ContentsINTRODUCTION......................................................................................................3

The current and prospective customers of Zara:................................................3The current and prospective customers of Lloyds TSB:......................................3

ZARA’S MARKETING STRATEGY.............................................................................4LLOYDS TSB MARKETING STRATEGY......................................................................6QUALITY MANAGEMENT.........................................................................................6

Quality Management @ Zara..............................................................................7Quality Management @ Lloyds TSB....................................................................7

APPROCHES TO OPERATIONS MANAGEMENT.........................................................8Value Chain Analysis..........................................................................................8Systems Approach..............................................................................................9Supply chain management.................................................................................9Lean management............................................................................................10

OPERATIONS MANAGEMENT CONCEPTS..............................................................11INTERGRATION OF OPERATION MANAGEMENT CONCEPTS..................................12CONCLUSION.......................................................................................................13REFERENCES........................................................................................................14

Question A Identify each organisation’s current/prospective customers and analyse whether each organisation’s operation is adequately designed to meet its customers’ needs. Your analysis should be based on any two from: corporate strategy, marketing strategy, process strategy, competitive priority and approach to quality management

INTRODUCTION

Zara Clothing, an apparel manufacturing business chain in based majorly in Europe, it has shops in America and Asia and the Middle East.The second company is Lloyds Banking Group, a major banking and insurance group, predominantly UK -based, with operations in 30 countries it is also a constituent of the FTSE 100 Index.

The current and prospective customers of Zara: The youthfulThe stylishKids Young AdultsProfessionalsSenior citizens

The current and prospective customers of Lloyds TSB:Corporate Organisations Business men & womenInvestors in securitiesProfessionalsStudents and Kids

The first is a manufacturing organisation and the second a service based organisation. In both organisations the efficient and effective use of resources is of utmost importance. And the principles and practice of operations management is therefore highly relevant to both. This is not to say that all the techniques are equally applicable to all operations. The field of operations management (OM) is the study of the processes for the design, procurement, production, delivery, and recovery of goods and services.

It is rare to find organisations that are purely a producer of goods or purely a producer of services, most operations are a mixture of the two.Zara clothing for instance has a telephone call handling service and will also take customers and prospective customers on factory tours in other

to impress them. Zara clothing also has showrooms and shops where they display their outfits. These are all service based operations even though the company regards itself solely as a manufacturing company.

ZARA’S MARKETING STRATEGY

Zara’s marketing strategy focuses on product variety, speed-to-market, and store location. It is also notable for what it excludes. Zara does not advertise in the traditional sense. If you want to find out what’s currently available at the Zara stores you have two options: go to the web site or go to the store. Zara puts 10,000 different items on the store shelves in a single year. It can take a new style from concept to store shelf in 10-14 days in an industry where nine months is the norm. In its primary European markets, Zara locates its stores close together. Visitors comment that Zara in Madrid is like Starbucks in a major U.S. city—you see another store on every street corner.  Zara’s Toronto store is located just north of the center of downtown in a major shopping district dense with malls and lined with stand-alone stores and giant office buildings. The potential for intense competition is clear.  “These office buildings are full of the people we want as customers. We want them to stop in at lunch or after work. We want to see them often, so we have to change what we have on the shelves,” said Zara’s Toronto store manager. “They could shop in a lot of other stores, so we have to make it worth their time to come here.”This also helps explain why the company does not advertise. If a Zara customer wants to know what Zara has, he or she must go to the store. The stock changes often, with most items staying on the shelf for only a month, so the customer often finds something new and appealing. By the same token, if the customer finds nothing to buy this visit, the store’s regular customers know that tomorrow or next week—sometime soon—new goods will be on Zara’s shelves. That makes it worth another visit.Zara relies heavily on store employees for market information. If a customer looks at a sweater and comments, “That would look really nice with a cowl collar,” an employee can relay that information to Spain where managers decide whether or not to produce the suggested item. If they decide to make it, they can put it on the shelf in Toronto in two weeks or less, partly because they ship by air. Ocean shipping would add at least another ten days to the time it takes to get the product in front of the customer, undermining the speed-to-market and product variety strategy. 

The Role of LogisticsPutting the variety of goods on the shelves in Toronto and other North American stores requires an unusual, though not unique, logistics strategy

for the fashion industry. Zara air expresses goods from its single distribution center in Spain, usually in small quantities. In the 1970’s, The Limited used a similar strategy to support its test marketing, air expressing small quantities of new styles from Asia to U.S. stores. In Zara’s strategy, however, the speedy shipments are part of the core strategy, not just test marketing. Zara also ships frequently, allowing lower inventories while serving its multinational market from a single distribution center in Spain. “We receive shipments o n Tuesday and Saturday, which means that we have different items in the store at least twice a week. While each shipment replenishes items that sell well, each also includes new items. That’s why our customers come in often,” the Toronto store manager said. “We might get ten of one item and five of another. We’re constantly testing.” The density of Zara’s store locations in Europe helps achieve logistics efficiencies. They can fill trucks for frequent shipment in markets close to production and ship larger quantities by air to more distant stores. Zara keeps transportation costs low on the supply side, since most of the production takes place in Spain. This contrasts radically to most large fashion manufacturers, which rely on low cost manufacturing in Asia and South America, but then pay higher inventory costs and move goods to market more slowly. The air express strategy also allows Zara to maintain a multinational market presence with only one distribution center. They trade higher transportation costs for lower warehousing and inventory costs. Add to this the idea that fast transportation supports the product-innovation strategy that is the heart of Zara’s marketing, and the importance of logistics in Zara’s marketing strategy is clear.Zara’s parent company reached $2.7 billion in 2001 revenue. This made it the fastest growing clothing manufacturer in the world. Zara, fastest growing division, and turns its inventory twice as fast as major competitors, with an inventory-to-sales of 7% compared to an industry average of 14%. Their profitability in European operations (15%) is fifty percent higher than that of its major competitors. Zara manufactures 80% of its clothing in Europe, with most of the remaining 20% is sourced in Mexico.While top managers are understandably closed-mouthed about their plans, Zara seems ideally positioned to penetrate the U.S. market in a major way. With some manufacturing already in Mexico, they could easily open a second distribution center aimed directly at the U.S. market. This would make their youth-oriented styles widely available in the world’s most lucrative market.

LLOYDS TSB MARKETING STRATEGYLloyds TSB’s marketing strategy is based majorly on the concept that every customer or potential customer has a life time value and the lifetime value is what an average customer contributes directly and indirectly to your bottom line over a few years.The difficulty of delivering a high and uniform standard of customer service across an organisation as large as Lloyds TSB is mind-boggling.The difficulty of delivering a high and uniform standard of customer service across an organisation as large as Lloyds TSB is mind-boggling.The retail banking wing of Lloyds TSB offers more than 350 different banking and financial services to 16 million customers through a network of 3,000 branches and offices staffed by 35,000 employees. Only what head of branch services Colin Fisher describes as 'an obsession with customer service' can ensure that customers really come first.A shortlisted finalist in last year's awards, Lloyds TSB again caught the judges' eyes for the sheer quality of its service excellence programme and some striking customer care initiatives. Seven years ago Lloyds had a very poor reputation for customer service. Today Lloyds TSB is confident that it can be 'first choice for customers by understanding and meeting their needs better than any other competitor'. To leap from customer disgust to customer delight is a remarkable feat. Moreover, the results, says service quality manager Andreas Wasmuht, are far from immediate. 'In the first instance the quest for service quality is an act of faith. It takes some time before the effort which is required feeds through to customers.

QUALITY MANAGEMENTQuality as a concept is all about commitment, competence, communication and continuous improvements. Quality management is crucial to effective operations management, particularly continuous improvement. More recent advancements in quality, such as benchmarking and Total Quality Management, have resulted in advancements to operations management. Benchmarking is the use of standard measurements in a service or industry for comparison to other organizations in order to gain perspective on organizational performance.Total Quality Management (TQM) is a well-known philosophy for coordinating all of a company's production processes, which mandates cooperation by all affected departments. Its three basic principles are employee involvement, continuous improvement, and customer satisfaction. Customers often use the term "quality" to refer to their level of satisfaction with a company's products. Companies that incorporate customer satisfaction considerations into production processes are usually referred to as having a market orientation. High-performance companies generally use a market orientation to guide development of products and services to satisfy customers better than competitors that is; they offer something important to customers that competitors do not offer.

Quality circles are used by organisations as a participatory problem solving approach also found in Kaizen and JIT. Small groups usually 5-15 individuals of employees from a particular area meet regularly to identify problems with quality. They then analyse the problems and propose solutions. It should be noted that this is also related to the aspect of TQM philosophy which teaches that quality is everyone’s business and that team work is the best way of solving problems. Zara applies these principles in practice. Shop floor operatives in Zara for instance do not think of quality as being the job of quality control department and problem solving as being the job of management.While these concepts were developed initially in the manufacturing industry, quality circles have proved to be a useful tool in the hands of customer service personnel at Lloyds TSB.

Quality Management @ ZaraZara has a culture of quality. The management of the company has adapted TQM as an organisational goal and the Quality Policy of the company is ‘to satisfy our valued customers with quality products’

Quality Management @ Lloyds TSBCustomer satisfaction is the cornerstone of the TQM approach. Every organization that is under the service industry is very pleased to remain at the top of the competition. Lloyds TSB is determined to provide the most effective strategy to achieve the service quality. Organizations effectiveness in the service industry leaves a great experience to the customers and can increase the rate of return. As a sequential effect, the increase of return of the people means that there is a great influence of the organizations regarding the services and its quality.When an organisation handles billions of transactions a month, quality and excellence becomes an extraordinary challenge.

The TQM approach believes that standards and technology alone are not enough to produce quality (Revilla, 2002). The idea of TQM drives the entire organization for competitive advantage. There is however a need for standardization in quality throughout the Lloyds banking group.

The end they say justifies the means and so I personally think that Zara’s organisational operation is adequately designed to meet its customers’ needs. This is evident in the company’s progress reports of the past few years.Question BSelect and discuss the concepts/frameworks on managing operations that are appropriate to each of the organisations, review the extent to which it

is practised and/or applied, and analyse critically the difference between the organisations.

APPROCHES TO OPERATIONS MANAGEMENT

There are different approaches to operations management and organisations may use one or more of these approaches to improve their processes and as a source of competitive advantage over competitors.The common strategies include the Value chain and the Supply chain Management. This is the view that an organisation is one link in a chain that aims to turn raw materials into what the customer wants, as a result all links in the chain benefit.

Value Chain AnalysisRefers to the sequence of business activities by which in the perspective of the end user value is added to the products or services produced by an entity. Organisations have linked functions and activities. Functions are the familiar departments of a business e.g. production function, the finance function, sales function, marketing function etc. These all reflect the formal organisation structure and the distribution of labour.Activities are what actually goes on to make these various departments in the organisation function properly. Activities are the means by which an organisation creates value in its products. Activities incur costs and in combination with other activities, provide a service which earns revenue.Activities may be analysed in terms of how much they cost compared to how much revenue (value) they add. Activities that add more cost than they add in revenue are not value adding and should therefore be designed out of the operation. It should be noted that the essential question for operations managers of Zara and Lloyds TSB is to understand how all their activities fit into this calculation for the organisation as a whole.

Systems ApproachLes Galloway in his book Operations Management in Context talks about the three key ideas for analysing operations using the Systems Approach: Operations can be seen as a series of inputs-process-outputs which is open to influence from the environmentOperations have to be controlled and control means gaining information on the performance of the operation and then changing the operation if it is not meeting some predefined standards.Problems should be solved by following structured methodologies. The hard systems methodology applies when there is agreement on what the problem is. In situations of conflict the soft systems methodology is used.

Supply chain managementSupply chain management is concerned with the flow of goods and services through the organisation with the aim of making the firm more competitive. This involves not only purchasing goods and services at competitive prices but also focusing on cost reduction techniques, improving cycle times and reducing time-to-market.SCM can also be seen as the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. The following are five basic components of SCM.Plan This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting customer demand for their product or service. A big piece of SCM planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.SourceNext, companies must choose suppliers to deliver the goods and services they need to create their product. Therefore, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. And then, SCM managers can put together processes for managing their goods and services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and authorizing supplier payments.MakeThis is the manufacturing step. Supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery. This is the most metric-intensive portion of the supply chain—one where companies are able to measure quality levels, production output and worker productivity.DeliverThis is the part that many SCM insiders refer to as logistics, where companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.ReturnThis can be a problematic part of the supply chain for many companies. Supply chain planners have to create a responsive and flexible network for receiving defective and excess products back from their customers and supporting customers who have problems with delivered products..Lean managementLean production is seen as a successor to mass production. Through the application of methodologies such as JIT and TQM, lean production usually requires half of the input resources as compared to the mass production system. For example:

Less material/parts Less human effort Less space Less investment in tools

One of the central problems that have faced Lloyds TSB in the past years has been the problem of long queues. Excessive queuing can quickly erode customer loyalty. The overriding question facing operations managers is how to minimise the time spent by customers standing in a queue. Are current resources being optimised or does the company need to invest in more? What is the trade-off between the time customers spend queuing and the cost of additional capital to reduce queuing times. Lloyds TSB has applied the lean management principles more intently lately. This they have done by investing in tools i.e. the cash machine.With Lloyds TSB, there is more access to the nationwide network of Cash point machines, and people can now do far more than withdraw cash while they are there. At many of the Lloyds TSB cash machines customers can now enjoy a complete range of services and, unlike some other UK cash machine providers, they are offered for free. Services such as paying a bill, printing a mini statement, transfer of funds, making a deposit etc that were once only available in banking halls, requiring customers to go into banking halls, are now available via cash points thereby reducing queuing time considerably. This helps the bank save on space, time, human effort and materials.Over the past seven years, Lloyds TSB has built a business model which encompasses all aspects of the customer service challenge. Vision, performance and feedback are the three stages of a continuous improvement loop which Lloyds TSB has applied to all aspects of customer service delivery. Understanding customer needs was the starting point of Lloyds' service excellence journey and the bank now boasts impressive capabilities in segmenting its customers, anticipating their needs and tracking customer perceptions.

OPERATIONS MANAGEMENT CONCEPTS

Quality Speed Dependability Flexibility

Cost

New product/service

X       X

development strategy

Vertical integration strategy

  X X   X

Facilities strategy   X X X X

Technology strategy X     X X

Workforce and organization strategy

X     X X

Capacity adjustment strategy

  X   X X

Supplier development strategy

X   X   X

Inventory strategy   X X   X

Planning and control systems strategy

  X X   X

Improvement strategy X X X X X

Failure prevention and recovery strategy

X   X

Source: Pearson Education (1995-2005) Chapter 3 Operations strategy, study guide Question CEvaluate the mix of managing operations concepts/framework used by each of the organisation

INTERGRATION OF OPERATION MANAGEMENT CONCEPTSThe 6 Ps of operation are more commonly known as the operation mix. The origin of the 6 Ps is unclear yet Professor Keith Lockyer of Bradford Management Centre (1988) developed an early version to apply a logical thought process to the implementation of operations. In operations management we can apply this mix to new or revised operations for

reference. The 6 Ps are: Product/Service, Process, Place, Programs, Procedures and People.

The mix of managing operations concepts is an integrative approach to operations management which takes into account the systems processes people and the technology that determines an organisations strategy and success. The integrative approach to operations management can be described as a well mixed ingredient.In order to maintain and improve the performance of the operations functions in any organisation, manufacturing or service based, the operations approach needs to set the direction for each of the operations main decision areas, this is because these areas are all related.

CONCLUSION

For some industries, the economies of scale are important. For others, the integration of the processes involved is seen as an imperative

Zara which is second only to the Gap in world clothing sales provides another example of comprehensive application that involves every aspect of an organization. Its Zara stores feature an integrated manufacturing and logistics capability that embodies a market orientation. 

Instead of outsourcing to Asian manufacturers, half of Zara's clothes are manufactured in Spain or neighbouring countries to facilitate rapid production—from sketch to store rack in as little as two weeks. Only a few dresses of each design are sold from each store's small inventory and new designs quickly appear. Store managers relay information on customer purchases and preferences back to headquarters in Spain, thus guiding designers in creating more "fast fashion." The short production runs and fast changes in design induce consumers into believing that Zara's clothes embody the latest in fashion.

Zara’s senior managers recognize the need for a comprehensive application of market orientation at Zara. According to analyst Luca Solca of Sanford C. Bernstein, "The Zara’s way is an all-or-nothing proposition that has to be fully embraced to yield results.’

Sir Victor Blank, chairman of Lloyds TSB was quoted as saying ‘Shareholders, I am delighted to say that your bank has come through the credit crisis in excellent shape. How did we do it? The answer is a strategy that some have called "management by inertia", although nowadays we refer to it as our "prudent business mode. True to his words strategy is what makes or breaks a company. It is

important to know what strategy works for a company and to know how and when to apply the principles.

REFERENCES

Chris Hughes (2009) Why an unambitious strategy paid off for Lloyds TSB (Online) Accessed 7 may 2009 www.ft.com

Les Galloway, F Rowbotham (2000) Operations Management in Context

Thomas Wailgum & Ben Worthen (2008) Supply Chain Management Definition and Solutions (Online) www.cio.com

Professor Robert Dailey (2008) Organisational Behaviour

Cashpoint www.lloydstsb.com

www.zara.com

CIMA Study Text (2009) Operational Paper E1 Enterprise Operations

Carter McNamara (2009) Operations Management (Online) www.managementhelp.org

Pearson Education (1995-2005) Chapter 3 Operations strategy, Study Guide