Zara's Product Management Process versus the New Products Process - Literature review Example

Heading: Zara Case Your name: Course name: Professors’ name: Date Zara case Some of Zara’s success factors include effective information gathering, designs made on customer demand, excellent manufacturing and logistics, limited production runs, adoption of information technology, vertical integration, and inexpensive products. Detailed discussions of these factors are as follows: Information gathering Gallaugher (2008) argues that one of the success factors of the company is information gathering. Information gathering-the store managers lead the intelligence collecting information that identifies what should be in the store. They use their handheld personal digital assistants (PDAs) to collect customer input, employees frequently engage customers in conversation in order to acquire information on what they want to see in the stores. The staff also collects information by analyzing unsold items to find out the customers’ preference and disappointments, especially in terms of color, cloth, or styles. PDAs also connected to the Point-of-sale (POS) system in the stores, displaying the way garments’ level by sales. In a short time, store managers may transmit updates that blend hard information acquired from the cash register joined with customer insights on their needs. Consequently, the firm can plan and issue purchase orders as per the customer feedbacks instead of guesswork and hunches. The aim here is to enhance the quality and frequency of making sense for the planning and design teams (Unique Business strategies 2005). Designs Here, the firm prefers making designs based on customer demand to fashion shows. Information regarding what customers want is directed to The Cube in La Coruna, where groups of 300 designers produce 30,000 items per year as compared to 2,000 to 4,000 products offered at the big firms including Gap and H&M (Gallaugher 2008). Whereas H&M offers lines by top designers like Karl Lagerfeld and Stella McCartney, and celebrity collaborations with Kylie Minogue and Madonna, the Zara design employees are mainly young, hungry Project Runway kinds of latest design from college. The Cube lacks prima donnas. Team members should humble themselves in order to receive reaction from workmates and share recognition for winning insights. Individual bonuses are connected to the accomplishment of the group, and groups are frequently rotated to share experience and motivate innovation (Schermerhorn 2010). Effective manufacturing and logistics As Gallaugher (2008) asserts, Zara has excelled in getting domestically targeted designs fast on the store shelves. The minimum time it takes Zara concept to evolve into an idea to appearance in its stores is 15 days as compared to rivals who attain latest once or twice per season. For example, if adequate number of customers visit the stores and ask for a change in the design of a shirt, the new version can be acquired within just 10 days. In fact, Zara is faster than Gap by fifteen times, in spite of providing about ten times more exceptional products. On the contrary, it takes H&M 3-5 times to move from manufacturing to delivery, and they are perceived as the best. In fact, other retailers require at least six months to design a new collection and another three months to produce it. Relatively, VF Corp may take nine months to design a pair of jeans, whereas, J. Jill requires a year to move from concept to delivery. Nevertheless, Zara needs just three weeks to deliver customer demand (Gallaugher 2008). Besides, Dahlén, Lange & Smith (2010) say that the company is capable of responding via a competitor-crushing blend of technology-orchestrated collaboration and vertical integration of suppliers, finely-tuned logistics and just-in-time manufacturing. While H&M has 900 suppliers with no factories, almost 60% of Zara’s merchandise is manufactured in-house, while focusing on leveraging technology in those fields that enhance complex tasks, reduced error, and recycle tasks. Profits from the clothing retailer result from combining math with data-centered sense of fashion. Inventory improvement models enable the firm establish the number of items in which sizes must be delivered to the stores during twice-a-week consignments, hence, ensuring stores are stocked with whatever they have. Apart from the distribution center in La Coruna, the cutting and dying is done by robots in 23 greatly automated factories. Additionally, the firm is vertically integrated; the firm produces 40% of its fabric and buys most of the dyes from its subsidiaries (Gallaugher 2008). About half the fabric is acquired undyed so that the firm may respond as mid-season fashion changes happen. Upon cutting and dying, several items are sewn together via system of local cooperatives, which have been involved with Inditex as long as they do not operate using written contracts. Also, Zara does influence contract manufacturers to create staple items with extended shelf lives including jeans and t-shirts, yet this volume represents just approximately one-eighth of dollar capacity (Gallaugher 2008). What is more, Gallaugher (2008) shows that the firm has a good distribution strategy. For instance, La Coruna store is bigger than the Amazon’s warehouse by nine times. This also implies that the facility is as a big as 90 football fields. These facilities distribute almost 2.5 million products per week, and that no item stays in-house for over 72 hours. It boasts of customized sorting equipment and ceiling-fixed racks that are patterned on machines used by the immediate parcel services to move items from the production points to staging points for every store. In fact, clothes are always ironed beforehand, hanger-packed, with price tags and security affixed. This implies that rather than struggling with inventory in peak seasons, the staff just move products from the consignment box to store racks, hence spending their time on value-added activities, such as, aiding customers to meet their needs. These also enable the store employees to recover more hours in main selling time (Gallaugher 2008). Moreover, trucks serve destinations that may be reached instantly, whereas chartered freight flights serve further terminuses. Zara lately twisted its consignment models via Emirates Air and Air France-KLM Cargo, thus flights can organize outbound cargo of all Inditex brands with return legs full of raw materials and semi-finished clothes from places outside Spain. Besides, Zara is a pioneer of the going green concept. In fact in 2007, its CEO launched an environmental conservation strategy that incorporates the utilization of renewable energy technology at logistics centers. This also includes the initiation of biodiesel for the company’s trucking fleet (Capell 200). Limited production runs According to Gallaugher (2008), to succeed in its operations, the company manufactures products that have a short production run. It has also adopted the practice to achieve numerous advantages. To start with, short production runs enable the company to nurture the uniqueness of its products. Whereas Gap in Los Angeles holds the same products as those in Milwaukee, Zara’s stores hold items that are custom made for specific domestic clientele. This makes its products and unique and creates variety that most customers want. Secondly, limited runs motivate customers to purchase immediately and at full prices. Zara’s savvy shoppers are aware that the latest products arrive packed in black elastic hangers and the employees moving items to wooden hangers later. This practice also motivates many customers to visit the stores, with an average customer to visits Zara at least 17 times annually, whereas its rivals only get three yearly visits. Amazingly, the firm manages to acquire such a wide customer base with no advertisement at all (Torun 2007). Furthermore, few production runs enable the company to minimize the risks of mistakes. As a result, Zara reports only 1% of the mistakes as compared to the industry average of 10%. It also uses software to schedule employees on the basis of every store’s forecasted volume of sales. Additionally, the adoption of flexible schedules has reduced staff working hours by 2%. The consistent modification of operations all the company’s value chain has facilitated the increase of sales and cost reduction. Workers assess and fine-tune the firm’s outstanding window displays, stock layout, and in-store dialogue. Consequently, latest store layout orders are always presented to managers at various outlets (Bhatnagar 2004). Zara’s product management process versus the ‘New Products Process’ Zara’s product management process involves idea generation as one of the steps in the new product process. The source of information in this stage comprise of competitors, customers, journals, employees, suppliers, and newspapers (Sorli & Stokić 2009). Zara product process also encompasses screening as it happens with new product process. Here, the generated ideas go through a process of screening in order to identify the feasible ones. Also, the business collects information from customers, workers, and other firms so as to avoid expensive unrealistic ideas (Annacchino 2003). According to Nelson, Karol & Nicholson (2013), Zara’s product management process is similar to the new product process since they both go through the concept development stage. Here, the firm carries out research in order to establish revenues, costs, and profits from the products. The firm undertakes a SWOT analysis so as to identify the strengths, weakness, opportunities, and threats in the current market. The market plan is conducted to detect the product’s target team that enhances the market segmentation. Product development is a common stage in Zara’s product management process and new product process. Here, the actual design and product manufacturing take place. Development starts with the production of the sample that enables market testing. Basing on the test outcomes, the firm’s owner decides on whether to do large-scale manufacturing or not (Annacchino 2007). Moreover, Zara’s product development process comprises of commercialization as the final stage of new product process. This is a stage in which the company launches the promotion campaign for the new products. The market research carried in the conception phase determines the time and place of the product launch. Nevertheless, Zara engages in product development as per the customer needs. It does not conduct promotional activities, such as, advertisement and runway fashion shows. Instead, it produces custom-made items and delivers them within the shortest time possible. The fact that the company moves from idea generation to the target market very fast makes it unique. Thus, Zara product management process is very effective as it enables its products to reach the market within a short period. The company’s products are also exceptional and custom-made; hence there are no stocks left unsold on the shelves (Kahn 2006). Lessons from Zara’s product management process to other Australian fashion retailers There are several lessons that firms should get from Zara’s product management process. Firstly, firms need to acquire a lot of ideas from various places in order to succeed. In Zara, the design team collects information from customers and other stakeholders regarding what they want to see in the stores. Thus, firms should first conduct information gathering before production. It is also important to move swiftly from the design stage to the market. It is worth noting that it takes at most four weeks for Zara to move from idea generation to the delivery. Therefore, to achieve economies of scale, Australian fashion retailers need to adopt the Zara’s strategy (Gallaugher 2008). Additionally, firms should innovate every aspect of their businesses. In fact, Zara’s innovation does not just involve products. It has just employed creative methods to streamline and enhance supply chain management, manufacturing, inventory management, data tracking, staff operations, and store layout (Iglesias 2009). Furthermore, firms should learn from Zara’s approach of prototype and model fast. Ideas and designs should be tested quickly. At the firm’s headquarters in Spain, there are 25 complete shop windows with various lighting and displays. This allows the designers to see how the stores will appear under various conditions. For the Australian fashion businesses, it is critical to do adopt the same model in order to excel (Nelson, Karol & Nicholson 2013). Besides, Zara uses fast feedback in order to be successful. Its store employees utilize wireless communications to pass information daily back to the headquarters regarding inventories and sales. This is because fast information regarding what sells and what does not allows the team to react to the public attitude and to swiftly supply more of the renowned designs to where there is demand (Gallaugher 2008). Adopting flat structure has also greatly improved Zara’s performance. Other firms should learn from the fashion leader’s strategy. Traditional fashion firms have hierarchical management organizations with various big egos participating in every decision. Speed, innovation, and agility are what boost the firm’s sales and profits. It is thus, crucial for other fashion retailers to follow in its footsteps. It is also vital for the companies to embrace the going green concept. This boosts its image and reputation; hence a wide customer base. As well, adopting just-in-time business model is also crucial for firms that strive to excel like Zara (Nelson, Karol & Nicholson 2013). References Annacchino, M 2003, New product development: from initial idea to product management, Butterworth-Heinemann, Amsterdam Boston, MA. Pp. 10-50. Annacchino, M 2007, The pursuit of new product development the business development process, Butterworth-Heinemann, Amsterdam Boston. Pp. 20-40. Bhatnagar, P 2004, How do you ad(dress) the Gap? Fortune, Oct. 11. Capell, K 2006, Fashion Conquistador, Business Week, Sept. 2006 Dahlén, M, Lange, F & Smith, T 2010, Marketing communications: a brand narrative approach, Wiley Chichester, U.K. Pp. 10-30. Gallaugher, J 2008, Zara Case: Fast Fashion from Savvy Systems, Dep. Of Information Systems. Boston College. Pp. 1-8 Iglesias, C 2009, An analysis of market-orientated supply chain management in the retail fashion industry with particular reference to the case of Zara, Diplomarbeiten Agentur, Verlag. Pp. 9-20. Kahn, K 2006, New product forecasting an applied approach, M.E. Sharpe, Inc, Armonk, N.Y. Pp. 10-40. Nelson, B, Karol, R & Nicholson, G 2013, New product development for dummies, John Wiley & Sons, Hoboken, N.J. Pp. 15-30. Schermerhorn, J 2010, Management, Wiley John Wiley distributor, Hoboken, N.J. Chichester, Pp. 50-60. Sorli, M & Stokić, D 2009, Innovating in product/process development gaining pace in new product development, Springer, New York London. Pp. 5-30. Torun, F 2007, ZARA - A European fashion brand, GRIN Verlag GmbH, München. Pp. 1-30. Unique Business strategies, 2005, Making Good Business even Better, The story of Zara-the Speeding Bullet. Pp. 1-3. http://www.uniquebusinessstrategies.co.uk/pdfs/case%20studies/zarathespeedingbullet.pdf Read More