Business Model Competition M&S vs. ZARA

1. Business Model CompetitionM&S vs. ZARA 指導教授：葉誌崇 學　　生：蘇芳瑢 溫啟宏 日　　期：2006/10/31

2. Classic textile Business Process：12 month lead time Purchase Raw Mat Discount (On Sale) Design Mfg Dist Sell

3. Classic textile Business Process：12 month lead time • 傳統服飾門市在每一季的前置作業 51天 構思服飾類別的概念、布料的挑選 16天 剪報設計概念和尋求意見 31天 採購計畫批准及布料訂購 46天 布料測試及、實驗室浸泡等等 56天 原型開發、等待批准、確認價格 51天 服飾零售商訂貨單各尺寸樣品 91天 生產條碼包裝 5天 出貨

4. Why is profitability in textile so low, when margins are so high? Perfect forecast: Does not exist in real life! Excess stock: Value loss due to discount sales when actual demand is lower than expected Excess demand: Value loss due to unrealized sales when actual demand is higher than expected Waste!Expected DemandActual Demand

5. Introduction：ZARA • ZARA 成立於1985年，隸屬於Inditex集團為全球排名第三、西 班牙排名第一的服裝零售商， 目前在歐洲27個國家及世 界55個國家，開了2200家連鎖店。 2004年度全球營收額達46億歐元（約新台幣1600億元)， Zara的品牌價值在全球排名 77名。 • 經營模式： 一流的設計、二流的面料、三流的價格 超速經營、少量多樣、製販一體 • http://www.zara.com/i06/index.html • http://www.chanel.com/

6. The ZARA wins in the speed to conduct ZARA 在每一季的平均前置作業時間 (24天) 1天 設計風格概念、價格和品質 1天 布料的調度 3天 設計 1天 設計獲得批准 3天 設計原型、樣品批准 生產 10天 出貨 5天

7. ZARA Business Concept “Integrated” fashion delivery: Fashion at low cost!!! • Low Cost • Fashion • Get it approximately right • Reduce creative design • Define a fast-response process incl design • Finalize design knowing material supply constraint • Optimize the process • Manage follow-up (next batch) and customer flows • Store experience • Copy fashion • Involve the customers and his group / cohort • Create a network / brand

8. ZARA Customer Offer: Lean and Focused “Fresh / Fast” “Quality” Cost • Fast copying of leading styles • Fast delivery in own stores • Limited editions • Raw material: medium • Knit: poor • Look: grand! • Customer satisfaction: fashion at low price! • Low monetary cost • Low time cost: “the Zara experience”

9. Lean Production • 開發者：TOYOTA • 與1920年代的大量生產方式 (Mass production)有所區別，以突顯其在少量生產方 式上的不同 • 核心要素： 1. 彈性生產組織 2. 零缺點製造過程 3. 降低庫存 4. 製造商供應商經銷商長久緊密合作關係

10. ZARA Customer Offer: Lean and Focused Flexibility: - / + • Limited customer variety: only what is on display and in limited choices • But every customer is participating in the process: help determine the next batch

11. Waste elimination at ZARA • Advertising eliminated for not necessary in a « pull » model; too slow anyway and our offer is localized • Discount Sales: eliminated through quick response & the strategy that we are always “below” demand

12. Push & Pull SCM

13. Waste elimination at ZARA • Design largely out-sourced to the “market” and replaced by active scanning – greatly facilitates a “process-based organization” • Product complexity 3 types, sizes, and colors greatly reduces the product complexity, allows us to operate with reduced inventories and working capital –with little loss in customer value

14. ZARA Business Process in full:One week lead time!!! Step 1: Scan Designers PULL next RM batch Step 2: Simplify hits & produce library of designs Purchase RM Step 3: Final Design Of next batch Mfg Dist Shopping experience Shopper (and store mgers) PULL next design (shape) & Designers adapt

15. Why is profitability at ZARA so high, when margins are so low? Excess stock and unmet demand Zara as a “Lean Enterprise” Expected Demand Actual Demand Small batches

16. ZARA is the DELL of the dress industry • 活用IT設備 利用統計技術與網路，將每家分店的客戶身份、喜 好、熱賣款彙集後傳回總部，再由總部配合當季流 行趨勢，加以評估，從原料開始，規劃出最符合市 場價值與利潤的商品樣式。 • 物流配送 堅持不走低成本的海運物流，主要就是為了爭取上 市時間

17. Traditional SCM Dell SCM All-powerful of Dell Supplier Supplier Manufacturer Dell Agent Retailer Consumer Consumer

18. Comparing with Dell Supply Chain: 2 daylead time Customers <<pull>> RM Re supply Step 1: Scan Comps Supply Simplify & design new product offer Sell Pick Comps <<Mfg>> (Assembly) Dist Customers Select Customers <<pull>> product & supply chain adapts

20. Introduction：M&S • M&S (Marks & Spencer Group PLC) 於1894年在英國成立的百貨公司，主要銷售服飾與食品，在20世紀有段很長的時間，是英國最大的零售商，也是代表性的企業之一 • 經營理念：優質貨品、合理價錢、摯誠服務、 創意及信心保證 • 現存危機：存貨控制、定價與行銷方面的錯誤 、法律訴訟案件

21. ZARA vs. M&S summarized:The <<Lean>> Enterprise

22. Industrialization: Strategic value gained from positioning Product Offer High customization Low volume High unit margin High quality High standardization High volume Low unit margin Low quality Supply Process Flexible Process Rigid Process

23. Industrialization:redefinition of classic industry trade-offs Product Offer Supply Process Low customization High customization Medium customization Manual shop Batch flow Continuous flow

24. Auto Industry Dynamics: the long road to mass customization!!! High custom High unit margin Low volume Low custom Low unit margin High volume Product Process Flexible shop Rigid flow • . • . • . • .

25. Industrial Process life Cycle • Phase1: Result of many years of experience LEARNING and PROBING with an innovative formula • Phase2: DEFINING the Zara process & IMPROVING process performance • Phase3: Process improvement becomes more difficult & LIMITS TO IMPROVEMENT APPEAR • Phase4: Innovation then continues at the INTERFACE (shopping experience, internet, …) • Phase5: Process eventually OVERTAKEN( but when?)

26. Disruptive technological change 1: Setup Performance: M&S quality (RM, cut, fit, variety) Time

27. Disruptive technological change 2:disruption ZARA Performance: ZARA quality (<<freshness>>) M&S M&S is overtaken by a technology they consider <<inferior>> to theirs!!! Time

28. Conclusion • All types of innovation ＊ Technology innovators ＊ Business model innovators ＊ Process innovators “ZARA is a innovative company”

29. Thank you!!