Zara and Process Innovation

This discussion critically analyzes the aspects of process innovation in the operations management of Zara and how it has outperformed competitors. Recommendations are also given for improving Zara's future position in the market.

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Zara and process Innovation
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Discussion
Process innovation is vital element in operations management approach of every organization as
it helps in determining competitive advantage in market. The current discussion helps in
critically analyzing aspects of process innovation in operation management of Zara, along with
understanding how Zara has outperformed competitors by virtue of process innovation. Further
some recommendations are given for improvement of Zara’s future position in market.
1. Zara is considered as one of the leading brands in retail sector because of process
innovation. The concepts of lean thinking and agility are observed in Zara’s use of just-
in-time strategy where they extraordinarily manage inventory to increase their designing
and production efficaciousness, lower costs and wastage by receiving materials only
when they are required. Zara believes in philosophy that Inventory=Death and commits 6
months beforehand to only 15-25% of season’s line while locks only 50-60% by start of
season which means that over 50% of its product lines are designed and produced right in
middle of season. This concept helps Zara adapt a certain fashion or design immediately
after it becomes popular thus helping them to react quickly by designing new patterns and
distributing them to stores while the trend is peaking. As such Zara satisfies seasonal
demand as well as exploits changing customer preferences. Zara utilizes Just in Time
strategy to create and deliver fashionable and trendy products which caters to the needs of
different types of customers. In this context, production is carried out minimally to
reduce wastage in an efficiently integrated and controlled system. As stated by Ahmad,
Ayman & Samer (2017) the Just In Time is operational strategy which is being borrowed
from Japanese technology that helps in controlling operational procedures and inventories
of company by minimizing wastages and by reducing defects in production process. It
also helps in reducing costs of inventory and production time. Zara has capitalized with
Just in Time Strategy by keeping inventories in check which helps to maintain high
volume of production in-house. The JIT concept also insures that Zara’s own factories
reserve about 85% of their capacity for in-season adjustments through significant control
of production in-house and this permits Zara to maintain high level of flexibility in
variety, amount and frequency of new goods to be produced. As stated by Terjesen &
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Patel (2017) besides possessing flexible production mode, Zara also depends on highly
sophisticated process of manufacturing products from the facilities which are located near
to their design locations in Spain. Though the cost involved is relatively higher but Zara
highly benefits from turnaround time which makes it highly efficient. This particular
strategy also ensures that they have adequate time to make adjustments for their designs
midway through the season as Zara always has extra capacity in hand to respond to
demand as it develops and changes. Like Zara typically operates 4.5 days/week round the
clock in full capacity leaving flexibility for extra shifts and temporary workforce to be
added when required.
2. Zara has managed to outperform its competitors through its process innovation in an
effective manner by increasing efficiency of their supply chain through ensuring full
control of each and every step of operations. Like Zara have inventory optimization
models which helps to estimate quantity that should be delivered to each of their retail
outlets through shipments that goes out twice per week. This strictly limited stock
delivery ensures that each store of Zara gets just what they need and this build
exclusiveness of their brand while avoiding buildup of unnecessary stocks. This quick
in-season turnaround from production units close to Zara’s distribution facilities allows
them to ship more regularly and in small batches which helps them outperform
competition. Also compared to competitors, Zara do not spend more money on
advertisements and commercials because they focus on spreading their brand awareness
through verbal communication with customers and with their labels on their customized
packages. Also, because of their process innovation Zara is able to quickly respond to
demands of market from their factory in La Coruna. As opined by Hervas-Oliver,
Sempere-Ripoll, Rojas Alvarado & Estelles-Miguel (2018) Zara has innovative
manufacturing processes in place which allows them to be quick in responding to market
demands and accordingly in designing and sending products to their various retail outlets.
They also continue re-designing of their existing products in this period of time which
helps to maintain adequate supply. Another main process innovation aspect which
enables Zara to outperform their competitors is that only 15-20% of their products are
manufactured before the start of particular season, around 50-60 % during the start of
season and rest of the products are manufactured during the season based on requirement
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of customer and existing market trends. Another aspect of process innovation which
helps Zara in outperforming is that their design team creates nearly 40,000 deign in a year
among which 10,000 are selected for production and also they can design, produce and
deliver new garment and put it on display in their stores worldwide in just 15 days.
Further, Zara’s process innovation makes them fast and market responsive in nature
which helps to outperform their competitors in the market.
3. Despite the success of an agile and lean supply chain management, it can be observed
that there are some weaknesses of Zara which requires improvements in order to continue
as an innovative fashion retailer in market. The first and foremost recommendation to
Zara is to improve their e-commerce operations in which they are currently performing in
below average manner. The current world is inclined towards use of internet in selling
products and Zara has been left behind in this context. Although their current strategy is
highly effective in nature but still Zara needs to design an effective e-commerce tool
which will help them to reach to their customers in different regions. The other
recommendation is to form strategic alliances with their customers for more effective
management of their supply chain. As opined by Maier, Olaru, Weber & Maier (2014)
Zara should focus on forming horizontal collaborations with other retail players present
in market along with extension of the concept of game theory which will enable them to
benefit from minimal supply chain disruptions through neutralization of procurement
issues during terrorist attacks which hits supply chains operations.
References
Ahmad, F. A., Ayman, B. A., & Samer, E. D. (2017). The mediating role of product and process
innovations on the relationship between knowledge management and operational
performance in manufacturing companies. Business Process Management Journal, 23(2),
349-376. doi:http://dx.doi.org/10.1108/BPMJ-03-2016-0047
Hervas-Oliver, J., Sempere-Ripoll, F., Rojas Alvarado, R., & Estelles-Miguel, S. (2018). Beyond
product innovation: Deciphering process-oriented innovators, complementarities and
performance effects. Technology Analysis & Strategic Management, 30(5), 582-595.
doi:http://dx.doi.org/10.1080/09537325.2017.1347623
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Maier, D., Olaru, M., Weber, G., & Maier, A. (2014).Business success by understanding the
process of innovation. European Conference on Innovation and Entrepreneurship, 534-
538. Retrieved from https://search.proquest.com/docview/1674840950?accountid=30552
Terjesen, S., & Patel, P. C. (2017). In search of process innovations: The role of search depth,
search breadth, and the industry environment. Journal of Management, 43(5), 1421-1446.
doi:http://dx.doi.org/10.1177/0149206315575710
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