Supply Chain Management & Zara Case

This assignment delves into the world of supply chain management, focusing on the case study of Zara, a global fashion retailer known for its rapid response to trends. It requires an examination of Zara's operational model, highlighting their ability to manage risks effectively while maintaining a competitive edge in the fast-paced fashion market. Students will analyze key aspects like production planning, inventory control, and logistics, drawing upon relevant academic literature and real-world examples.

Operations Management 1
OPERATIONS MANAGEMENT
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Operations Management 2
Table of content
1.0 Introduction………………………………………………………………………3
2.0 Principal Operation Tasks……………………………………………………...…4
2.1 Design process……………………………………………………….……4
2.2 Products Development Process……………………………………………5
2.3 Distribution Process…………………………………………………….…5
3.0 Analysis of Process strategies…………………………………………………..…6
3.1 Retail Process………………………………………………………………6
3.2 Inventory Management………………………………………………..……6
3.3 Communication and Marketing……………………………………..………6
4.0 Operations Management Success……………………………………………………7
5.0 Operation Challenges…………………………………………………………..……8
6.0 Conclusion and Recommendations……………………………………………….…9
7.0 References…………………………………………………………………….…….11

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OPERATIONS MANAGEMENT
1.0 Introduction
Success in any business has for a long time been attributed to be based on strategic management
of its key functions and operations. Today’s vast technological advancements have
tremendously increased competition in global business space. One way of evaluating
sustainability of a business is by assessing its grip in the market of concern. Zara is a company
that specializes in retail services of textile products, mostly clothes and bags. It was founded in
1975 and is a subsidiary of Inditex, the predecessor and manufacturer of the retailer’s products.
Market domination depend on how best services or products are provided and the extent to
which customers or clients are satisfied. This satisfaction is attained through operations functions
that create and deliver services and products to an organization.
Zara is facing tough competition from main rivals such as Benetton, Gap and H&M, all who are
looking forward to a greater share in the market. One of the major advantages Zara has over
other competitors is the direct control and coordination from the mother company, Inditex. The
present state of success at Zara can be attributed to its consciousness to factors affecting its
operations directly and indirectly. The fact that it developed and established a unique supply
chain has enabled the business to lead the fashion industry. PESTEL analysis of Zara will help in
understanding its contributions in the fashion industry, based on its performance in relation to
external and internal environmental factors (Khanna, 2015).
The company’s unique philosophy and policies contribute to its success in a great way. High
delivery speeds, short response time, use of technologically advanced approaches, good use of
organizational resources, timely operations, legal compliance and adoption of vertical integration
are the core competence attributes that have placed Zara in its strategic position in fashion
business. Politically, the business has achieved cross boarder penetration to experience presence
in different countries in and regions. This has been achieved over time and in chronological
manner. Zara first opened up its expansion for international coverage in 1988 when the business
entered Portuguese market. In 1989, it entered the United States then France in 1990 followed by
Mexico (1992), Belgium, Sweden and Greece in 1993. It furthered its international penetration to
cover Asia with entry to Japan in 2002 then Russia and Malaysia in 2003, China and Romania in
2004, Indonesia (2005), South Korea (2008) and India in 2010. In 2011 Australia and South
Africa were reached.

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Technologically, the company is diverse and advanced. In September 2010, Zara opened its first
online stores in Spain, Portugal, Germany, the UK and France. Online services then extended to
five other countries in November the same year. This included the United States (2011), Canada
and Russia (2013) followed by openings in Romania, South Korea and Mexico in 2014. To
further enhance service delivery, introduction of use of RFID technology was launched in 2014.
This technology involves use of RFID chips placed in tags to monitor stock. When an item is
sold, a signal is received from RFID chip which notifies the stockroom to make replacement.
2.0 Principal operation tasks
2.1 Design process
To ensure smooth and well-coordinated design process is one of the key task of operations
management in this company. Zara has organized its design procedures in a way that spells big
difference from what the competitors do. To achieve this, three separate functions are managed
in coordination to ensure the input variables and parameters are in compliance to the expected
high quality products that will satisfy customers to their best interests. This is done through a
controlled design process in form of a production principle that is described as “just in time
production”. The three functions comprise of designers, customers who place orders and market
specialists. At Zara, operations are categorized with consideration of men, women and children
wear. In close proximity to the retail stores and in different localities across all regions that Zara
covers, are offices for designers and market specialists (Chen, 2015).
These offices are strategically located so as to critically capture the third necessity of input for
improvement of designs; the customers. The specialist and designers engage customers in small
workshops within their offices to discuss and experiment various design prototypes. This
strategic positioning of designers’ and market specialists’ offices next to retail stores allows them
to constantly engage in timely discussion of various aspects arising from customers reactions to a
new design in the market. This helps the company to know what feedback to expect and react
accordingly. It is for this reason that customers are always astonished that their suggestions about
a design appears to be considered in real time and that new designs incorporating their
suggestions are placed in the market in very short periods of time. This strategy ensures a closed
loop system whereby the retail stores do not mark the end of supply chain but important
beginning of next new styles and designs that are more enhanced and more detail oriented
(Taghipour & Frayret, 2013). This improves the input parameters in the next generation products

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vehemently resulting into greatly improved products with customers’ considerations well taken
care of. Zara has over 300 designers producing over 40,000 designs of various items per year.
However, only about a quarter of this go to production. This is because of the thorough analysis
that the designs undergo through further modelling and such considerations as change in market
trends that could alter certain needs in some designs.
2.2 Product development process
One big problem facing fashion industry is the nature of preferences which change drastically as
products go out of trend constantly and irregularly. This makes it difficult for manufacturers to
plan for production, shipping of products and retailing them to designated stores. Zara faces
relatively smaller number of challenges in comparison with its competitors since it enjoys highly
coordinated planning that sees designs influenced at the retail by customers, designers and
market specialists. This relieves the pressure that results from uncertainty of market behavior.
Furthermore, for Zara, production to shelf cycle of new designs occurs within 15 days which is
twelve times more the average of competitors who receive new designs and styles only once or
twice in a season. The fact that the company is vertically integrated makes it easy to produce and
purchase majority of products such as dye from other subsidiaries. In order to maintain flexibility
in volume, the company employs factory workers on single-shift system (Min, 2015)
2.3 Distribution processes
The company has invested massively in technology. Automated warehouses are strategically
situated near to production centers. This is where storing, packaging and assembling of specified
orders for retail networks are carried out. These automated warehouses form a large investment
and the company still seeks to expand the capacity even though the utilization of the existing has
never been fully exploited. This is based on the company’s believe in providing more designs
without causing unnecessary clogging in the warehouses as a result of jamming orders. With the
aid of the automation in the warehouses, the company is able to deliver new designs in desired
amounts to satisfy the rapidly increasing market demands. This automation plays a major role in
coordinating design house activities and warehouse activities that determines the available space
at any given time.

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3.0 Analysis of process strategies
3.1 Retail process
All Zara’s retail stores are partially ran and managed by Inditex since it has a significant role in
controlling productions of new designs and orders. The distinguishing characteristic of Zara as
retailer is that products only stay in retail store for a maximum period of two weeks. The product
designs are not repeated and it is recommended that they are produced in controlled amounts.
This is aimed to enabling displays in the stores to change radically after every two weeks. It
works for the company as customers will avoid delaying in making a purchase. It also
encourages them to visit the retail stores more frequently in order to remain updated about new
designs. The target customers are mostly young and those living in urban.
3.2 Inventory management
Zara has the least inventory based on annual sales in comparison with its global competitors.
Operations management have achieved this by setting working strategic plans. Computerizing of
production, warehousing and retail outlets has been a driver towards achieving low inventory. In
addition, the cleverly design of short supply chain boosts reduced lead time of 10-15 days
beating by large margin the rest of industry’s average of 5 to 6 months. Zara’s business models
lie under revised methods that ensure sufficiently fast supply chain which enables production of
fashionable current generation wear. The policy of inventory renewal after every two weeks and
provision of new designs within two weeks helps in avoiding excessive inventory. New designs
are frequently made available in the outlet stores with limited shelf life, a strategy that aims not
only to entice customers to buy without much delays and which also encourage them to return
more regularly as new items are constantly introduced after 2-3 weeks. From execution of these
policies, Zara has seen customers making an average of 17 visits per year which is far much
higher when it compares with the average of three visits per year in competitors’ stores (Hansen,
2012). By use of these methods and by the help of company’s advanced inventory system, it is
becomes possible to reduce and sometimes completely avoid financial risks related to large
inventory stock.
3.3 Communication and marketing
Communication is an important aspect when it comes to synthesis of operations management
models, operations principles and product development functions. Zara boasts of well-
established communication channel which enhances strong connections among product

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development function, operations function and sales function (Usui, et al, 2017). The perfect
coordination between manufacturing functions and retail functions, has played a key role in the
success of the retail business. This is important for both parties since the design prototypes and
customer feedback are essential entities in the manufacture of new designs. Similarly, the
viability of retail business depends on competence of delivery functions during manufacture.
Each of the company’s head office team of designers, market specialists, liaison managers and
other stakeholders work collaboratively to strategize operations and analyze current trends in the
market so as to produce new products that best satisfies current market requirements (Chopra &
Sodhi, 2014).
Every store manager is expected to place orders for products two times in a week, although this
is based on the intelligence they gather from the market. Communication with designers on
findings from reviews of formal and informal feedback, is planned to take place on daily basis.
The intersection of information gathered from this analysis and that from monitoring systems
provide a focal point from which supply processes can be controlled. This brings about a
situation that stimulates a strategic approach to make accurately estimated supplies that are based
on current trends and which match exactly with customers’ expectations .Zara does not make
conventional advertisements like coca cola and other commercially advertised brands do.
Instead, the company employs other cleverly means to make its products popular among
consumers. Since the target consumers are young people and urban dwellers, enticing them to
make purchases involves encouraging them to interact with products as much as possible. This is
achieved by company’s policy of frequent changes in designs, uniqueness and inducement of
artificial scarcity. This makes the customers regular visitors of the outlet stores and in the
process, word of mouth advertisement is achieved (Sanders, 2016).
4.0 Operations management success
The company has dedicated resources in attempts to achieve short lead time. Short lead time
allows fashion forward clothing with the aim of capturing quick responding yet fashionable
customers. In this regard, the stores are observed to carry only the products in demand at a given
time (Rangel, et al, 2015). Zara determines necessity of a specific trend and provides the trendy
style in 30 days. This is made possible through careful analysis of customers’ preference and
with the help of modern factories with equipment that are able to quickly react to change in

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trends by taking information from received reports, processing it and producing required styles in
2-4 weeks (Moreira & Tjahjono, 2016).
Of great interest is the policy of production of low quantities per style of design as a means of
generating artificial scarcity. This is in accordance with the common philosophy in business, that
the more the scarce a product is, the more important it becomes to a consumer. In addition to
impression created about a given style, reduced exposure time will eliminate criticism that may
arise from the product overstaying in the market (Pearlson, et al, 2016). It also reduces the risk of
loss from oversupply of a given style or if it does not work well. Scarcity will cultivate some
kind of uniqueness and this will attract more customers to the retail stores. Production of more
styles enables customers to have more options to choose what they prefer from. Zara produces
about 12000 styles per year, the rate which none of the competitors have been able to produce.
Even if a given style does very well in the market, it equally gets replaced in time-base manner
as the rest of styles. This is the policy at Zara and it has worked for years. Zara provides most
styles per fashion than its competitors who opt to providing more quantities in one style
(Lingzhe, & Daniels, 2017). The success achieved through these diverse and intelligently crafted
operations with the aim of providing maximum customer satisfaction impacted in a big way
towards Zara being ranked 30 in the list of global best brands by Interbrand in 2015.
5.0 Operation challenges
One of the major challenges Zara is currently facing is low growth rate of market share. This is
mainly pointed to be due to reluctance in adopting new marketing strategies. As time and designs
changes, so is the customers’ approaches of doing things. With the rising use of technology,
many people would not feel comfortable doing things in the old way while there is convenience
that comes with technological advancements. It is therefore possible that the low rates of growth
of market results from failure to reach all potential customers (Krajewski, et al, 2013). Another
problem that the business faces is social and cultural differences in different countries and
regions. These differences pose some sensitive threats that are detrimental to company’s
progress. For example, the claims of swastika symbol on one of designs in 2007 was interpreted
to mean that Zara had been openly anti-Semitic. Another claim appeared in 2014 that a design T-
shirt by Zara resembled some uniforms worn by Jewish inmates. This received a lot of criticism
in Israel with claims that Israel do not have Sheriffs. Such incidents that results from cultural and
religious conflicts always force the company to immediately withdraw the controversial design

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after only a few hours of display thereby incurring losses to the company. Legal issues in
different countries cause hard time during entry in those countries. Some countries pose complex
legal requirements that make it hard to conveniently operate in such localities. Other related
challenges include poor implementation of copyright laws to protect company’s designs (Galliers
and Leidner, 2014).
6.0 Conclusion and recommendations
Zara as a leading fashion retailer has demonstrated great competence in textile and garment
industry. The company has been able to achieve great success through unique and strategically
planned operation management techniques. The company’s strong philosophy, governing
policies and principles are the key drivers of this success. Being the pioneer of fast fashion, Zara
has enjoyed great deal of market share given that it has provided great customer satisfaction.
Through its vertical integration and “Just in Time Production” policies, the company has been
able to achieve rapid products delivery to its customers (Caro, et al, 2010). Decision to
constantly expand its market and extensive use of technology to improve designs and to monitor
inventory has significantly increased its profits. However, some certain aspects of the fashion
market and those imposed by the company itself have posed challenges to progress of the
business (Fernie and Sparks, 2014). These includes the companies reluctance to adopt new
marketing policies, social cultural and religious conflict in some regions, increased competition
and lack of political good will in some instances. In response to the mentioned challenges, it is
recommended that Zara management should:
Adopt new marketing and advertising strategies
Zara needs to adopt unique approaches to advertisement and marketing operations so as to
capture more potential consumers. Although the adopted marketing strategy which does not
involve the traditional media advertisement, is working for the company, it does not imply that
the business has fully exploited the market. There is still more room to grow that can be achieved
by media marketing and advertisements. Since the business has expanded to cover some of
developing countries like India and South Africa, old marketing strategies may not work in such
developing countries. It is therefore necessary to adopt marketing strategies that will capture a
large number of consumers as this will help solve the problem of low rate of growth of market
share of developing world (Choi, Cheng & Zhao, 2016).
Review shelf-life

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Polices governing shelf-life of certain styles and designs need to be reviewed. It is necessary to
consider that different styles and designs would receive different reactions from customers’
perspective. It is therefore prudent to adopt new strategic plans that will allow shelf life based on
some parameters that are described by specific design’s competence in the market. This will
improve customers’ satisfaction and also improve the feedback about that design (Monczka, et
al, 2015).
Develop foreign market outreach program
These program should be planned and coordinated so as to enhance expansion of the business in
best way possible (Olhager, 2013). This program will greatly help resolve political, economic
and social issues that affect the business particularly in regions which need careful analysis of
designs and market intelligence. Understanding of social and cultural beliefs and behaviors
among different demographics, as a function of this program, will play a crucial role in
eliminating the misunderstandings previously experienced and those anticipated.

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7.0 References
Caro, F, Gallien, J, Diaz, M, Garcia, J, Corredoira, J, Montes, M, Ramos, J, & Correa, J 2010,
'Zara uses operations research to reengineer its global distribution process', Interfaces, 1,
p. 71, Academic OneFile, EBSCOhost, viewed 18 October 2017.
Chen, C.F., 2015. Study on the Application of I-Ching, Yinyang and Five Elements to Marketing
Strategy and Management.
Choi, T, Cheng, T, & Zhao, X 2016, 'Multi-Methodological Research in Operations
Management', Production & Operations Management, 25, 3, pp. 379-389, Business
Source Complete, EBSCOhost, viewed 18 October 2017.
Chopra, S. & Sodhi, M.S., 2014. Reducing the Risk of Supply Chain Disruptions. MIT Sloan
Management Review. Springs (2014).
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new
challenges in the retail supply chain. Kogan page publishers.
Galliers, R.D. and Leidner, D.E. eds., 2014. Strategic information management: challenges and
strategies in managing information systems. Routledge.
Hansen, S., 2012.How Zara Grew Into World’s Largest Fashion Retailer. The New York Times
Magazine, 9 November.
Khanna, R.B., 2015. Production and operations management. PHI Learning Pvt. Ltd.
Krajewski, L.J., Ritzman, L.P. and Malhotra, M.K., 2013. Operations management: processes
and supply chains (Vol. 1). New York, NY: Pearson.
Lingzhe, L, & Daniels, H 2017, 'Towards a Value-Based Method for Risk Assessment in Supply
Chain Operations', IUP Journal Of Operations Management, 16, 2, pp. 36-40, Business
Source Complete, EBSCOhost, viewed 18 October 2017.
Min, H., 2015. Principles of Supply Chain Management. FT Press, 25 June
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and
supply chain management. Cengage Learning.
Moreira, M, & Tjahjono, B 2016, 'Applying performance measures to support decision-making
in supply chain operations: a case of beverage industry', International Journal Of

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Production Research, 54, 8, pp. 2345-2365, Business Source Complete, EBSCOhost,
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Olhager, J 2013, 'Evolution of operations planning and control: from production to supply
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Pearlson, K.E., Saunders, C.S. and Galletta, D.F., 2016. Managing and Using Information
Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.
Rangel, D, de Oliveira, T, & Leite, M 2015, 'Supply chain risk classification: discussion and
proposal', International Journal Of Production Research, 53, 22, pp. 6868-6887,
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Sanders, NR 2016, 'How to Use Big Data to Drive Your Supply Chain', California Management
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planning co-ordination', International Journal Of Production Research, 51, 9, pp. 2715-
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Usui, T, Kotabe, M, & Murray, J 2017, 'A Dynamic Process of Building Global Supply Chain
Competence by New Ventures: The Case of Uniqlo', Journal Of International Marketing,
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