Operational and Project Management (OPM)

Operational and Project Management (OPM)

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Executive Summary

This paper describes the Quality and Supply chain management findings for Zara, one of the most rapidly
expanding fashion clothes businesses in the world.
The first part of this paper will be focus on analysing the implementation and the optimisation of few of the most
common theories and practices in Quality management such as the Fishbone diagram (Cause and Effect) and the
revenue and cost impacts highlighted in the Annual Inditex report.
Paired with a discussion of TQM specifications and costs used at Zara, such as product design and durability and
the Sustainability Partnerships the firm has launched since 2022 to enable the creation of innovative and recycled
textile items in its collections and finally it will be focus on the Lean Six Sigma definition and how is the
methodology implemented in the chosen organisation.
The paper will then opt for a supply chain analysis : there will be a brief introduction of different theories and then it
will be discussed the use of the vertical integration adopted by Zara and the results on leveraging distribution and
vertically integration production.
The following study will illustrate how agile and flexible the current supply chain at Zara is leading the textile
industry in Europe with important statistical data reported in the latest financial statements of the selected
organisation.
Moreover the study will evaluate the supply network and its supplier selection, contractual agreement, relationship
process alongside with the alignment of the proximity manufacturing of its stakeholders.
The second part of this paper will be talking about the significance of two different real-world concerns and
recommendations that the operations manager should bring up in his annual meeting with the newly hired
Marketing Manager of the main firm.

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Table of Contents
Page

Executive Summary 1

Table of Contents 2

Introduction 3

1.0 Task 1
1.1 Topic 1 Quality Management at Zara

1.1.1 Definition of quality 4

1.1.2 Zara quality and retail award 4
1.1.3 Zara Global Key indicators and financial performance trend 4
1.1.4 Zara Fishbone diagram and Six Sigma software solution 5
1.1.5 Design and Durability of Raw materials at Zara solution 5

1.1 Topic 2 Supply Chain Management at Zara

1.1.1Definition of quality 6
1.1.2Zara quality and retail award 6
1.1.3 From Design to Sale 6
1.1.4 Agile and Innovative supply network at Zara 7
1.1.5 The effects of an agile supply chain and the impact of Covid at Zara 7

2.0 Task 2
Your organisation has recruited a new Marketing Manager; please provide two examples of significant problems, issues,
agenda items, policies, or suggestions that the Operations Manager should discuss with the new Marketing Manager during
their annual meeting.

2.1. Example one – Issues relating to Suppliers under Pressure 8

2.2 Example 2 : Issues relating to Sustainability and employees 8

3.0 Conclusions 9

4.0 References 10
5.Appendices

5.1 Appendix A 11
5.2 Appendix B 12
5.3 Appendix C 13
5.4 Appendix D 14
5.5 Appendix E 15

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Introduction

ZARA, with its highly integrated and distributed production system, is an example of a corporation that has transformed several
facets of the fashion sector in the worldwide apparel market.
Amancio Ortega founded the retail conglomerate Inditex in 1975. Its subsidiaries include the Zara fashion label as well as the
widely recognised Pull & Bear, Massimo Dutti, Oysho, Stradivarius Bershka, and Zara Kids lines..

It is essential to determine what are Zara’s strategies how the organization is currently working towards its goal achievements .
After a careful analysis is clear how the strategy of the firm is found within the corporate level as the group adopts a vertical
integration strategy that goes from fashion development to manufacturing and point of sale.
In addition, it also uses an internationalisation strategy, therefore the first section of this study will examine the effectiveness of
the Fishbone diagram (Cause and Effect) and the revenue and cost implications indicated in the Annual Inditex report, two of
the most prominent theories and practices in Quality management. To continue with the quality management aspect of the
organization the Lean Six Sigma will be analyzed: how it is implemented at Zara and what TQM specifications and costs are
currently used by the company.
Product design and durability paired with the Sustainability Partnerships the company has launched since 2022 to enable the
creation of innovative and recycled textile items in its collection are part of the first task of the report.

The other half of the case study will be focused on Supply chain analysis, which will include a brief introduction to various
theories, a discussion of Zara's use of vertical integration, and an examination of the effects of this strategy on the company's
ability to leverage distribution and vertically integrate production.
Using key statistical data published in the most recent financial statements of the selected business, this research will show how
Zara's current supply chain is leading the European textile sector in agility and flexibility.
The research will also assess the network's alignment with its stakeholders' proximity manufacturing, as well as its suppliers'
selection, contractual agreement, relationship process, and proximity manufacturing.

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1.0 Task 1- Topic 1 Quality Management

In 2005 Anon stated formally in one of his case studies that a customer's needs come first. Although few CEO will generally
agree upon, it is likely more crucial to make sure that the correct items reach the client. However, this will only take place if the
supply chain is effective enough to ensure a streamlined production and distribution process. Companies might be forgiven for
assuming that a job like this would be easy. Customers, however, are erratic individuals whose routines frequently change
without even mention the reality that fashions come and go, some more swiftly than others, and it's clear that a retail business's
success will hinge in large part on its capacity to adapt to shifting consumer preferences.

1.1 Definition of quality

Operations management pertains to the aspect of management that focuses on optimising the effectiveness of an organisation.
According to Slack(2019) "improvement" means enhancing or refining something to make it better. Regardless of efficiency, all
operational processes can be improved and while operations management improves performance in general, there are yet
specific issues related to improvement. In the past operations managers did not focus on improvement before, while their role
was more focused on expecting to run the operation smoothly and maintain the existing performance. Zara, which operates in
more than 64 countries across the globe, has developed a customer-oriented and integrated business model to ensure the
timely delivery of the latest fashion trends while adhering to high sustainability standards and maintaining the necessary quality.

1.2 Zara quality and retail awards

This particular model facilitates the management of challenges encountered in the business environment. The sector is
characterised by intense competition, which is fuelled by emerging technologies and a growing recognition of environmental
concerns. This dynamic environment has resulted in a customer base that is constantly evolving. (Inditex annual report, 2022).
In 2007 Zara won the World Retail Awards in Barcelona (Fashion United, 2007) and the following year Zara Russia has been
awarded as the Best fashion Product according to Fibre 2 Fashion Magazine during an event organised by the homonymous
British Retail Magazine in Russia, known as Akort.

1.3 Zara Global Key indicators and financial performance trend

According to Zara’s annual report, (2022) in the people section, more than 160,000 employees dedicate their commitment to the
brand acting as pioneers of the sector transformation and design. As shown in Figure 1 and Appendix B to D

Figure 1: Global key indicators at Zara

(Source :Inditex annual report, 2022)

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1.4 Zara Fishbone diagram and Six Sigma software solution

The Fishbone diagram,

commonly referred to as a
cause and effect diagram, is a
technique utilised for the
purpose of identifying and
analysing potential causes of a
given problem or issue. A
visualisation tool is employed to
aid in the identification of
underlying causes by
categorising potential sources of
a problem. (Sower, 2017)

Figure 2

The company's employees are the driving force behind the model's long-term viability. 182 different nationalities represented in
the workforce, all united by a shared dedication to fashion, creativity, responsibility, and teamwork.

Built on respect and promotion of human rights, transparency, and ongoing interaction with stakeholders, the Group's mission is
to supply fashion items that fulfil the most stringent sustainability and health and safety criteria. As shown in Figure 1

A recent study conducted on a group of Zara staff and supplier highlighted how a centralised information and communication
technology (ICT) infrastructure, including six sigma tools and the Fishbone Diagram would be useful in carrying out the
aforementioned resilient strategy.

This will allow all participants in the supply chain to obtain knowledge, save information, and share up-to-date data.

Six sigma tools and the Fishbone Diagram and widely used today to help businesses identify and fix defects in their
manufacturing processes. Because any supply chain network may be represented by a simulation model, modelling and
simulation could be utilised as an application tool to support design, management, and optimisation of supply chains.

1.1.5 Design and Durability of Raw materials at Zara

Inditex made 80,000 tonnes of recycled materials available to clients this year from 2021.

Their Sustainability Innovation Hub is investigating second- and third-generation waste-based materials that meet product
technical and durability requirements. They also joined the Textile Exchange and UN FICS Action's 2025 Recycled Polyester
Challenge , as shown in Figure 3 , to increase recycled polyester consumption and cut greenhouse gas emissions.

Figure 3 Design and Durability of Raw materials at Zara

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(Source Inditex report, 2022)

2 . Task 1- Topic 2

2.1 Supply Chain definitions

Managing the various aspects of supply chains is the idea behind Supply Chain Management (SCM). One of the most important
aspects of competing successfully in a global market is efficient SCM. Internal factors, such as a lack of unified SCM strategies
and a breakdown in communication, frequently contribute to SCM's drawbacks (Sower, 2017).

Studies conducted by Zijm et al, (2019) claimed Allen and Hamilton, both members of the American management consulting
firm well known in the 80’s , to be the first to develop the concept of supply chain management. SCM is an umbrella
management concept that aims to improve supply chain visibility and coordination for businesses. To maximise event profits,
supply chain management is similar to managing relationships between different organisations (Slack, 2019). Greater customer
value at a reasonable price requires consideration of both parties ,suppliers and consumers.

One way effective SCM can give a company an edge over the competition is by helping them gain and maintain a position of
consumer preference leadership, defining efficient process management is ultimately the foundation of a lasting competitive
advantage, according to the value-chain principles developed by Michael Porter in the mod 80’s in which primary activities
corresponded to:

 logistics

 marketing

 trades

whereas service and support encompasses things like

 Infrastructure

 workforce management

 technological development

 Purchase

2.2.1Supply networks and Vertical integration at Zara

According to Inditex's annual reports, the company has established a unified and adaptable operating system that is explicitly
centred around customers with the goal to supply the newest trends in fashion at the correct moment, fulfilling the requirements
of sustainability and with the required quality which is typical of vertical integrated systems. (Inditex annual report, 2022)

The vertically integrated approach at Zara allows for lightning-fast turnaround times and nimble design. Zara's approach is to
provide clients mid-range pricing, specialised fashion, and a constantly evolving selection of products. However, the system's
lack of flexibility in plant relocation and higher manufacturing costs in Europe are drawbacks.

When applied to the corporate world, this paradigm aids in overcoming obstacles. Strong industry competition, spurred by
emerging technology and rising public consciousness about environmental concerns, creates a market with a dynamic client
base.

Factors that may prevent Zara from reaching out the full potential include, but are not limited to, political instability, population
shifts, and economic downturns in countries that supply or distribute our products, as well as a general slowdown in
consumption in some areas. Climate change may have an effect on businesses in a number of ways, including shifts in buyer
behaviour and the availability and demand for fabric components used in clothing production. (Sight Supply Chain Group, 2023)

2.2.3 From Design to Sale

Design, production, distribution, stores, and customers (across both brick-and-mortar and online points of sale) must all be
connected and flexible for this business model to work. Environmentally and socially responsible supply chain management
underpins manufacturing and procurement, guaranteeing respect for workers at every stage of the production and distribution
chain. Zara’s supply chain operates on a global scale, with 98% of manufacture clustered in 12 supplier groups.

However, a large proportion of their raw materials are sourced from regions close to the design hubs. This means that in years
like 2022 and 2021, when sudden shifts in fashion were particularly important, they were able to quickly update our commercial
range to meet the new demand. [Appendix A]

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2.2.4 Agile and Innovative supply network at Zara

According to Ivalua, 2023,the company's streamlined distribution network ensures year-round, uninterrupted shipments to brick-
and-mortar and virtual retailers from distribution hubs serving all retail formats and sales periods. In this model, goods are
stored and distributed to retail locations and e-commerce platforms all over the world from centralised logistics facilities for each
chain.

Figure 4 (Student creation)

To create an adaptive Supply Chain, Zara relied heavily on the following unique approaches: Rather of concentrating on
finished garment output, Zara's purchasing department looks at the raw materials needed to make such items. As part of the
"production feedback" process, retail managers often pass on comments and suggestions from customers to market specialists,
who then pass them along to the product's makers and creators. As shown in figure Figure 4

The company decided to create its products in Spain for things with more volatile demand rather than subcontracting all of its
production to Asia Pacific and Western Europe.

The advantages of a shorter path to market, cheaper transportation, and less exposure to customs would still outweigh the
lower manufacturing costs in other regions.

Zara purposefully leaves up to a high percentage of its processes, not less than 90%, to better respond to shifts in demand
throughout across the globe. Zara is able to stock just the correct amount of merchandise in each location by using highly
accurate demand predicting tools. (The 2022 Annual Report of Inditex)

Market volatility and fluctuating client needs demand adaptability in the supply chain. Because of this, nimble and fast-fashion
business models have emerged. In order to keep up with demand, manufacturers of fast fashion needed to shorten production
periods and boost their adaptability. Price, consumer satisfaction, and corporate values like profit, turnover, and sales are all
influenced by these three factors, as reported by Bloomberg in 2023. Zara's production ratio needs to stay low so that
manufacturing capacity is not wasted. It challenges the conventional wisdom that placing a lot of orders will lead to more stock
on hand. .

2.2.5 The effects of an agile supply chain and the impact of Covid at Zara

Covid-19 epidemic continued to influence business performance in 2022, as due to restrictions in key Group markets in the first
and fourth quarters of 2021, the pandemic twists the comparison of fiscal year 2022 to the same period of the prior year. The
pandemic has caused occasional plant closures, shipping delays, and other supply market disruptions, but less than in past
years. The agile Group's business model's flexibility has mitigated these interruptions as the Group's integrated strategy relies
on its very diverse supply sources, technological infrastructure and online shop, which allowed it to maintain operations in this
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context. The group's operational and financial performance has depended on business model flexibility, integrated inventory
management, and operating expenditure reduction. [Please refer to Appendix E]

Example one – Issue: Suppliers under Pressure

Suppliers under pressure from shifting consumer needs affect the supply chain (Slack , 2019). Modern fashion companies are
under pressure to compete on price and freshness. This new situation is stressing most retailers, so the advice is surrounding
product standardisation to may reduce the massive amount of documentation needed.

 Standardised products and processes allow documentation reuse. Changes to products and procedures require
approval.

 To improve communication, multidisciplinary and department-specific business process, system, and product
training is recommended. This course aims to improve understanding of well-known processes and harmonise
working and communication paradigms. Educating on value-chain dynamics also provides insights.

 Supplier-customer communication improves SCM. Customers can also ensure a long-term relationship by treating
suppliers appropriately. Zara must accept these truths in its daily operations.

As explained in the Inditex annual report, Zara designers use daily sales and inventory data from all stores to assess the
situation.

In anticipation of supply chain challenges in the second half of FY22, Inditex increased product availability in the first nine
months of the year by bringing in more inventory than usual. The quality of the collections prompted rapid expansion in the
number of items sold. Inventory recovered to normal levels and was only 5% higher as of 31 January 2023 as a result of strong
sales during 2022 and a gradual normalisation in supply chain conditions at the end of the year. As shown in Figure 5 below

Figure 5

Example two – Issue: Sustainability Training

Issues relating to Sustainability and employee

Every step of our value chain is infused with a commitment to sustainability. It's a guiding philosophy for everything from making
products to running retail operations. There are many things we do as a company to foster a culture of sustainability, and we
work hard to make sure it encompasses each level of the administration as shown in figure 6

Figure 6

Training for new employees, for instance, often includes a focus on sustainability. Providing

 overview of the various Group courses, and then,

 depending on their position, they receive more in-depth training in those programmes.

Zara purchasing and product teams will benefit most from this education, since their decisions and actions will have the greatest
bearing on the long-term viability of our products and supply chain. This is why, beginning in 2021, Zara have a dedicated
training programmes: the Sustainable Fashion School, developed in collaboration with the University of Leeds.

The Entrepreneurs programme is a great illustration of how serious we are about empowering our retail employees to spread
the word about our commitment to sustainability. Leaders in this field disseminate information on sustainability throughout the
Group and collect employee and customer feedback on the topic

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Conclusions

In conclusion Zara's potential for expansion stems from the company's competitive edge and its preparedness to meet new
challenges in the fashion clothes market. In this regard, Zara is similar to other fast-moving corporations. The intimate
relationship between clients and designers is the foundation of its success. They have a distinctive and effective business model
that has allowed them to sustain high levels of operational income and expand into new markets. They regularly provide chic
new garments at reasonable prices. The Inditex corporate is constantly brainstorming new ways to grow the business, innovate
in the fashion apparel market, and enhance product quality. Many companies in the clothing retail sector are exploring ways to
emulate Zara's success. In order to adapt to the ever-changing nature of markets and consumer demand, agility has been
implemented. In spite of this, with all designers, purchasing specialists, and management in one place and production facilities
nearby, assuring maximum flexibility and agility in order to react on the rapid change in consumer demand Zara has
mechanised an well-organized agile supply chain. The providers impression is to be seen on the effects of the ever-increasing
velocity with which consumers change their requests. The fashion industry is highly competitive, and manufacturers must not
only compete on price but also on innovation and regular product updates.

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Reference

 Slack, N. and Brandon-Jones, A., 2019. Operations management. Ninth edition. ed. Harlow: Pearson Education.

 Zijm, H., Klumpp, M., Regattieri, A. and Heragu, S., 2019. Operations, Logistics and Supply Chain Management:
Definitions and Objectives. In: Operations, Logistics and Supply Chain Management. Switzerland: Springer
International Publishing AG.pp.27–42. https://doi.org/10.1007/978-3-319-92447-2_3.

 Sower, V.E., 2017. The Value SPC Can Add to Quality, Operations, Supply Chain Management, and Continuous
Improvement Programs. In: Statistical Process Control for Managers, Second Edition. United States: Business Expert
Press.

 Ivalua, Zara – a Masterclass in Supplier Relationships and Supply Chain Management , Patel [online]. Available
from https://www.ivalua.com/blog/supply-chain-managementzara/#:~:text=The%20key%20to%20Zara's
%20ability,needed%20to%20manufacture%20the%20clothes [Accessed 27 April 2023].

 Bloomberg, Zara Owner’s Lesson for Others Is Keep Supplies Close to Home, Orihuela [online]. Available
https://www.bloomberg.com/news/newsletters/2021-03-16/supply-chain-latest-zara-owner-succeeds-with-regional-
network [Accessed 27 April 2023].

 Inpinj, Zara’s Retail Inventory Management System Drives Business, [online]. Available
https://www.impinj.com/library/blog/zaras-retail-inventory-management-system-driv [Accessed 27 April 2023].

 Sight Supply Chain Group, Agile or Lean? Get the Best of Both Worlds, Smith [online]. Available from
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 Rouse, D., 1995. Managerial Breakthrough: The Classic Book on Improving Management Performance. Booklist, .

 Wruck, K.H. and Jensen, M.C., 1998. The Two Key Principles Behind Effective TQM Programs. European financial
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 Ahire, S.L., Golhar, D.Y. and Waller, M.A., 1996. Development and Validation of TQM Implementation
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 Retailisation, How Vertical Integration Helps Fashion Leaders Grow, Zeelenberg [online]. Available from
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 South China Morning Post, H&M, Zara defend quality control practices after watchdog criticism, Griffiths [online].
Available from https://www.scmp.com/business/china-business/article/1581717/hm-zara-defend-quality-control-
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 Inditex, Annual Report, Suppliers, [online]. Available from

https://static.inditex.com/annual_report_2022/pdf/SUPPLIERS.pdf [Accessed 24 April 2023].

 Inditex, Annual Report, Our Products, [online]. Available from

https://static.inditex.com/annual_report_2022/pdf/PRODUCTS.pdf, [Accessed 24 April 2023

 Inditex, Annual Report, [online]. Available from Available from https://static.inditex.com/annual_report_2022/pdf/Inditex-

group-annual-report-2022.pdf [Accessed 24 April 2023].

 Anon. 2005. How Zara fashions its supply chain: Home is where the heart is. Strategic direction (Bradford, England),
21(10), pp.28–31. https://doi.org/10.1108/02580540510626709.

 Fashion United, World Retail Awards recognizes Zara and Kate Moss, Online, Available from
https://fashionunited.uk/news/fashion/world-retail-awards-recognizes-zara-and-kate-moss/2007040234665 [Accessed 27
April 2023].

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 Fibre 2 Fashion, Zara receives 'Best Fashion Product' award, Online, Available from
https://www.fibre2fashion.com/news/fashion-company-news/zara-receives-best-fashion-product-award-63872-
newsdetails.htm [Accessed 27 April 2023].

Appendix A

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Appendix B

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Appendix C

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Appendix D

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Appendix E

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