Zara Manufacturing Case Study
In a fast pace industry, with rapidly changing trends, Zara’s sought to “respond quickly to the demands of the target customers, who were young, fashion-conscious city dwellers.” (p.3) In order to meet these demands, Zara would need to “produce and deliver styles while still hot” and “keep abreast of fast changing trends”. For the business model to be successful, they needed to know what items were selling and what target customers were wearing and they needed to have confidence in the decisions made by the product managers. Questioning or second guessing the decisions would compromise the company’s speed (p.4). In order to operate effectively, Zara relied to three cyclical processes. The three processes included ordering, fulfilment, and design and manufacturing.
Ordering was completed twice a week and was the most precisely defined of the processes. Inventory information was gathered by store managers and employees then relayed to the information systems at La Coruna. Offers made to each store were unique and based on demographics, sales patterns, and inventory availability. Following the offer, orders were then based on the need for replenishment and the request for new items. (p.5)
Fulfilment of orders to each store required that supply be matched to demand. Inventory at the distribution centers ultimately determined fulfilment needs. If supply and demand matched, inventory would be distributed evenly. If supply could not meet demand, decisions on fulfilment would be made my management teams based on successful selling within a specific store. The team would then communicate with production the need for an increase or decrease in manufacturing of a specific item. (p.6)
Design and manufacturing of merchandise needed to be fast, as Zara was introducing approximately 11,000 new items a year. Workshops located in Galicia and northern Portugal provided new garments with guaranteed quick turnaround. With the constant need and introduction of new items, response times needed to be swift to meet increased demands but also when demands decreased and production needed to be stopped.
Salgado maintained that “having 100% control is most of the time just too expensive. Being 95% right is pretty good and often you dont need more accuracy.” Zara’s approach to technology was consistent with its preference for Speed and decentralized decision-making (p.7). Believing the organizations unique business model would inhibit the use of commercially available software, the preference was to write programs internally as needed for operations. The organization sought to keep technology stable, effective and easy. Important aspects of its IT approach included:
1. the development of an IS department and the division of responsibilities within it.