Analyzing Zara's Business Logistics: FMEA and Six Sigma Frameworks

This report provides an analysis of Zara's business logistics, focusing on Failure Mode and Effect Analysis (FMEA) and the Six Sigma framework. The introduction highlights the importance of business logistics, particularly inventory management, for companies like Zara. The main body delves into the application of FMEA to mitigate risks in Zara's Asian distribution centers, covering steps like failure mode identification, severity ranking, and action plan development. The report then explores the Six Sigma framework to enhance customer satisfaction by addressing issues like stock-outs, damaged goods, and delivery times. The analysis includes the stages of Define, Measure, Analyze, Improve, and Control within the Six Sigma methodology. The conclusion emphasizes the significance of these frameworks in addressing business challenges and improving customer satisfaction. The report leverages these frameworks to analyze and address logistical challenges, offering strategic recommendations for Zara's operational improvements and customer satisfaction enhancement.

BUSINESS
LOGISTICS

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Failure Mode and Effect Analysis (FMEA) methodology to analyse the ways to mitigate the
risk associated with Zara's distribution centres in Asian countries.............................................3
Six Sigma Framework to analyse the ways to increase the customer satisfaction......................6
CONCLUSION ...............................................................................................................................7
REFERNCES:..................................................................................................................................8
Books and Journals:....................................................................................................................8
Online-.............................................................................................................................................9

INTRODUCTION
Business logistics is the concept which is related to group activities which is related to
storage and movement of information and products from company side. It consist of the process
from purchasing raw material to the preparation of finished goods and transferred it to the end
customers (Klumpp, 2018). It is essential for an organisation to manage their inventory
appropriately for gaining high success in future. Zara is one of the most popular company in
fashion industry which was founded in the year 1975 and it is headquartered in Municipality of
Arteixo, Spain. There are 2270 stores of Zara at worldwide level and it also sell its products
through online mode (Kala. K., 2018). The company is popular due to its activities like adopting
trends as soon as possible and offer a unique and good quality of dress codes to their customers.
The following report covers Failure Mode and Effect Analysis (FEMA) methodology to analyse
the ways to mitigate the risk associated with Zara's distribution centres in Asian countries. It also
covers Six Sigma Framework to analyse the ways to increase the customer satisfaction.
MAIN BODY
Failure Mode and Effect Analysis (FMEA) methodology to analyse the ways to mitigate the risk
associated with Zara's distribution centres in Asian countries
Failure Mode and Effect Analysis is an framework which will help to analyse the failure factors
in during the design stage so that the company will identify the chances of their failure and what
al;l strategies will help them to mitigate the negative effects of failure upon company (Li, Diaz
and Soares, 2021). There is a big risk of failure in design stage of an product or services. Hence,
a company is required to prepare for the outcome whether is it success or failure and FMEA
analysis will help a company to identify how they can fail and in future so that they will prepare
some effective strategies to mitigate failure factors. The best time to performing FMEA
framework is when a company is designing any new product, services and even a new process
within their company. It is also required when a company plans a new existing process for their
company and for a specific goal of a quality improvement. There are ten steps in performing this
model for a company and this is mentioned below in context of Zara-
 FMEA Pre-Work and Assemble the FMEA Team- It consist of collecting the essential
documents required which is required by a company to analyse the failure factors which
already exist in their past. It also include to prepare a team for conducting this analysis

for the company. In context of Zara, they can hire only those employees for this work
who are enough capable to analyse the things well and collect marketing data effectively.
The team members of FMEA team should include only those employees who had worked
for longer period of time within the company because they are well known about past
experience and past failures of the company.
 Brainstorm potential failure modes- This is the stage where the team review all the
data and documents which they have collected from past experience as well as present
working condition of the company (Anjalee, Rutter and Samaranayake, 2021). In context
of Zara, there could be three major risk in their designing process of clothes which are
technological factor, they machines in cutting and making the design of their cloths.
Hence, in case of any technical error or wrong coding then the measurement for cutting
cloths will be impacted negatively. Ineffective inventory management is another risk for
Zara. The last risk can be related to quality of product because it may happen that the
company will produce quality products but the quality will get effected in long delivery
process and transportation process from one place to another.
 List potential effect of each failure- There are huge effect of each failure like in the case
of technical issue, the wastage of raw material can be seen or this can even ruin brand
image if they sell wrong cutting piece of cloths in market (Subriadi and Najwa, 2020).
Secondly, ineffective management of inventory will effect upon the company's earning
proportion. The last risk which is improper delivery process which further results in
declining the quality of product will effect to dissatisfaction of customers and when
customers start d9issatisfied then they will plan to switch the brand.
 Assign severity ranking- It is based in the hardness of the consequences of the failure
(10 steps to do a process of FMEA, 2022). In context of Zara, this ranking should be
given to each factor of failure like-
1. Technical issues- 4
2. Improper management of inventory- 5
3. Impact on quality due to delivery process- 6
 Assign occurrence ranking- It include to rate the severity of each effect using
customised ranking scale as a guide. In context of Zara, this ranking should be given to
each factor of risk like-

1. Technical issues- 2
2. Improper management of inventory- 2
3. Impact on quality due to delivery process- 4
 Assign detection ranking- It include the chances of the failure which will be detected
prior to occur (Zhang, Xiao and Dong, 2019). In context of Zara, this ranking for each
risk factor is mentioned below-
1. Technical issues- 3
2. Improper management of inventory- 7
3. Impact on quality due to delivery process- 3
 Calculate the RPN- It is calculated by multiplying all rankings (severity ranking X
occurrence ranking X detection ranking). In context of Zara, RPN calculation for each
factor is mentioned below-
1. Technical issues- 4x2x3= 24
2. Improper management of inventory- 5x2x7= 70
3. Impact on quality due to delivery process- 6x4x3= 72
 Develop the action plan- It include to analyse the highest impact of mentioned risk for
the chosen organisation and then analyse the mitigation strategies for that specific factor
(Boral and et. al., 2020). In context of Zara, it is analysed from the above mentioned
ranking calculations that the highest affecting factor for the company is the risk of
damaging the quality of products in delivery process. This issue can be mitigated it the
company can use their own vehicles to make sure that the dresses will be placed in their
physical stores as soon as possible. Secondly, they can use high quality of packaging
materials from their manufacturing area itself so that the products will not get damaged
while transporting it to one place to another. To mitigate the risk of technical issues, Zara
is required to hire high quality of tools and machines and make sure that their software
will be updated on regular basis to avoid any error. To mitigate the risk of ineffective
inventory management, Zara is required to follow the technique of First In First Out
which makes sure that the products which comes first at warehouse or inventory room
will be move out first to manage inventory appropriately.
 Take action- This is the stage where plan is converted into action. In context of Zara,
they can implement their plan effectively by preparing a appropriate budget for

improving their packaging system and making sure that the product will be delivered to
end customers with full quality.
 Calculate the result RPN- It include to review the performance well.
Six Sigma Framework to analyse the ways to increase the customer satisfaction
Six Sigma framework is having 5 stages which will define the issues and mitigation
strategies for a company to help them to satisfy their customers better. It will help the business of
Zara by reducing the errors for producing their products and to conduct any other business
function. The application of Six Sigma Framework for Zara is mentioned below-
Define- This is the stage where a team will recognize that what is their main aim to
perform the project and what they will get by doing it so (Antony, 2018). Here, the business
issues is defined from the perspective of customer. In context of Zara, their main issues is related
to their stock out frequency, delivering damage free items and delivery time. Their most of the
customers are complaining about their quality which is damaged in delivery process and they
took longer time to deliver their products due to which their physical stores may face stock
issues.
Measure- This is the stage which define that how much the determined factor is
impacting upon the company and it's performance (Moya and et. al., 2018). Here, Zara can scan
their current environment and relate it to the issues which they determine. It is determined that
their customers are dissatisfying with the quality of Zara and the long delivery time. Hence, due
to this their most of the customers have switched to other brand and some are planning to switch
if they did not take corrective actions to mitigate this issue.
Analyse- This is the stage which will help to know about the root of the problem. It will
help the company to analyse process and problem effectively (What is Six Sigma: Everything
You Need to know About it, 2022).
Improve- It will help to identify the solution of mentioned problem. In context of Zara,
they can focus to mitigate their issue of lack of inventory by adopting high quality of
communication tools and techniques so that the employees within the stores will convey their
message to warehouse or production department directly to manage inventory for their stores.
For ensuring that their products will deliver to their customers without getting any damage then
they should use high quality of packaging materials and must make sure that they will use their
own transportation facilities to deliver the product from one place to another. Secondly, to ensure

the delivery time, the company is recommended to use GPS tracker in their transportation
vehicles to help customers to get to know that how much time is required by the vehicle to
receive at their doorstep.
Control- This is the last stage of Six Sigma framework where the plans are implemented
in real situations (Al-Qatawneh, Abdallah and Zalloum, 2019). It is suggested to the company
that they must plan a fix budget for managing their cost effectively to use their own vehicles and
improved communication systems for their organisational benefit. Effectively managed
inventories and delivering the quality products to customers in minimum time will help the
company to gain high customers satisfaction which is one of the most priority mission of the
chosen organisation.
CONCLUSION
From the above information it is concluded that analysing business issues is one of the
most important task for the companies to grow well in future. FMEA is the framework which is
used to analyse the issues and mitigate it well in technical manner. It mainly focus on future
aspect that what kind of issues and challenges a company can face in their production and
product design process. Six Sigma is another framework to focus on the satisfying customers
effectively and mitigate those obstacles from the company which will cause customer
dissatisfaction.

REFERNCES:
Books and Journals:
Al-Qatawneh, L., Abdallah, A.A. and Zalloum, S.S., 2019. Six sigma application in healthcare
logistics: a framework and a case study. Journal of Healthcare Engineering, 2019.
Anjalee, J.A.L., Rutter, V. and Samaranayake, N.R., 2021. Application of Failure Mode and
Effect Analysis (FMEA) to improve medication safety: a systematic
review. Postgraduate Medical Journal, 97(1145), pp.168-174.
Antony, J., 2018. A conceptual Lean Six Sigma framework for quality excellence in higher
education institutions. International Journal of Quality & Reliability Management.
Boral, S. and et. al., 2020. A novel hybrid multi-criteria group decision making approach for
failure mode and effect analysis: An essential requirement for sustainable
manufacturing. Sustainable Production and Consumption, 21, pp.14-32.
Klumpp, M., 2018. Automation and artificial intelligence in business logistics systems: human
reactions and collaboration requirements. International Journal of Logistics Research
and Applications, 21(3), pp.224-242.
Li, H., Diaz, H. and Soares, C.G., 2021. A developed failure mode and effect analysis for
floating offshore wind turbine support structures. Renewable Energy, 164, pp.133-145.
Moya, C.A. and et. al., 2018. A new framework to support Lean Six Sigma deployment in
SMEs. International Journal of Lean Six Sigma.
Subriadi, A.P. and Najwa, N.F., 2020. The consistency analysis of failure mode and effect
analysis (FMEA) in information technology risk assessment. Heliyon, 6(1), p.e03161.
Zhang, H., Xiao, J. and Dong, Y., 2019. Integrating a consensus-reaching mechanism with
bounded confidences into failure mode and effect analysis under incomplete
context. Knowledge-Based Systems, 183, p.104873.

Online-
Kala. K., 2018, FASHION HISTORY- ZARA, [Online] available through:
<https://medium.com/@kalyanii8927/fashion-history-zara-19ac531d9ab1/>
10 steps to do a process of FMEA, 2022 [Online] available through:
<https://fmea-training.com/10-steps-process-failure-mode-and-effects-analysis/>
What is Six Sigma: Everything You Need to know About it, 2022 [Online] available through:
<https://www.simplilearn.com/what-is-six-sigma-a-complete-overview-article/>