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Over 1
Kaan Over
James K. Lill, Adriana Gil-Matos
Introduction to Engineering Management
October 30, 2016
Zara International: Fashion at the Speed of Light
This study analyzes the status of Zara International taking a broader look at the apparel industry where it operates and the competitive factors, its current operational performance, its market competiveness and its response to the new trends such market globalization. The study also stretches to find out whether Inditex is still providing worthy management benchmarks that firms such as Zara could follow.
Apparel Industry and Its Competitive Factors
The global apparel industry continues to grow healthily into the future. This is attributed to the absence of switching costs for consumers and great product differentiation which has resulted into moderate competition rate. Apparel industry is important to all the economies across the globe as it contribute immensely to trade, employment, investment and revenue all over the world. The industry has vast product differentiation, short product life cycles, and is characterized by great pace of demand change that is coupled with rather long and fixed supply processes.
According to statista.com, the US Apparel industry is estimated to be around $225billion with the women accounting for the largest sales volume at $110,826 million. As of 2015, the market was valued at approximately 343 billion U.S. dollars. Price per apparel article in US was estimated to be about $19. The clothing stores sales in the industry was also estimated to about $183.01bn. The U.S. Apparel Manufacturing was reported to have employed about 89,588 people as of 2014. At the retail level clothing store sales in U.S. was estimated at $183.01bn while the U.S. apparel and accessories retail e-commerce revenue was reported to be about $63.5 Major retail and discount stores are the likes of Target, Wal-Mart, and Kohl's; these firms operate by keeping profit margins thin at stores which sell moderately priced apparel.
As seen in the figure below, the market value of the apparel industry in the United States has been on the increase since 2011. In 2011 the market was valued at $309.98 billion, in 2012, this increased to $316.92 and in 2013 it reached $323.75 billion. In 2014, the market again recorded an increase standing at $331.49 billion. In 2015 it increased to $342.94 billion and currently it stands at $358.88 billion.
Fig1: Market value of apparel and footwear in the United States from 2011 to 2016 (In $billion)
The major competitive factors in the apparel industry include the cost of labor, cost of raw materials and the shipping costs (Lu 32). Besides these, in order to remain competitive within the apparel industry, firms must updated on the latest trends in the market. As such, firms must ensure tha.
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Over 1
Kaan Over
James K. Lill, Adriana Gil-Matos
Introduction to Engineering Management
October 30, 2016
Zara International: Fashion at the Speed of Light
This study analyzes the status of Zara International taking a
broader look at the apparel industry where it operates and the
competitive factors, its current operational performance, its
market competiveness and its response to the new trends such
market globalization. The study also stretches to find out
whether Inditex is still providing worthy management
benchmarks that firms such as Zara could follow.
Apparel Industry and Its Competitive Factors
The global apparel industry continues to grow healthily into the
future. This is attributed to the absence of switching costs for
consumers and great product differentiation which has resulted
into moderate competition rate. Apparel industry is important to
all the economies across the globe as it contribute immensely to
trade, employment, investment and revenue all over the world.
The industry has vast product differentiation, short product life
2. cycles, and is characterized by great pace of demand change
that is coupled with rather long and fixed supply processes.
According to statista.com, the US Apparel industry is estimated
to be around $225billion with the women accounting for the
largest sales volume at $110,826 million. As of 2015, the
market was valued at approximately 343 billion U.S. dollars.
Price per apparel article in US was estimated to be about $19.
The clothing stores sales in the industry was also estimated to
about $183.01bn. The U.S. Apparel Manufacturing was reported
to have employed about 89,588 people as of 2014. At the retail
level clothing store sales in U.S. was estimated at $183.01bn
while the U.S. apparel and accessories retail e-commerce
revenue was reported to be about $63.5 Major retail and
discount stores are the likes of Target, Wal-Mart, and Kohl's;
these firms operate by keeping profit margins thin at stores
which sell moderately priced apparel.
As seen in the figure below, the market value of the apparel
industry in the United States has been on the increase since
2011. In 2011 the market was valued at $309.98 billion, in
2012, this increased to $316.92 and in 2013 it reached $323.75
billion. In 2014, the market again recorded an increase standing
at $331.49 billion. In 2015 it increased to $342.94 billion and
currently it stands at $358.88 billion.
Fig1: Market value of apparel and footwear in the United States
from 2011 to 2016 (In $billion)
The major competitive factors in the apparel industry include
the cost of labor, cost of raw materials and the shipping costs
(Lu 32). Besides these, in order to remain competitive within
the apparel industry, firms must updated on the latest trends in
the market. As such, firms must ensure that at each and every
moment they are in the market, they remain updated on the
consumer tastes, preferences and demands. This is very
important when it is remembered that the apparel industry is
characterized by short product life cycles. Product
3. differentiation is another factor that is essential in this industry;
in order to remain relevant in this industry, a firm must strive to
be innovative and come up with products that are unique and
different from those offered in the market (Kim, Ann, and
Hyejeong 153). Apparel industry is about fashion and trend and
the better a firm can keep up with the emerging trends and
fashions while still maintaining quality and proper customer
service, then such a firm is likely to be competitive enough to
remain in the market.
As suggested above excellent customer service is another
competitive factor that firms in this industry must focus on.
Consumers in these industry are agile as such they expect agile
services. A firm must thus employ a supply chain and logistic
system that will ensure that products are delivered fast and in
time. This has seen many firms including Indext to employ just
in time approach in the production process and inventory
management. The lead time in this market must be short and the
stores must be updated frequently. Customers expect to walk
into the apparel store and get the latest garments on fashion or
trend. Stores that are known to stock latest apparels are the
most frequented by the customers.
Zara International Currently
The firm is currently doing well noting that it has showed
improved performance even during economic downturns. It was
able to defy recession by its Cheap and Chic Zara Clothing
chains which allowed it to record strong sales gains. The firm
has also managed to maintain its agility to the market trend
adaptation; this has given it a competitive edge with some
participants in the industry describing it as the most innovative
and devastating retailer in the world ().
In order to record such good results, Zara has learnt from its
parent firm, Inditext and has tried to internalize most of its
4. operations in order to improve efficiency and optimize profit.
The firm has an effective logistic system that allows it to
achieve these objectives. Zara has logistical centers across the
world to which its finished garments are shipped to after each
and every two weeks; upon receiving the garments, these
logistical centers ship them simultaneously to all the stores
across the world. This smooth flow of goods has allowed them
to ensure continuous replenishment and update of the stock in
its various stores worldwide. This has ensured that, the firm
remains on top of the trending fashions in the market and that
customers visit its stores all the time (Lutz).
In order to remain relevant in the market, Zara has continued to
maintain its strong design and fashion identity that runs through
both its clothes and the stores they are sold. Zara has come up
with new styles that combine fashionable designs with a strong
link to current high fashion themes; it offers these products at
fairly moderate prices that has kept customers trooping in its
stores worldwide (Tidd, Bessant and Pavitt 2). Zara makes over
10,000 clothing models that are created and sold every year; the
firm has also been successful because of its string commitment
to quality in designing. The firm employs over 200 designers
who are dedicated at making these wonderful garments. Zara
Success is also attributed to its amazing flexibility; the firm
uses a different manufacturing model that employees over 2500
employees who are working directly in manufacturing
operations and much larger workforce working outside the
manufacturing zones spread across the small villages in Spain
and northern Portugal (Tidd, Bessant and Pavitt 2).
With all these innovations and expansions, Zara is doing well
generally; the firm is valued at $10.7 Billion and was listed as
one of the world’s most valuable brand by Forbes in 2016. In
order to deal with the pressures that come with globalization,
Zara has expanded its operations to the international markets
adding 77 stores in 2015 alone and expanding to countries such
5. as Taiwan, Hong Kong, and Macau (Lutz). It is also vastly
present in the U.S cities such as Los Angeles, New York, San
Diego, Houston and Las Vegas. Zara has also effectively
adopted e-commerce that has allowed it to tap into the online
retail market that has expanded with the business globalization.
It has retail websites where customers get to order their goods
and organize for the delivery of the orders.
Status of Inditex as Management Benchmark Firm
Inditext is indeed still considered to be one of the
industry best firms to benchmark on. The firm has continued to
post strong sales gains even during economic recessions. It has
managed to maintain its prices low enough for its target
customers. The firm also has maintained rapid response to
fashion trends and managed to top the industry as one of the
best global clothing vendors beating many other strong firms
including Gap Inc. Inditex is active in more than 70 countries
and offers over 8 key brand groups with each targeting a
particular segments or product types (Tidd, Bessant and Pavitt
2). Inditext has also invested heavily on the complex system of
just-in-time production and inventory management technique
that has allowed it to shorten the lead time of its orders and
generally keep the firm a head. With its lead times of 24hrs to
48hrs in its European and American stores respectively, the firm
has been a lesson to many firms on how products can be gotten
to the stores in time. Inditext has also maned to internalize
many supply chain operations which has helped it in saving cost
and enhancing general effectiveness within the firm; it does this
by fully controlling the design, production, distribution and
retail sales. This has allowed the firm to optimize the flow of
goods without having to share its proceeds with the
intermediaries. With such amazing performance records, many
apparel firms still view Inditext as the yard stick when it comes
to measuring economic performance, customer service and
innovation.
Works Cited
6. Global apparel market size projections from 2012 to 2025, by
region. Statista.com. 2016. Accessed October 31, 2016 from
statista.com
Forbes. The World's Most Valuable Brands. Forbes, 2016.
Accessed on October 31, 2016 from www.forbes
Kim, Eundeok, Ann M. Fiore, and Hyejeong Kim. Fashion
Trends: Analysis and Forecasting.
Oxford: Berg, 2011. Print.
Lu Sheng. 2016 Fashion Industry Benchmarking Study. United
States Fashion Industry Association, 2016. Print.
Tidd Joe, Bessant, John and Pavitt Keith. Exploring Innovation
in Action: Sewing up the
Competition - Innovation in the Textile and Clothing Industry.
Innovation Portal, 2013. Print
HealthCare.gov
A Failure Analysis by The Next Group
Team
Chris Blackden
Gianfranco Savino
Hillel Chaitoff
Kaan Over
Agenda
Background
Project Overview
The Failure
Starting Out
Identifying Stakeholders
7. Determining Requirements
Planning
System Timeline
The Design Approach
Software Development
Synthesis, Analysis, Optimization and Integration
Test and Evaluation
Keeping It Up
Operational Use
Lifecycle Support and System Retirement
Lessons Learned
Background
Project Overview
Patient Protection and Affordable Care Act
Health Insurance Exchange
Facilitate Health Insurance Sales
Easy-to-Use Interface
Central “Marketplace” for Health Insurance
The Failure
Oversight
Lack of Proper Management
Poor Requirements Management
Non-Incentivised Contracts
Deadlines
Not Met by Contractors
Not Enforced by Customer
Technical
Poor Infrastructure
Lack of Features
8. Project Overview:
Enactment of the Patient Protection and Affordable Care Act
Mandating the creation of a Health Insurance Exchange
The Failure:
General (Project) Management Oversights
Poor Requirements Management
Non-Incentivised Contracts
Technical Infrastructure Issues
Lack of Expected Features
Hillel Chaitoff () - [email protected]
_Assigned to Hillel Chaitoff_
Identifying Stakeholders
Federal Government
POTUS
Congress
Supreme Court
Health Insurers
Healthcare Providers
Customers
Small Businesses
Self-Insured Individuals
Starting Out
Determining Requirements
Poorly Defined
Technical Requirements
Contract Requirements
Performance Requirements
Constantly Changing
New Requirements
Changes to Old Requirements
Workflow
Governance
9. Identifying Stakeholders:
Federal Government
Insurers
Healthcare Providers
Businesses
Individuals
Determining Requirements:
Poorly defined requirements...
Workflow and governance were not agile; could not handle
introduction of new requirements or changes to old ones.
Hillel Chaitoff () - [email protected]
_Assigned to Hillel Chaitoff_
Planning Timeline
April 19th 2010: HHS Creates OCIIO in part to handle
development/launch of full HealthCare.gov site
January 26th 2011: OCIIO merged with CMS to work on
HealthCare.gov site
January 3rd 2012: CGI Federal Hired by CMS to develop
HealthCare.gov site and QSSI to build Identity Management
System (EIDM)
August 20th 2013: CGI Federal presents screenshots of website
instead of prototype because production of site was
significantly behind schedule
September 26th 2013: CMS requested double hosting capacity
for HealthCare.gov, 3 business days before launch
September 29th 2013: EIDM system fails, CMS assures
stakeholders that site will be ready by October 1st
Design Approach
10. Highly complex project with high risk for failure further
complicated by lack of clear direction from CMS
CMS required use of database platform that CGI Federal stated
they were not able to develop for
EIDM was intended to be used for single point of logon, but
was not designed for that requirement
Rather than prioritize functional aspects of the site, CMS chose
to focus on non-critical functions, such as a spanish language
version and an anonymous shopper feature,
Software Development
CMS had a ‘vision for functionality’, but never translated that
vision into specific technical requirements
Requirements were frequently changed by CMS, resulting in
inconsistencies in development
Developers followed an ‘Agile’ Methodology
Agile software development builds one piece of the whole, then
tests it, and if successful, builds the next piece
Relies on heavy testing and consistent iteration to ensure
success
Agile development also can create potential to develop off-
requirements if they are not clearly set at the start of
development
Testing was given a lower priority than launching the site in a
non-functional state
Hillel Chaitoff () - [email protected]
_Assigned to Chris Blackden_
Keeping It Up
11. Lessons Learned
References
GAO-14-694 - A Report to Congressional Requesters
OEI-06-14-00350 - HealthCare.gov Case Study
1. Intro
2. Failures in the SYSE process
a. Requirements Analysis
i. System was not adequately tested for server load against the
projected number of users
ii. While errors were made in the SYSE process at every level,
most glaring and obvious was lack of clear leadership in
defining tasks, requirements, mission, budget, etc.
iii. Lack of clarity in project tasks
iv. Leading officials did not understand the enormity of the
undertaking.
b. Feasibility Analysis
i. CMS required highly complex system and used consultants
with no experience integrating an application of that size
ii. Outside contractors were brought in with incomplete
requirements, then forced to use components outside their
expertise (noSql Database platform)
iii. Late and shifting policies
c. Synthesis
12. i. Coding left incomplete, not properly tested against
infrastructure
ii. Best practices for making late stage coding changes were not
followed.
iii. Incremental approach of early testing and early delivery of
tested system was not followed.
d. Design Validation
i. Lack of TPMs
ii. Testing plan was incomplete, and not properly executed
e. Turnover and Support
i. Reports of improper management of contracts had a negative
impact on this system
ii. Due to high-stress, lack of planning, CMS experienced high
staff-turnover during development
3. How Proper Implementation of SYSE process would have
changed things
a. Clear leadership would have provided clear direction,
eliminated some of the waste, broken processes
b. Requirements analysis
i. Would have shown need for improved infrastructure before
development, could have been improved in parallel with website
c. Feasibility Analysis
i. Proper integration testing and planning
ii. Consulting with outside consultants on database component
would have resulted in more stability
d. Synthesis
i. Clear requirements and plan may not have allowed for
meeting deadline, but would have shown which components
needed to be finished and which could be put on hold
e. Design Validation
i. Testing run on schedule and with a plan would have shown
flaws in the system that made it not production-ready
f. Turnover and support
i. Properly motivated staff may have resulted in the project
completing with fewer errors and delays
4. Conclusion
13. Outline Document.png
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