Zara

This article makes up Chapter 1 of the free, open access book titled, Information Systems: A Manager's Guide to Harnessing Technology, by John Gallaugher. Please ensure that you read the entire Chapter 1 of the book consisting of 3 parts (Part 1 Introduction; Part 2 Don’t Guess, Gather Data; and Part 3 Moving Forward).

Answer 2: The quantitative management approach and data analytics could help Zara in more ways than one. For instance by paying close attention to the numerical data varying from sales by store, what product sells by each store, keeping track of inventory, and always having an idea if you’re making more than you’re spending. The quantitative management approach will help executives always be up to date on sales and what the public is buying. Generating more designs that will continue to sell.

Yes, the POS terminals were out-dated and were being backed by DOS operating system which Microsoft no longer supported. They are running a risk of the product becoming obsolete and being unable to maintain support from vendors. Up-to-date operating system would provide more user friendly mechanisms, more functionality, thus allowing effective communication between stores and headquarters. New modern operating systems would allow simple standardisation and sharing of data across the board. Modern operating systems also provide more security platforms (such as credit card details), inventory management, and report generation for decision making. Also it allows real time transactions to be recorded.

What Bruno Sanchez Ocampo couldn’t see, was that even though the system was working properly, there were several gaps that a new system could fulfill efficiently. The lack of constant communication with the headquarters could be taken as a perfect example. The cost of having only one daily communication after the store was closed could be simply solved by a new wireless system. Having only one modem connected POS per store turned day to day operation into highly unproductive situation, not to say that using floppy disk and carrying them around the store each time was extremely out of date by the year 2003. A major lack in the system was that there was no possibility of sharing data between the POS and the PDA. As a consequence there was a complete miscommunication between the point of sales and the personal display assistants. Furthermore, another flaw in the system was the impossibility of communication between the different stores. This is a huge opportunity cost if we think about the internal supply that could be provided by the nearby stores. Even though Zara made an effort and changed the hardware of the POS, this seemed to be not enough. The software was still run by DOS and there was no more support for that kind of program.

The business idea of Zara is to link customer demand to manufacturing, and to link manufacturing to distribution. And based on this general idea, Zara has several essential elements for its business model. First, speed and decision making, which means that in the external level, Zara need to respond very quickly to demands of target customers, and always keep in style. While for the inside, Zara treasure intelligence and judgment of common employees who enjoy a great deal of autonomy. Second, its marketing, merchandising and advertising strategy. Zara does not spend on virtually advertising, while it spends heavily on stores, and no selling online because of

Finally, the group invested heavily in 1994 in Office Machines Dealership (OMD) a commercial systems designed to support the administrative information system at Bandon Group. This system is dated and a solution is required to overcome the current limitations of the system and allow for the seamless flow of information in and out of the system.

There vertical integration allows small batches of produce to be distributed and tested out allow them to save more money and cut inventory backlogs. Zara maintains a low cost by avoiding outsourcing (where possible) and producing all its merchandise and produce in home soil in Spain. Also Zara own many fabric dying, cutting and processing equipment that provided Zara added control and flexibility to adopt new trends on demand. Effectively Zara is able to design and manufacture products as well as deliver them in less than two weeks in contrast to competitors such as Benetton and H&M which require at least between five weeks and 4 months lead time to fill orders from its retail operations. One major unique characteristic was that Zara own its in house production which gives Zara the flexibility of quantity, variety, and the frequency of the designs they produce.

Zara has inadvertently taken an operational approach to mitigating risk through having decentralised stand alone store systems that interact once a day with headquarters therefore requiring little protection and staff only having limited access and control over their part of the system, not a network of data (Austin and Darby,

Q3. What current or potential weaknesses do you see in Zara’s IT infrastructure and IT strategy?

Zara’s strategy is to offer cutting edge fashion at affordable prices by following fashion and identifying which styles are “hot”, and quickly getting the latest styles into stores. They can move from identifying a trend to having clothes ready for sale within 30 days (whereas most retailers take 4-12 months). This is made possible by controlling almost the whole garment supply chain from design to retail.

Delaying the IT investment on the new system would have been the best option, since it is a good way to maintain costs down.

The basic strategy for fighting competition is to attract buyers at lower prices, more unique designs, high-quality design, efficient customer service and solid image brand. Thus bargaining power of buyer for apparel industry is high as the products falls under the basic needs in human lives. There is no much difference in terms of products offered by the apparel company, so if buyer is unhappy with the product or service they can easily switch to another brand. Thus, Zara are trying to strengthen its position in the market by using their unique strategy by giving priority to buyer to meet their special needs.

Zara’s business model can be broken down into three basic components: concept, capabilities, and value

From an analytical prospective, explain how information systems relate to the way Zara runs its business. What types of systems are the most essential for this company in its current environment?

Amancio Ortega, had a simple idea of linking customer demand to manufacturing and manufacturing with distribution, when creating ZARA in 1975 in la Coruña, Spain Zara came under the holding company Inditex in the year 1985 and is today the biggest fashion brand of the group. Zara believes that the prime factors for running a successful business are quick response to customers, use of computers, and disintegrated decision-making (McAfee, Dessain, & Sjoman, 2007)