Operations management relates to all processes that take place in an organization. These processes include management of purchases, inventory, logistics and human resources. Emphasis is placed on effectiveness and efficiency of these processes (Jones & Robinson 2012, pp. 3).
Successful operations management result into efficiency and effectiveness of the overall strategy of an organization. Successful operations management result into improved competitive advantages of an organization. The management of Zara provides a perfect example of successful operations management.
The company has operations in approximately 50 countries. Many organizations in the textile industry manufacture clothes in bulk and offer low prices for their products. However, Zara provides clothes that consumers desire as long as they feel that the clothes are fashionable and exclusive. Zara can design, produce and make a cloth available to consumers in two weeks. The rapid supply chain enables Zara to stock clothes faster than competitors.
Zara is the main brand of Spanish retailer Inditex SA. Inditex SA is a leading company in the textile industry in the world. The company opened the first Zara retail shop in La Coruna, Spain in 1975. Currently, the company has its headquarters in La Coruna. It has shops in various cities in America, Europe, Asia and Africa.
The company has experienced continuous growth in sales every year since its establishment. In the last five years, sales have increased by approximately 25%. Zara contributes approximately 80% of Inditex SA’s revenue (Ferdows, Lewis & Machuca 2003, pp. 63). However, its competitors, like Mark and Spencer, have experienced a reduction in profits. Operation strategies that Zara uses have enabled it to achieve success in business. This paper discusses the operation strategies in Zara that provide it with competitive advantages.
Supply chain systems play pivotal roles in the success of companies. Supply chain strategies provide a company with methods through which it can differentiate itself. Supply chain management integrates all processes related to flow of information, materials and finance in an organized manner. Zara’s supply chain management considers control of product design, inventory, logistics and information systems (Caro & Gallien 2010, pp. 259).
The company can design and provide fashionable clothes to consumers within a short time. The existence of a controlled and mixed process makes this possible. The company includes the commercial and procurement teams, stylists and market analysts in the entire production processes. Store managers are also included in the production processes. All the people included in these teams provide ideas collected from various sources. Designs that meet the needs of the market are then selected.
This enables Zara to meet the fashion requirements of the clients that it has. The inclusion of all teams in the production process improves Zara’s competitive advantages. The strategy reduces decision assembly time. Decisions are made in one room, and all team members have access to vital information. The strategy also reduces uncertainty related to designs selected.
The success of a production process depends on procurement of required materials. The procurement of materials at Zara enables it to improve its competitive advantages. Zara produces 60% of the clothes that it sells. The company has flexibility in the quantity, frequency and diversity of the products that it offers. However, it has less outsourced production compared to its competitors.
Zara has twenty two production facilities worldwide (Caro, Gallien, Díaz, García, Corredoira, Montes, Ramos & Correa 2010, pp. 75). The facilities have the capacity to respond to changes in demand. On the other hand, Zara’s competitors have overseas suppliers. These suppliers do not provide the flexibility required to respond to unforeseen changes in demand.
The company only outsources labor-intensive tasks. Thus, the procurement practices at Zara saves labor costs, provides flexibility in production processes and ensures maintenance of quality of the produced products. Therefore, the procurement practices provide Zara with competitive advantages.
Successful operation management also requires effective information systems. Information systems relate to the flow of information in an organization. Information systems at Zara ensure success of the fast response strategy in management of the organization. Store managers at Zara have micro computers with which they use to send information to the organization’s headquarters.
They send information on customers’ comments, fashion trends and placement of orders. Designers can send information to production facilities and distribution centers using computers. They can scan the designs they have developed and send them electronically. The designs are fed into CAD systems that then send them into machines (Ferdows, Lewis & Machuca 2003, pp. 67).
The use of information systems at Zara reduces the time used in the dissemination of messages. Additionally, it minimizes the wastage of fabrics since the information systems are connected to production machines. The information systems used at Zara provides competitive advantages to the organization.
Inventory refers to the supplies and products that a company has stocked. Companies maintain inventory to stabilize production, meet demand, achieve flexibility and prevent losses. Inventory management is the control of products and materials maintained by an organization. Effective inventory management has enabled Zara to gain competitive advantages in the textile and fashion industry.
Zara maintains a low inventory level compared to its competitors (Caro & Gallien 2010, pp. 265). It avoids maintenance of a large inventory in its entire supply chain system. The company maintains a small inventory to ensure reduction in risks. Additionally, a small inventory level ensures that finances are not tied up. Maintenance of a small inventory also enables Zara’s products to be exclusive.
The office layout at Zara is also an operational strategy that ensures success of the organization. Plant layout refers the organization of the production centers and offices. The overall goal of plant and office layout is to streamline the flow of information and materials in an organization. Appropriate plant and office layout also improves the utilization of human capital and other resources.
Zara uses plant and office layout that ensures free flow of information. The layout design used by the company eliminates layers of bureaucracy between departments and workers. The layout design also ensures efficient operational procedures and effective performance mechanisms. The layout enables the inclusion of the workers in the production processes.
It also ensures success of the quick response strategy that the company adopted. Hence, the layout of the production facilities and the offices of Zara have enabled the company to attain competitive advantages over its competitors.
The other operational strategy that has enabled Zara to realize competitive advantages over its rivals is the combination of business approach and processes. The company uses both upright and level integration in its expansion tactic. Zara copies styles from the catwalk and fashion conferences. It then designs, produces and issues clothes within two weeks. In addition, Zara owns the entire supply chain system and uses speed in competition.
Zara’s production operations are connected to the fast response business strategy. The operation processes that the company uses allow delivery of clothes from concept to distribution stores within two weeks (Caro, Gallien, Díaz, García, Corredoira, Montes, Ramos & Correa 2010, pp. 73). Possession and management of the production facilities and distribution centers allow success of the rapid reaction business strategy.
The distribution centers are equipped with hi-tech systems that improve delivery of goods to customers. Furthermore, Zara uses sales staff to conduct market examination. This allows the company to respond quickly to customers’ preferences, comments and needs.
The use of a centralized logistics and distribution system has also enabled Zara to achieve competitive advantages. Zara uses a system that is predictable, adaptable and quick in production and distribution of clothes. The central logistics and distribution center receives orders from each store twice a week. An order from each store is received on a specified day and at a given time.
Ordered clothes are then transferred to the distribution centers overnight. Distribution trucks also leave the production facilities at specified times. Additionally, they arrive at the distribution facilities at a specified time. The produced clothes are labeled and priced before they are shipped from the production facilities (Ferdows, Lewis & Machuca 2003, pp. 63).
Hence, the centralized logistics and distribution system used by Zara has enabled the company to achieve efficiency in the production processes. The centralized system ensures that all workers involved in the production and distribution of goods know their roles. Furthermore, customers know when they can get fresh designs.
The regular rhythm of the production processes makes customers know the exact days of the week when they can visit stores and get new designs. The use of a centralized logistics and distribution system also enables Zara to react to fluctuations in demand. This enables the company to produce and distribute a product within two weeks.
On the other hand, it takes Zara’s competitors approximately six months to produce and distribute a new design. Hence, the centralized operation management system provides Zara with competitive advantages.
Finally, low promotion and advertisement costs are the other operational strategies that have enabled Zara to attain competitive advantages over its competitors. Many fashion organizations use approximately 4% of their revenues on promotion and advertisement.
However, Zara spends between zero to 0.3% of its income on promotion and advertisement. The company depends on the word of mouth promotion strategy. It also depends on store arrangement to promote itself. The arrangement of clothes in the stores projects the image of the company.
In conclusion, Zara’s strategic model has enabled success of the company in the fashion industry. Zara has become the leader in the industry due to effective operations management. The design of the supply chain in the company ensures free flow of information and goods.
The supply chain, layout of facilities and other processes improve competitive advantages that the company has. Zara capitalizes on its strength and speed to maintain leadership in the fashion industry. Effective operations management has enabled it to achieve leadership.
List of References
Caro, F & Gallien, J 2010, ‘Inventory Management of a Fast-Fashion Retail Network’, Operations Research, vol. 58, no. 2, pp. 257-273, Business Source Complete, EBSCO host.
Caro, F, Gallien, J, Díaz, M, García, J, Corredoira, J, Montes, M, Ramos, J & Correa, J 2010, ‘Zara Uses Operations Research to Reengineer Its Global Distribution Process’, Interfaces, vol. 40, no. 1, pp. 71-84, Business Source Complete, EBSCO host.
Ferdows, K, Lewis, M & Machuca, J 2003, ‘Zara’, Supply Chain Forum: International Journal, vol. 4, no. 2, pp. 62-66, Business Source Complete, EBSCO host.
Jones, P & Robinson, P 2012, Operations management, Oxford University Press, Oxford.