AssignmentTutorOnline
ZARA AND ITS BUSINES LOGISTICS
Table of Contents
- Introduction. 2
- Failure mode and effects analysis in mitigating Zara’s risks in relation with ‘receiving step’ in distribution centres. 2
2.1 Overview of FMEA methodology. 2
2.2 Three risks faced by Zara. 3
2.3 Recommendations for mitigating the risks. 4
- Six sigma model used by Zara for increasing customer satisfaction. 5
3.1 Overview of Six sigma model 5
3.2 Improving customer satisfaction by stock out frequency, delivery time and damage free. 6
- Conclusion. 7
Reference list 9
- Introduction
Zara is one of the biggest companies of fashion, which is recognized globally. This company belongs to Inditex, which is also one of the major groups of distribution worldwide. Zara with different types of strategies has also been able to respond to the changing needs of the customers (Zara, 2022). Customers are at the heart of the business model of Zara. The business model of the company includes distribution, production, sales as well as designing with the help of extensive network of retailing. This study has been developed in order analyse the business logistics of the company. The Failure mode and effects analysis has been used in order to identify three different types of risks that are faced by Zara while receiving step in the distribution centres at Spain, while sourcing from the Asian countries. Additionally, recommendations have also been provided that can be chosen by the company for mitigating this risks. Lastly, six sigma models has been implemented for identifying how customers experience can be increased by the help of different indicators.
- Failure mode and effects analysis in mitigating Zara’s risks in relation with ‘receiving step’ in distribution centres
2.1 Overview of FMEA methodology
Failure modes and effects analysis is defined as the systematic process that is used by different companies for evaluation of the process for identifying failures and the effect of failures that might affect the entire business. Companies like Zara use this methodology for identifying the process which is more prone to failure and in need of different changes. Rahmatin et al., (2018) stated that Zara and many other big companies like Zara use this methodology for identifying what could go wrong and what could be consequences of failures. In addition to this, it has also been noted that with the help of this methodology, companies evaluate the processes for identification of the possible failures and prevent the same by rectifying the process, rather than reacting to the uncertainties of the failure. Boral et al., (2020) additionally stated that emphasis on the prevention of the failure results in mitigating the risks of harming both the staffs as well as the customers. Hence, it can be stated that the implementation of FMEA methodology is beneficial for the evaluation of the processes before implementing them in the company in order to assess the effect of changes on the existing processes of the company (Lo et al., 2019).
Figure 1: FMEA (Failure mode and effects analysis) Methodology
(Source: Rahmatin et al., 2018)
2.2 Three risks faced by Zara
It has been noted that the unique way used by Zara for handling the changing demand of the customers has helped the company to become majorly successful and become a leading business organization within the retail industry of fashion. Xuejie et al., (2019) stated that many companies struggle to achieve what Zara has achieved in these years because of the changing business environments along with cost of the inventory and operations. As per the opinion of Aftab et al., (2018), it can be implied that the continuous change in the business environment has resulted in arrival of new trends leading to bullwhip or Forrester effect. The main production of Zara is dependent on outsourcing even after most of the decision of inventory as well as operations being carried out in the headquarters in Spain. The company has been taking the help of technological advancements for producing only what is needed by customers and trending and this further help the company to reduce the number of unsold items caused by the changing taste of the customers. This strategy has been helping Zara in maintaining the quality as well as keeping the cost of the inventory as low as possible (Aftab et al., 2018).
Centralization is the source of competitive advantage for the company and this is the reason that after expanding into new markets the company maintains its operations in the Spain headquarters. When sourcing from Asian countries, the company has to continually diversify the range of products in order to meet the needs of the customers leading to the increased cost of operations. Therefore, it can be stated that increased cost of operation in order to increase the variability of the products is the first risk faced by the company (Lopez et al., 2021). Expansion of the distribution channel for meeting the needs of the customers results in different challenges while making quick changes in the designs because of the complexities of coordination between the marketers, buyers as well as the designer. Therefore, the second risk can be considered as the complexities of coordination between the different parties involved in the operation, making it difficult for the designers to make quick changes in cloth design when needed. Lastly, the third risk of Zara in relation to the receiving step of the distribution channel is the development of new warehouses in the Asian countries along with the acquisition of advanced equipment and labour costs for the new facilities in these Asian countries (Duoyan, 2021).
2.3 Recommendations for mitigating the risks
It has been noted that Zara uses the Failure mode and effects analysis for identifying the risks and the impacts of the risks on the company as well as its operation. The three major risks faced by the company have already been mentioned in the above section and this section has been used for discussing about the steps that can be recommended for Zara in order to overcome these challenges. The challenges are faced by Zara in terms of its distribution and supply chain management, if not solved then the company will be unable to solve the issues that might be faced by it in the post pandemic world, which will further ruin the reputation built by the company over these years. Some of the steps that ca be used by the company are:
Recommendations of reducing operations cost: Zara can opt for the development of cost reducing objectives by going through the evaluation of the different expenses of the business. In addition to this, the concerned company can also check for better prices in order to compare the same with their existing prices and make necessary changes whenever needed. Furthermore, the company can look for inefficiencies within its operations and cancel any kind of unused services (Arora et al., 2020).
Recommendations for reducing complexities of coordination between different parties after the expansion of the company: Zara has expanded internationally which led to the complexities of coordination among the designers, marketers and all others involved in the processes and operations of the company. Alyammahi et al., (2020) stated that effective communication is the only solution to this problem and the company can take the help of different communication channels like social media or other online services for reducing these complexities.
Recommendation for meeting customers’ needs: With effective communication, the company also needs to streamline its operations in order to promote increased productivity among the labourers and workers. In other words, the company needs to have effective warehouse management in place for encouraging the labourers and workers work dedicated to fulfilling the needs of the customers (Torabizadeh et al., 2020).
- Six sigma model used by Zara for increasing customer satisfaction
3.1 Overview of Six sigma model
From the article of Shamsuzzaman et al., (2018), it has been noted that six sigma is considered as the process of quality management that helps business by giving it the blueprint of improving the different processes carried out within the company and reduce the number of ineffective practises that leads to worse customer experiences. Companies like Zara use this model for concentrating on the development of nearly perfect products and delivering them on time as well. As influenced by the idea of Kowalik et al., (2018), it can be stated that six sigma has been used in customer services for determining the factors that are essential for the maintenance of the qualities needed by the customers. The main focus of six sigma in terms of customer experience is on the capabilities, efficiencies as well as the stability of the customer services for supporting six sigma (Sodhi et al., 2019).
Figure 2: Six sigma model
(Source: Shamsuzzaman et al., 2018)
The process of six sigma involves six steps and the first step involves the identification of the problem and this step is followed by the measurement of the data and the effect of the problem that can take place or has been taking place. In addition to this, the third steps of the six sigma process involve the root cause of the issues are analyzed and this step is followed by improvement of the customer services by addressing the issue with a typical solution. Arcidiacono and Pieroni (2018) stated that after the completion of the fourth steps, companies like Zara develop control processes for monitoring and continuing the correct process within the company. Finally, in the last step, perfect customer services are provided to the customers as per the needs
3.2 Improving customer satisfaction by stock out frequency, delivery time and damage free
Stock out frequency: The probability of not having enough stock in the inventory of the company can result in the failure of meeting customer needs. As result of increased stock out frequency, companies like Zara will not only lose sales but also have to face decreased numbers of satisfied customers and lower levels of customer loyalty (Mahalingam, 2018). Hence, with the help of 6 sigma, the company identify the levels of stock in the inventory and do the need for making stocks available and meets the needs of the customers and thereby enhance customer satisfaction by providing them with the products they desire for. Hence, Zara need to implement six sigma in order to develop products as per the needs of the customers and avoid stock out frequencies (Ikumapayi et al., 2020).
Delivery time: It has often been observed that the companies delay in dispatching their products resulting in delayed delivery to the clients. There might be many reasons behind delayed delivery of the products and some of them are inventory stocking out or miscommunication among the company and the delivery personnel. The companies like Zara need to identify the problem first in order to develop proper solution for late delivery of the products and then implement solution for solving the issues of delayed delivery Gijo and Antony (2019). As per the opinion of Gijo and Antony (2019), it can be stated that on time delivery helps the companies to have increased numbers of loyal customers and with enhanced level of satisfaction.
Damage free: Damage free or high quality products have always been the reason of customer satisfaction. Zara has been well known for the quality of products that it provides to its customers (Zara, 2022). However, with the risks that have been identified in the above section, there might be situations where Zara might fail in delivering quality products to its client and this will lead to dissatisfied customers. Hence, it can be stated that Zara needs to take the help of 6 sigma model in order to keep a track of the quality of the products and make changes wherever needed. This will further help the company in providing customers with quality product and keep the satisfied. With greater number of satisfied customers, the company can expect longer time of partnership with them (Witell et al., 2020).
- Conclusion
After analysis of the entire study, it can be concluded that Zara is a will known company within the fashion industry. This company has been operating in different markets across the world for a very long time. However, there are different risks faced by the company that might be taken care of as early as possible. The FMEA model and the si gma model has been used for identifying the risks as well as the issues that are faced by the company while handling customers, Furthermore, recommendations have also been provided, which can be chosen by the company in order to solve these issues in the future and run business as successfully as possible.
Reference list
Aftab, M.A., Yuanjian, Q., Kabir, N. and Barua, Z., 2018. Super responsive supply chain: The case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), p.212.
Alyammahi, A., Alshurideh, M., Kurdi, B.A. and Salloum, S.A., 2020, October. The impacts of communication ethics on workplace decision making and productivity. In International conference on advanced intelligent systems and informatics (pp. 488-500). Springer, Cham.
Arcidiacono, G. and Pieroni, A., 2018. The revolution lean six sigma 4.0. International Journal on Advanced Science, Engineering and Information Technology, 8(1), pp.141-149.
Arora, A., Li, J., Zantye, M.S. and Hasan, M.F., 2020. Design standardization of unit operations for reducing the capital intensity and cost of small‐scale chemical processes. AIChE Journal, 66(2), p.e16802.
Boral, S., Howard, I., Chaturvedi, S.K., McKee, K. and Naikan, V.N.A., 2020. An integrated approach for fuzzy failure modes and effects analysis using fuzzy AHP and fuzzy MAIRCA. Engineering Failure Analysis, 108, p.104195.
Duoyan, H., 2021, April. Research on ZARA Strategy from the Perspective of SWOT Analysis Method. In 2021 6th International Conference on Social Sciences and Economic Development (ICSSED 2021) (pp. 201-205). Atlantis Press.
Gijo, E.V. and Antony, J., 2019. Application of Lean Six Sigma in IT support services–a case study. The TQM Journal.
Ikumapayi, O.M., Akinlabi, E.T., Mwema, F.M. and Ogbonna, O.S., 2020. Six sigma versus lean manufacturing–An overview. Materials Today: Proceedings, 26, pp.3275-3281.
Kowalik, K., 2018. Six Sigma as a method of improving the quality of service process. Production Engineering Archives, 19.
Lo, H.W., Liou, J.J., Huang, C.N. and Chuang, Y.C., 2019. A novel failure mode and effect analysis model for machine tool risk analysis. Reliability Engineering & System Safety, 183, pp.173-183.
López, T., Riedler, T., Köhnen, H. and Fütterer, M., 2021. Digital value chain restructuring and labour process transformations in the fast‐fashion sector: Evidence from the value chains of Zara & H&M. Global Networks.
Mahalingam, S., 2018. An empirical investigation of implementing lean six sigma in higher education institutions. International Journal of Quality & Reliability Management.
Rahmatin, N., Santoso, I., Indriani, C., Rahayu, S. and Widyaningtyas, S., 2018. Integration of the fuzzy failure mode and effect analysis (fuzzy FMEA) and the analytical network process (ANP) in marketing risk analysis and mitigation. International Journal of Technology, 9(4).
Shamsuzzaman, M., Alzeraif, M., Alsyouf, I. and Khoo, M.B.C., 2018. Using Lean Six Sigma to improve mobile order fulfilment process in a telecom service sector. Production Planning & Control, 29(4), pp.301-314.
Sodhi, H.S., Singh, D. and Singh, B.J., 2019. An empirical analysis of critical success factors of Lean Six Sigma in Indian SMEs. International Journal of Six Sigma and Competitive Advantage, 11(4), pp.227-252.
Torabizadeh, M., Yusof, N.M., Ma’aram, A. and Shaharoun, A.M., 2020. Identifying sustainable warehouse management system indicators and proposing new weighting method. Journal of Cleaner Production, 248, p.119190.
Witell, L., Kowalkowski, C., Perks, H., Raddats, C., Schwabe, M., Benedettini, O. and Burton, J., 2020. Characterizing customer experience management in business markets. Journal of Business Research, 116, pp.420-430.
Xuejie, C., Chang, Q., & GuangHao, Z. (2019, August). Research on innovation supply chain management in fast fashion industry—A comparative analysis of ZARA and H&M. In Proceedings of the 3rd International Conference on Education, Culture and Social Development (ICECSD 2019), Guangxi, China (pp. 29-30).
Zara., 2022 Accessed from: zara.com/in/en/z-company-corp1391.html#:~:text=Zara%20is%20one%20of%20the,through%20our%20extensive%20retail%20network.[Accessed on 10th May 2022]