Posted at 10.13.2018
There is an increasing concern on lean procedure and offer chain management in the textile and apparel industry which has changed significantly over last decades, due to global sourcing and price competition. Among the main reason for the interest in supply chain management caused by apparel industry's unique characteristics, such as fast fashion and short product lifecycle. At the moment, lean operation and offer chain management played an important role in textile and apparel. This essay illustrates how an apparel company, Zara, achieved a tremendous success by take good thing about the practice of lean operation and offer chain. Lean procedure mainly focuses on eliminating waste and minimizing the time between a customer's order and delivery. Lean concept is a considerably faster, better and less-expensive way of receive the right done at the right place. It not only attempts to eliminate material waste, but also the reduce time in order to improve efficiency and improve processes. In other word, Lean procedure allows Zara to get low cost advantage and short lead times over its competitors.
2. Zara's operation management practice
Zara demonstrates clear advantages over its rivals by lean operations. Zara applies the latest software program and unique business ways of ensure that its overall capabilities are developed with their full potential. This leads Zara's business procedures performing more efficiently throughout all levels of the business. This enables Zara to not only update all relevant information, but also monitor and evaluate information such as sales, returns or pricing. These enhancements imply that efficiency is improved in all respects of the supply chain. sales can be precisely monitored at POS terminals across all stores allows Zara to identify when necessary strategic decisions need to be made in regards to supply and demand. Such communication between stores and other degrees of the supply chain.
This subsequently makes sure that the alignment between the demand at store level and the supply at its headquarters is optimal. Therefore stock control is more precise; shipment and replenishment is better and ordering time is minimal.
Zara's success is partly rely upon such lean operation and effective communication from customer to store manager, from retail sector to create section and from production to distribution. it takes benefit of lean operation to be able to manage almost every facet of design, marketing, production, retailing and distribution. A constant cooperation throughout every step of Zara's supply chain provides competitive advantages to Zara's fast fashion strategy, information flow transfer among customers, store managers, marketing employee, designers, production employee, warehouse managers and distributors managers, and so forth. Zara has made significantly efforts to ensure each progress is very efficient and information flow transfer much easier to facilitate operational procedures, performance assessment, and the location of each store and office layouts. It demonstrates procedure management is one of major activities for Zara to aid its fast fashion system. it is effective solution to hook up most of Zara's operations worldwide network and automating processes. this lean practices is entirely compatible to Zara's supply chain. Zara use such system to differ substantially from its competitors. Zara invests on prompt lean pratices. To maintain with fast reaction to business procedural changes, supply chain management will most likely ensure overall flexibility and quick response.
Today, many people still have a narrow view of lean opearion, they view lean procedure as cost reduction, mainly in terms of the costs they can save. Cost control is certainly an important part of lean operation. After all, if your rivirals can produce their products at a much lower cost, they could easily dominate the marketplace. However, some smart company view lean operation as their marketing plan and adding value for their customers. For example, Zara's design involves in many efficient lean practices which only design products the customer demand. All processes performed just for the sake of fabricating customer's Value. The lean manufacturer minimizes resources that are not only recycleables but also manpower and time. The lean standards is that activities, movement, resources and other input convert into final product efficiently. Zara has applied such lean criteria successfully. Product development is constantly working in order to adapt to new fashion trends. Designers and managers attend high-fashion fairs and exhibitions to acquire fashion information and then convert the latest fashion trends of the season into their designs. Other resources of design inspiration result from TV, Internet, film content or trend spotters. product development teams focus on venues such as university campuses and clubs round the world to capture fashion trends and customer preferences. Zara's product development teams have frequent dialogue via their internal IT system. Zara gave significant autonomy to each store manager in deciding the quantity of product needed by each store. Moreover, the store manager can decide which product to show in their stores and which product is usually to be sold at a lower price. The manager's responsibility is to make these decision predicated on market research and sales trends. Moreover, by using young and fashionable employee ensures that employees also contribute by helping to report the sales analysis, the merchandise life cycles, and the store trends to the designers.
There are specialized teams in headquarters to investigate feedbacks and information from each store, then design and produce their products. These sales analyses permit the designers to build up the right products to meet consumer Demand.
Design team issues up to approximately 12, 000 new design styles per year. Such a design concept obviously is determined by the standard creation of new design. For example, Zara's designer team came up with approximately 40, 000 new designs per year, from which only slightly more than one-quarter of them for production. Zara often follows the style trends of the high-fashion houses and will be offering similar products at lower prices by using less costly fabric. In addition, it attempts to provide more colors and larger range of sizes to meet the need of consumers. Following a prototype of new design was selected, a computer-aided design system can be used to refine colors and textures.
Limited amount of new items were produced and presented using stores for a trial period and large volumes of the product are produced only if customers reaction is positive. As a result, failure rates on new products is only 1% which is less than the common rate of 10% of other fashion retailers.
In fashion industry, the demand changes extremely fast due to new fashion trends and a volatile market situation. This demand is unpredictable and may vary and change completely in a short time, creating high difficulties for supply chain. To determine a lean supply chain is one crucial method for textile and apperal retailing company to enhance its performance also to gain competitive advantages. Zara has adopted lean manufacturing and combined this with practices in supply chain management for fashion retailing. In a few extend, the lean manufacturing and supply chain management have become an universal solution in the apparel and textile industry.
Zara has been able to obtain excellent success because of its lean manufacturing by vertical integration and fast fashion business strategies which provide Zara with a competitive advantage over traditional fashion retailers on the market. Generally speaking, apparel retailers always make an effort to keep lower costs by outsourcing production to developing countries where the lowest labor could reduce its manufacture cost. Alternatively, Zaras subsidiary retailing chain adopted a successful diverse method of conducting business through working through the entire value chain by in-house design, production, distribution and retailing. Highly capital intensity and vertical integration is a unique feature of Zaras business design.
From the upstream value chain, a subsidiary of Zara company, Comdietel, funnels fabric and other input given by external suppliers. Over fifty percent of the fabric was undyed which provide maximum flexibility to create in-season clothes. Comdietel can dye and process gray fabric into certain pattern within only 1 week to meet up with the requirement of downstream value chain.
Zara has 20 fully owned manufacture factories across the Europe. These factories use capital intensive production processes and provide cut garment and semi-manufactured products to approximately 500 in-house workshops. The relevant cutting machines and other systems produce semi-manufactured items and cut garments which is transited directly into workshops. The progress looks rigmarole, but it is quite efficient because bar codes track the cut pieces through the every production steps. Workshops are situated in labor-intensive areas across Europe such as Spain and northern Portugal. These workshops manufacture clothes in small scale to offer specialization in product type. The sewn clothes were sent back from these workshops to various product line under different brands. The guts will inspect, iron and fold before sending finished garment to distribution center.
The secret of Zaras success is that vertical integration causes short turnaround times and great flexibility. By implementing in-house production, zara has obtained advanced of variety, quantity and frequency of new styled clothes. Zara adopts market orientation by reducing lead-times and increasing flexibility. Zara can upgrade products in its stores within 10 to 15 days from design to stores. Vertical integration decreased Zaras stock to the very least level and reduced fashion risk. In the mean time, providing little bit of products in a great variety of styles rendered Zara shorter lead times and higher level flexibility. Because of offering fewer amount of product more often, Zara obtains larger percentages of the full price due to in-season sell and therefore achieve higher net margins on sales.
By concentrating on shorter response times to fashion trends and keeping up with fashion. Zara made efforts to ensure that its stores are able to offer latest fashion items which consumers desired at a given time. Zara can move from approaching a design to having clothes in its stores within 2 weeks. Short lead times is Zara one of the most important competitive advantages over its competitors. When Zaras shops provide consumer with latest fashion items and gain huge amount of sales, its competitors have still struggled to catch up. In comparison, H&Ms lead time is more than 20 days. Traditional retailers use 4-6 months.
Excellent supply chain management mainly concentrate on the understanding and balancing three key dimensions of flexibility, inventory and cost. Zara is obvious example for it by managing these trade-offs efficiently. Zara's supply chains has improved business performance and drive competitive advantage. Improving supply chain management is considered as its the
business model which resulted in rapid growth and profitability.
A more systematic approach to inventory distribution is another feature of Zara. Each retail chain has its own centralized distribution system. Distribution center is positioned in Arteixo and small satellite centers around the world. To keep its stores refreshed with new merchandise every fourteen days, the warehouses of Zara is simply a spot to transfer merchandise rather than store them. Under Indetexs distribution system, most of merchandise stayed at the distribution centers for only few hours. Products are inspected and shipped immediately in distribution center. Store managers can check lists of items available to be shipped with their stores. Predicated on their store inventories, they can request quantities and kind of products. However, Zaras international expansion required continuous adjustment on distribution. Zara schedules the shipment by time zone to be sure distribute effectively. Zara uses this method to gain a competitive advantage by minimizing the lead times.
Zara is experiencing significant growth and has great chance to continue that growth by its efficient lean practice in design and manufacturing process and effective supply chain management that is totally contrary to the rest of the clothing industry; Zara has have got a competitive advantage for itself in the sense of low prices and quick cycle times, introducing new fashions. For Zara, supply chain management is a strategic differentiator that causes a competitive edge. Supply chain management is greater than a new name for logistic. Lean operation is not merely concerned about cost control, Zara views its lean operation and supply chain as key strategy of its business models. The case study on Zara