current manufacturing industries. Keeping obligation towards product improvement and continual process and making production in small batches can be achieved with the help of JIT. â€Å"In the current market scenario, deliver the high quality and low cost product to capture most of the market share is main concern for many organization. JIT helps to solve this concern for most of the companies. JIT helps to reduce the cost for the companies because it saves the cost of storing the inventory and maintenance of the inventory. Generally in ‘Pull’ management JIT is used which helps to keep supply in time when there is high demand. Product of Zara used by consumers is more or less drives Zara’s design process. Store staff or the manager generally collects this data from the consumers and stored at the collection counter in every store which then sent to the distribution centre with full information and details every evening (Gallaugher, J. , 2008). Designing professional of Zara gets all this information on day to day basis. It helps then to figure out what consumers really need and main concerns of the consumers which help in creating designs for them carefully with reduction in consumers concern. Introduction of new design by Zara takes period of 6 weeks to get it from design to shelves and it also proves very efficient as well compared to the normal 6 months cycles for other companies (Appendix 2). Shortening the time cycle can effect in reduction in the intensity of working capital and helps in continuous production of new design products (Ghemawat, P. , 2001). In 2008, it has been seen that â€Å"From design to the shelves it takes 15 days to Zara to bring the product in the market† (Gattorna, J. , 2007). Maximum flexibility in the production of clothes has been achieved by Zara through purchase of Grey coloured fabric in one half quantities. Location of Zara’s internal production plant has been planned in and around the Zara’s headquarters which results in faster manufacturing by achieving faster designing and approval of the product process. The newly designed product then sent to central distribution centre of Zara, and then it gets distributed across their store two times in a week. It benefits Zara to concentrate of consumers’ needs and reduction in inventory. Kaizen: Kaizen can be defined as ‘Continuous Improvement’. This concept was introduced by Japanese and is considered as philosophy for whole business. â€Å"Kaizen is important for everyone in the organization and requires the same kind of participation from each employee† (Imai, M. , 1986). It has always seen that consumers always have some expectations, need and requirement from the supplier of the product and the suppliers output has some relevant characteristics matching to the consumer’s expectations, these can be defined as ‘Quality Characteristics’ (Rao et al, 1996). It has been found that there always remains some kind of gap between quality characteristics and consumer’s needs. Implementation of Kaizen can reduce the gap and helps in meeting consumers’ expectation closely. Important factors of Kaizen are as follows: Punctuality, Leadership, Just in Time, High Quality, Customer focus, Future thinking, Kanban, Reduction in Wastage, Empowerment, Low Cost, Quality assurance, Flexible workplace practices. Almost all the elements of Kaizen have been adopted by Zara as organisation. It has also been observed that â€Å"Zara has efficient Just in time running also they are more customer focused as there most of the designs are made according to the customers demand†. Zara has achieved reduction in the wastage of the company by implementing effective JIT system. Flexible workplace practices have also been absorbed by Zara. Problems faced by Zara’s Operational Model: Difference in the business model than other traditional retailers makes Zara as very successful organisation. It has also shown sustainable growth as well. Its weaknesses are also different than other retailers. â€Å"Zara holds around 86% of Inditex total International sales† (Craig et al, 2004). Difference in taste of Europeans and Americans, makes it difficult for Zara to enter in American market. They are also lacking in the developed strategy to acquire US market. It has also been observed that lack of distribution system in America can also limit the scope of Zara. Their centralised distribution system may lack to satisfy the need of American market. â€Å"Vertical integration reduces the possibilities of producing large quantity of goods in economic rate (Craig et al, 2004). There is also increase in cost due to speedy recurrent introduction of new products. Also they have higher research development cost. Creation of different apparel lines causes constant changeover of production techniques resulting in higher elevated cost and also increase in the employee training cost to enable them in order to use new manufacturing techniques†. Cannibalization is also one of the threats to Zara (Craig et al, 2004). As Zara is placing almost same products in their each and every store in one city results in selling same product to the variety of the people which may lead to loss in sales. It has also threat from the competitors like HM, as they comparatively same range and their prices are also less than Zara. This has been represented through Fish Bone diagram (Appendix). Conclusion: Zara has potential to face changing clothing standards as challenge and also has competitive advantage which helps them to grow. Zara also has the most of the processes like Kaizen, JIT and its structure effectively implemented in their company. It helps them in achieving the Total Quality Management (TQM) for their organization. Zara also has very unique and strong business model which drives their operating income to be much raised and provides growth opportunity as retail industry. They have been famous for their weekly changing well priced and trendy apparels. They are the most rapidly growing organization in US. Expansion methods as well as keeping the organization fresh as per the industry required with improved quality has been achieved by Zara very effectively with the help of their research and development team. Zara’s business model has been copied and trying to copy by most of the retailers now a day. Some Recommendations: The company is actively seeking new growth opportunity across all worldwide market. With the constantly changing behavior of market as a result of globalization gives very good opportunity to grow in US and other countries. It will be helpful for Zara to open separate distribution centre in US to acquire US market effectively. It also helps them to improve their image in the market as low priced and trendiest retailer in the market. Opening up distribution centre in US can be a part of expansion in their centralized distribution saving some money and helping to reduce the pressure on the current system. This will also save some money which can be used to effectively advertise their brand in different location which will drive more customers to the store. Online sales can also be one of the steps which can improve their sales and helps them in acquiring more global market. Zara can make available different range of product across different store in the same city which can reduce the threat of cannibalization. Zara Case Study free essay sample Forget football stars, the Costa del Sol and Real Madrid, they are nothing compared with Zara as Spain’s most successful international export. And it has other retailers reeling as Zara’s low-cost, fast fashion takes global markets by storm. This dynamic retailer is known for selling stylish designs that resemble those of big-name fashion houses but at moderate prices. ‘We sell the latest trends at low prices, but our clients value our design, quality and constant innovation,’ a company spokesman said. ‘That gives us the advantage even in highly competitive, developed markets, including Britain. More interesting is the way that Zara achieves its mission. Fast fashion – the newest wave A handful of European speciality clothing retailers are taking the fashion world by storm with a business model that has come to be known as ‘fast-fashion’. In short, these companies can recognise and respond to fashion trends very quickly, create pro ducts that mirror the trends, and get these products onto shelves much faster and more frequently than the industry norm. We will write a custom essay sample on Zara Case Study or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Fast-fashion retailers include Sweden’s Hennes Mauritz (HM), Britain’s Top Shop, Spain’s Mango and the Netherland’s Mexx. Although all of these companies are successfully employing the fast-fashion concept, Zara leads the pack in virtually every way. For example, ‘fast’ at Zara means that it can take a product from concept through design, manufacturing and store shelf placement in as little as two weeks, much quicker than any of its fastfashion competitors. For more mainstream clothing chains such as Gap and Next, the process takes months. This gives Zara the advantage of virtually copying fashions from the pages of Vogue and having them on the streets in dozens of countries before the next issue of the magazine even hits the newsstands! When Spain’s Crown Prince Felipe and Letizia Ortiz Rocasolano announced their engagement in 2003, the bride-to-be wore a stylish white trouser suit. This raised some eyebrows, given that it violated royal protocol. But women loved it and within a few weeks, hundreds of them were wearing a nearly identical outfit they had purchased from Zara. 1 Kotler P. et al, (2008), Principles of Marketing, 5th European edition, Harlow, Pearson Education Ltd. But Zara is more than just fast. It’s also prolific. In a typical year, Zara launches about 11,000 new items. Compare that to the 2,000 to 4,000 items introduced by both HM and Gap. In the fashion world, this difference is huge. Zara stores receive new merchandise two to three times each week, whereas most clothing retailers get large shipments on a seasonal basis, four to six times a year. By introducing new products with frequency and in higher numbers, Zara produces smaller batches of items. Thus, it assumes less risk if an item doesn’t sell well. But smaller batches also mean exclusivity, a unique benefit from a mass-market retailer that draws young fashionistas through Zara’s doors like a magnet. When items sell out, they are not restocked with another shipment. Instead, the next Zara shipment contains something new, something different. Popular items can appear and disappear within a week. Consumers know that if they like something they must buy it or miss out. Customers are enticed to check out store stock more often, leading to very high levels of repeat patronage. But it also means that Zara doesn’t need to follow the industry pattern of marking prices down as the season progresses. Thus, Zara reaps the benefit of prices that average much closer to the list price. The vertical secret to Zara’s success Just how does Zara achieve such mind-blowing responsiveness? The answer lies in its distribution system. In 1975, Amanco Ortega opened the first Zara store in Spain’s remote north-western town of La Coruna, home to Zara’s headquarters. Having already worked in the textile industry for two decades, his experience led him to design a system in which he could control every aspect of the supply chain, from design and production to distribution and retailing. He knew, for example, that in the textile business the biggest mark-ups were made by the wholesalers and retailers. He was determined to maintain control over these activities. Ortega’s unique philosophy forms the heart of Zara’s unique, rapid-fire supply chain today. But it is Zara’s hi-tech information system that has taken vertical integration in the company to an unprecedented level. According to CEO Pablo Isla, ‘Our information system is absolutely avant-garde. It’s what links our shop to our designers and our distribution system. ’ Zara’s vertically integrated distribution system makes the starting point of a product concept hard to nail down. At Zara’s headquarters creative teams of over 300 professionals carry out the design process. But they act on information fed to them from the stores. This goes far beyond typical pointof-sales data. Store managers act as trend spotters. Every day they report hot fads to headquarters, enabling popular lines to be tweaked and slow movers to be whisked away within hours. If customers are asking for a rounded neck on a vest rather than a V neck, such an item can be in stores in seven to ten days. This process would take traditional retailers months. Managers also consult a personal digital assistant every evening to check what new designs are available and place their orders according to what they think will sell best to their customers. Thus, store managers help to shape designs by ensuring that the creative teams have real-time information based on the observed tastes of actual consumers. Mr Ortega refers to this as the democratisation of fashion. 2 Kotler P. et al, (2008), Principles of Marketing, 5th European edition, Harlow, Pearson Education Ltd. When it comes to sourcing, Zara’s supply chain is unique as well. Current conventional wisdom calls for manufacturers in all industries to outsource their goods globally to the cheapest provider. Thus, most of Zara’s competitors contract out manufacturing to low-wage countries, notably Asia. But Zara makes 40 per cent of its own fabrics and produces more than half of its own clothes, rather than relying on a hodgepodge of slow-moving suppliers. Even things that are farmed out are done locally in order to maximise time efficiency. Nearly all Zara clothes for its stores worldwide are produced in its remote corner of Spain. As it completes designs, Zara cuts fabric in-house. It then sends the designs to one of several hundred local cooperatives for sewing, minimising the time for raw material distribution. When items return to Zara’s facilities they are ironed by an assembly line of workers who specialise in a particular task (lapels, shoulders, and so on). Clothing items are wrapped in plastic and transported on conveyor belts to a group of giant warehouses. Zara’s warehouses are a vision of modern automation as swift and efficient as any automotive or consumer electronics plant. Human labour is a rare sight in these cavernous buildings. Customised machines patterned after the equipment used by overnight parcel services process up to 80,000 items an hour. The computerised system sorts, packs, labels and allocates clothing items to every one of Zara’s 1,000 plus stores. For stores within a 24 hour drive, Zara delivers goods by truck, whereas it ships merchandise by cargo jet to stores farther away. Domestic manufacturing pays off The sae philosophy that has produced such good results for Zara has led parent company Inditex to diversify. Its other chains now include underwear retailer Oysho, teen-oriented Bershka and Stradivarius, children’s Kiddy Class, menswear Massimo Duti and casual and sportswear chain Pull and Bear. Recently Inditex opened its first non-clothing chain, Zara Home. Each chain operates under the same style of vertical integration honed at Zara. Making speed the main goal of its supply chain has really paid off for Inditex. In 2005, sales grew by 21 per cent over the prior year to â‚ ¬6Bn (retail revenue growth worldwide averages single-digit increases). That puts Inditex ahead of HM in the fast-fashion category for the first time. During the same period profits soared by b26 per cent to $712m. Most of this performance was driven by Zara, now ranked number 73 on Interbrand’s list of top 100 most valuable worldwide brands. Although Inditex has grown rapidly, it only wants more. In 2005, it opened 448 new stores (HM added only 145) and had plans for 490 more. With more than one ribbon cutting ceremony per day, Inditex could increase its number of stores from the current 2,900 to as many as 5,000 stores in 70 countries by the end of this decade. After European clothing stores , including Marks Spencer, fared badly in the US, European fastfashion retailers have recently expanded very cautiously in the US (Zara has only 19 stores there so far). But the threat of Zara has US clothing retailer rethinking the models they have relied on for years. According to one analyst, the industry may soon experience a reversal from outsourcing to China to manufacturing in America, despite its relatively high costs. 3 Kotler P. et al, (2008), Principles of Marketing, 5th European edition, Harlow, Pearson Education Ltd. ‘US Retailers are finally looking at lost sales as lost revenue. They know that in order to capture maximum sales they need to turn their inventory much quicker. The disadvantage of importing from China is that it requires a longer lead time of between three to six months from the time an order is placed to when the inventory is stocked in stores. By then the trends may have changed and you’re stuck with all the unsold inventory. If retailers want to refresh their merchandise quicker, they will have to consider sourcing at least son me of the merchandise locally. ’ So being the fastest of the fast-fashion retailers has not only paid off for Zara, its model has reconfigured the fashion landscape everywhere. Zara has blazed a trail for cheaper and cheaper fashion-led mass retailers, has put the squeeze on mid-priced fashion, and has forced luxury brands to scramble to find ways to set themselves apart from Zara’s look-alike designs. Leadership certainly has its perks. Questions 1. As completely as possible, sketch the supply chain for Zara from raw materials to consumer purchase. 2. Discuss the concepts of horizontal and vertical conflict as they relate to Zara? 3. Which type of vertical marketing system does Zara exhibit? List all the benefits that Zara receives by having adopted this system. 4. Does Zara incur disadvantages from its fast-fashion distribution system? Are these disadvantages offset by the advantages? 5. How does Zara add value for the customer through major logistics functions? Zara case study free essay sample Read the case study regarding capacity planning that is available on Moodle. Your answers should refer to: Relevant concepts and theories regarding the role of capacity planning in organizations and demonstrate your ability to utilize relevant information from the case. Case Study 1 – Capacity Planning (1,250 words, due date: 25/11/2013) Identify the key characteristics of fast fashion and discuss how these affect company approaches to capacity planning. How do fast fashion companies ensure that they can meet their demand? How does this approach contribute to Zara’s success? Introduction Over the past few years the fashion industry has changed rapidly with every New Year came newer fashion. Competition has been fiercer than ever in terms of costs, quality, dependability and innovation. In this case study you’ll find a clear discussion and logical explanation about Zara’s day to day operations, why and how have they become as successful as they are today. What makes them different from other companies and how they meet there and their customers demands in such a demanding and competitive industry. We will write a custom essay sample on Zara case study or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Zara is a Spanish owned fashion label and fashion chain stores established in 1975 by the group known as Inditex owned by Amancio Ortega, it sells up to the minute fashion products in men women and kids wear at affordable prices in stores that are clearly focused on one particular market. What is Fast Fashion? Fast fashion is a contemporary term used to affiliate with clothing that is based on most recent fashion trends. It is also a way of saying that designs move from catwalk quickly in order to capture current fashion trends. It emerges in the context of that the fashion cycle is moving faster than ever before and at least 10 times faster than it has been 10 years ago. Identify the key characteristics of fast fashion and discuss how these affect company approaches to capacity planning? + How does this approach contribute to Zara’s success? How do all these factors contribute Zara’s success is the main question. Firstly Zara have taken speed and responsiveness into account they have changed the way they operate in there industry where designing, distribution and delivery requires no longer than six months. This proves that Zara can get the latest trends into their store within 6 weeks, which exceeds the capabilities of its competitors as HM and Benetton and many other fashion companies take longer. This capability allows Zara to achieve their strategy of expedited response to consumer demand and keep up with the latest fashion. The advantage of this process is the quicker Zara can get a new design into their store the higher they will sell the product depending on the demand which will lead to more supply initially allowing company to boost profits and recognitions of their demanding products. Zara’s unique characteristics are very accurate. Instead of them predicting the demand Zara observes the trend and identifies what is selling, for example there designers continuously track customer’s preferences allowing them to get new designs and styles into the store shelves in under 2 weeks because they have observed the trend before hand and already ahead of their competitors such as HM. There vertical integration allows small batches of produce to be distributed and tested out allow them to save more money and cut inventory backlogs. Zara maintains a low cost by avoiding outsourcing (where possible) and producing all its merchandise and produce in home soil in Spain. Also Zara own many fabric dying, cutting and processing equipment that provided Zara added control and flexibility to adopt new trends on demand. Effectively Zara is able to design and manufacture products as well as deliver them in less than two weeks in contrast to competitors such as Benetton and HM which require at least between five weeks and 4 months lead time to fill orders from its retail operations. One major unique characteristic was that Zara own its in house production which gives Zara the flexibility of quantity, variety, and the frequency of the designs they produce. Another way there strategy contributors to their success is that they have the capability to keep a significant amount of product in home soil in there won factories and reserve approximately 85% of their capacity for seasonal adjustments this way they will be able to rapidly respond to unexpected trends in the industry. Additionally they use foreign factories as many other companies do as cost is much cheaper which allows production to increase and distrusted accordingly, however for fast fashion items Zara produces in the factories in Spain as it could lead to shorter time scales to be distributed and on the stores in less than 2 weeks of production. Today Zara can replenish existing stock in little as two weeks. The company spends very little on advertising and use those funds to support higher cost of producing in Spain as its more costly effective to produce than Asia. This ensures the company they avoid inventory backlogs, allowing the company to product what the customers want and allowing themselves to being able to respond quickly to any market need. Lower inventory cost is key for Zara because as it enables Zara to manufacture and sell its products at cheaper prices. One of Zara’s distinctive success contributors is there valuable and planned logistics and supply chain managements it operates which allows them to develop and deliver competitive marketing mix. Where customers expect to find latest trends which are still in fashion Zara for an example the ultimate company of how to make it possible because it usually could take up to six months in the textile industry for an idea to be transformed into a product and reach the stores. However if you were reduce the lead times through channel management Zara has developed a vertical integrated business model which allows them as said before lets them change some parts of their inventory in only a couple of weeks. This strategy they use is known as the quick response. As part of its vertical integration, Zara maintains a very high control of its supply networks as a strategy in achieving fast response. It supplies products to its 650 retail stores twice per week (Rice Hoppe, 2001) in strictly limited quantities of stock. This ensures Zara’s brand promise to customers of exclusivity and design freshness, thereby minimising inventory of old stock in any part of its supply chain from raw materials to end user. How do fast fashion companies ensure that they can meet their demand? Without customers businesses cannot exist. The clothing manufacture and clothing distribution industry has witnessed dramatic changes in recent years for example consumers have higher expectations today then before, they often look for quality and unique fashion at affordable prices. Hence why companies like Zara, HM and Benetton manufacture and distribute their garments in other Asia countries. Zara communicate with numerous manufactures around the world to provide consumers with what they want. For example like HM Zara a primarily a European retailer, produce most of their garments in costly Asian factories which allows them to save on cost rather than outsourcing to less expensive European and continuously monitors inventory levels in stores this way they can effectively match the supply and demand of the customers. Fast fashion combines with quick response production with enhanced design compatibilities to both design the latest garments as well as capture the latest trends. Also exploit minimal production lead times to match the supply with uncertain demand. This is why there are only a very few established fashion companies todaydominating the fast fashion market. Zara ensure they meet there demand and there consumers demand by keeping up to date with the latest fashion trends. They ensure that that if there isn’t a product selling of their shelf within a week then this product would be likely to get replaced with a new existing product. Another example, if body warmers become the season hottest trends and Zara’s competitors are selling well in this product then Zara reacts quickly, designs new styles, and gets them into stores while the trend is still peaking. This is one of the way Zara meets the customers demand as well as for the business as a whole. Another component is done by studying and monitoring the consumers and the fashion industries unexpected tastes for fashion which allows Zara to reduce design lead times. For example, Benetton another global fashion brand, based in Treviso, Italy employs a network of people known as ‘Trends spotters’ and designers throughout Europe and Asia who pay close attention to seasonal fashion and give feedback to the Benetton design team to help bring out newer garments that consumers like to wear. From an operational perspective quick response strategies have been relatively well studied, and are known to yield significant value to firms by better matching supply and demand and by influencing consumer purchasing behaviour. Zara has a 100% reputation for keeping their customers happy and always meeting their demand. The company is vertically integrated and controls most of the process in its supply chain. On average, 50% of Zara’s products are manufactured in home soil – Spain, and the rest are equally produced in Europe and Asia. Having said that this shows that Zara can bring in a blazer in less than two weeks from Zaras design team in Spain to a Zara stores in any part of the globe, as much as 12 times faster than the competition. And with shorter lead times, Zara can ship fewer pieces, in a greater variety of styles, more often and they can more easily cancel lines that dont sell as well, avoiding inventory backlogs. Recommendations/ Conclusion Zara’s operational strategies today defy conventional wisdom about how operation chains should be ran. The key to their success is because of their fast distribution channels, they mainly focus of their customer segment and their awareness for fashion; because of Zara’s fast distribution network they are able to satisfy the rapid change in demand of consumer behaviour. Zara is enjoying competition in fast fashion today as they are dominating in all areas. Over the last few years Zara have been a customer magnet, there fast distribution network of Zara is able to satisfy millions of customers with the rapid change in fast fashion and demand. In coming years Zara will need to be even more innovative as fashion is changing and competitors are always looking to improve therefore it is essential Zara stay on top of their game to ensure they are on top of their game. Zara Case Study free essay sample Huge rolls of fabrics are moved into the factory and placed on tables. Then a laser-guided machine cuts the fabrics according to the pattern. The cut textile is bagged and distributed to local sewing cooperatives. They return the finished garments to Zara’s factory within a week. After that, workers handle finishing touches to the clothes, such as adding buttons and details. Each garment is checked for quality. Once the checking is complete, the clothes are individually ironed. Then labels for each country are attached. After tagging, the garments are sent to Zara’s nearby distribution centre via a tunnel. At the massive centre all clothes are allocated first by country, then by individual store. This is done by a moving carousel of hanging rails. Using electronic bar codes each shop’s orders are carefully placed on the appropriate moving rail. Zara transports its products to the United States and Asia by plane in 48 hours. We will write a custom essay sample on Zara Case Study or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In Europe garments are distributed with trucks within a day. Finally, clothes are placed on show windows in elegant and spacious stores in the world’s ritziest shopping locations. (source: Capell, 2006) 2. Which type of vertical marketing system does Zara exhibit? List all the benefits that Zara receives by having adopted this system. As Kotler (2008) states a vertical marketing system (VMS) is a distribution channel system in which manufacturers, wholesalers and retailers have contracts between each other and one of them dominates the whole VMS, or in other words, they act as a unified system. A vertical marketing system consists of three main types: corporate, contractual and administrated. Zara uses corporate VMS – the entire distribution chain is under the control of the company. Zara has tight control over every aspect of the company’s supply chain – from designs to distribution. By adopting this system the company is able to move designs from sketch pad to stores in only two weeks (Capell, 2008). This system makes Zara not only fast but also quite flexible. It can easily change its products (clothe lines) in response to changing fashion and customer wants. Moreover, Zara’s corporate VMS makes the company more efficient and profitable than its competitors. By shipping products directly to its stores, Zara saves time, eliminates the need of warehouses and keeps the inventory to minimum. 3. Does Zara incur disadvantages from its â€Å"fast-fashion† distribution system? Are these disadvantages offset by the advantages? By using ‘’fast-fashion’’ distribution system, Zara faces both advantages and disadvantages. On the one hand, according to Tiplady (2006) Zara’s „fast fashion† distribution system helps the company to reduce the exposure to fashion faux pas. Zara produces small quantities of new clothe lines, so that if no one wants to buy them, it can cut its losses quickly and move on to another trend. Such an example occurred in 2003, when because of unseasonably warm autumn, people didn’t want to buy warm clothes. Another advantage of Zara’s fast VMS is that the company does not need to spend a lot on advertising (Tiplady, 2006). Zara introduces new lines every week, which keeps customers coming back again and again. Moreover, as Capell (2008) states, by adapting „fast fashion† distribution system Zara does not have to cut prices to mass quantities of out-of-season stock. The company can even charge more, because its clothe lines are adjusted to the most current looks. On the other hand, Zara’s distribution system has some disadvantages, too. As Capell (2008) states, Zara spends more money on workers’ salaries than its competitors. Because its clothe lines are produced mainly in Europe, the company has to spend more on European labour wages than, for example, on Asian. For instance, an average salary for worker in Spain is about $1,650 whereas in China is approximately $206. Another disadvantage of „fast-fashion† distribution system is the high cost of transportation (Capell, 2008). In order to keep up with deadlines, Zara has to use airplane shipment which is one of the most expensive means of transport.