...Zara: IT for Fast Fashion Abstract The case describes a discussion Zara Executives are having whether to update or to keep the current IT equipment of its stores. It goes into detail how the company works and that speed and adaptability are its key objectives. Finally the advantages of both options are shown, leaving it to the reader to decide which option is the best. Company Zara, based in La Coruna, Spain, was found in 1963. Since 1958 they are part of Inditex, a Holding Company atop several clothing retail chain. In 2002 they had about €3.9 billion in revenue and a net income of €438 million, with 11% net margin. Zara is the biggest retailer of the holding with 550 of the 1558 stores from the Inditex companys. Moreover it is responsible for 73,3% or Inditex’ revenues, coming 46% from Spain, with Fance as the second-largest market. Zaras woman sector has 60% contribution to its revenues; men and the fast-growing child sector both 20%. Product/System The store employees work with great autonomy and responsibility. They can choose which items they want to order from a given offer, which was chosen by the Product Store Manager. Each department gets new items 2 times a week. Commercials organize that orders and produced items match and decide in case of a mismatch which store gets the items. Zara does all of the production processes in Spain and Northern Portugal, making it possible that the time from design conception until it can be in store is as little as three weeks. Business...
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...Individual Assignment 1 Zara: Fast Fashion 1. + 2. Zara’s business and operating model is focused on speed and the need for fast fashion, I think a word that would classify it is mass customisation. It is targeted at young fashion and price conscious urban dwellers and is built on a vertically integrated system focussed on demand and supply. Zara is constantly updating its design and production base to deliver exactly what the client wants based on their buying habits and the latest trends. They have limited outsourcing and produce almost everything all in house. Zara is very close to its customers and provides them exactly with what they want, making Zara sell a trend value proposition at affordable prices. They can achieve this because of their integrated verticle supply chain; production time of a new product (estimated at under 5 weeks) and re-production and delivery of an existing product (estimated at under 2 weeks). Following this brief introduction it would be best to compare Inditex’s financial results with H&M as they are competing in very much the same markets and although their products and value chains are different their target consumer has the most overlap. Also GAP and to a lesser extent Benetton do not follow the fashion precisely but predict and produce in advance in bulk. Inditex despite being present in 39 countries, compared to H&Ms 14, and having over 50% more stores than H&M, they still manage to have considerably lower operating expenses...
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...customers are young fashion conscious city dwellers. Historically this demographic of customers are hard to reliably forecast there tastes. Zara has found that their taste in clothes change rapidly and they have manufactured there clothing with the idea that they are only being warn at most of ten (10) times. Zara has a decentralized decision making model. The managers in each regional stores, throughout the company, have input of what are being stocked and sold in each of their stores, not a small set of people in their corporate office in La Coroña, Spain. These managers have the power to order what they think will sell in there stores from the collections that they are offered, plus some “test” items that are supplied from La Coroña. IT is split into 3 different processes in Zara’s business model: Ordering, Fulfillment and Design & Manufacturing. The Point of Sale (POS) System is directly used in the Ordering and Fulfillment Systems. Information Systems tracks the theoretical inventory of each SKU. Shipments increase the inventory, while sales decrease it. This inventory could be off by inaccurate record keeping, they, damage and other losses. Senior Management believed having a 100% accurate inventory is too expensive, where 95% is good enough. Zara has no CIO (Chief Information Officer) and no formal process to set the IT budget. There is no formal justification for IT effort, nor does any cost Benefit analysis for their projects. Zara has a 50 member IT...
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...Executive Summary Zara has relied on Personal Digital Assistants (PDA’s) and Point of Sales (POS) terminal operating on Microsoft DOS which are not linked to the headquarters or other stores for its daily transactions. Although, the system has proved to be stable and reliable over time, it has become obsolete and cannot be supported by the providers. I recommend that the company invest on a new system like Windows, UNIX or Linux operating system which will enhance connectivity and flexibility in operations and information flow. Investing in a cutting edge technology though may be capital intensive initially; it will ultimately improve efficiencies across board and provide new learning opportunities for the entire workforce. Introduction Zara is a division of the Inditex group, a multinational clothing retailer and manufacturer with headquarters in La Coruna, Spain. Inditex operates in a `fast fashion` industry and in an environment where consumer demand was notoriously hard to forecast. The first Zara store was opened in 1975 near the factory. Today, Zara has over 650 stores spread across 50 countries around the world located in luxury shopping districts that attracts well-heeled customers. As part of an integrated group that includes, fabric, dye making and computer aided (CAD) cloth making factory, Zara contributes over 73.3% of the group’s sales in 2002 fiscal-year and the most profitable. Almost half of Inditex revenue is gotten in Spain while...
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...dig further into them. Background: Inditex is an international fashion retailer that designed, manufactured and sold apparel, footwear, and accessories for women, men, and children through Zara and other five chains around the world. The six retailing chains were organized as separate business units within an overall structure that also included six business support areas and nine corporate departments or areas of responsibility. They are separate in the sense that each chain is responsible for its own strategy, product design, sourcing, and manufacturing, distribution, and image, personal and financial results. Inditex was based in the northwest of Spain; it also operated about 20 manufacturing and distribution facilities in the region It is most interesting to compare Inditex with its largest competitor-Gap- as Gap have the highest market capitalization of all Inditex competitors, the highest operating revenues and largest no. of store locations worldwide. So when comparing the financial results of Inditex with Gap we find out that: Gap Vs Zara: Gap had achieved stellar growth and profitability in the last ten years; it was one of the largest specialist apparel retailers in the world ahead of Inditex. It owned most of their stores but outsourced all production in contrast wit Inditex. Nevertheless it ends with a massive a decline in its stock prices and the departure of Its CEO in 2002. Although Gap and Zara follow the same business model, Zara's business model improved...
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...Case: “Zara: IT for Fast Fashion” Issue Zara, the flagship chain of Spanish based holding company Inditex, has grown to great prominence in the international retail fashion industry. It has done so by advantage in recognizing and responding to changing fashion. Recognizing and quickly responding to the changes in fashion trends is largely achieved through a collaborative system of store managers and mid-management level commercials. The exponential growth of Zara has been upon the backbone of a reliable but increasingly antiquated IT system that begins to counterproductively threaten the speed by which the majority of the 32,535 employees operate. At the center of the technical issue is the Point of Sale (POS) system commonly used in each of Zara’s stores. Focal Stakeholder Opinion It is an open issue frequently in the mind of Xan Salgado Badas, the head of IT for Inditex. The current POS system exists in each store as a non networked terminal operating upon the outdated Disk Operating System (DOS). Though incredibly stable and familiar to Zara’s employees, it proves to be increasingly lacking in functionality across the current and future needs of the expanding international chain (McAfee, Dessain, Sjoman, 2). The heart of the issue is not a debate over whether to upgrade the operating system and the POS application itself, but rather when and how to facilitate such a large modernization. Salgado’s advisor Bruno Sanchez Ocampo expresses, “We could mess it up in the process...
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...Zara: IT for Fast Fashion Case Alternatives |ISSUE |PRO |CON |ALTERNATIVE | |POS System – Upgrading |1) Avoid future issue, such as|1) Cost lot of money and time |1) Purchase extra terminal to avoid | | |software can not work with |to do the new system |software and hardware issue for now; | | |hardware; | | | | | |2) Takes time to find out if |2) Analyse/Test new IT system and | | |2) New system can support more|the new IT system and operation|operation system at same time. | | |function, such as check |system can work well as | | | |inventory; |expected. | | | | | | | | |3) Place order more flexible; | | ...
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...ZARA :IT FOR FAST FASHION CASE EXECUTIVE SUMMARY I would highly recommend a company like Zara to adopt new windows/ Linux based operating system. Skyscrapers are not built on weak foundations and in this case, everyday, the company is achieving new heights. Their SCM is fast and flawless, but if the terminal vendor changes it's machine design and makes it incompatible with DOS, the success story will be in doldrums. Even if the IT department buys enough POS terminals, it still means the company is putting a limit on its growth. Will the company not open any more stores when their inventory for POS terminals depletes out? Speed is the essence in today's business and a speedy supply chain is the real strength of ZARA. There is no point in keeping a lame horse in a stable of fast ones. With the new system in place, every location can have a theoretical inventory of all stores. Unsold merchandise from a location can be quick and cost effectively moved to another close location, thus giving better response time to customer demands as well as saving transportation costs. On the cost front, the total cost for upgrading the system is 13.3 Million Euros, and with debt to assets ratio of just 41.57%, upgradation cost can be very easily met. Also the company has fixed assets to current ratio of 123 %, which is way higher than any competitor, and with this high...
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...ZARA :IT FOR FAST FASHION CASE EXECUTIVE SUMMARY I would highly recommend a company like Zara to adopt new windows/ Linux based operating system. Skyscrapers are not built on weak foundations and in this case, everyday, the company is achieving new heights. Their SCM is fast and flawless, but if the terminal vendor changes it's machine design and makes it incompatible with DOS, the success story will be in doldrums. Even if the IT department buys enough POS terminals, it still means the company is putting a limit on its growth. Will the company not open any more stores when their inventory for POS terminals depletes out? Speed is the essence in today's business and a speedy supply chain is the real strength of ZARA. There is no point in keeping a lame horse in a stable of fast ones. With the new system in place, every location can have a theoretical inventory of all stores. Unsold merchandise from a location can be quick and cost effectively moved to another close location, thus giving better response time to customer demands as well as saving transportation costs. On the cost front, the total cost for upgrading the system is 13.3 Million Euros, and with debt to assets ratio of just 41.57%, upgradation cost can be very easily met. Also the company has fixed assets to current ratio of 123 %, which is way higher than any competitor, and with this high...
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...European Planning Studies, Vol. 10, No. 4, 2002 RESEARCH BRIEFING The Fashion Industry in Galicia: Understanding the ‘Zara’ Phenomenon ARTURO REVILLA BONNIN ABSTRACT Galicia is traditionally one of the weaker regional economies in Spain. However it is home to one of the most successful global marketing phenomena of the age. Zara, the mid-market fashion arm of the Galician INDITEX Group, is amongst the ‘culprits’ that have been blamed for the demise from high street hegemony of such European retail notables as C&A, Littlewoods and Marks & Spencer. In this paper an analysis is provided of the mechanisms by which this peripheral region has succeeded in producing, from virtually nothing, a globally outstanding retail fashion industry in one of the world’s most cutthroat competitive industries. It is shown that regional, national and supra-national factors have had important parts to play, but that the Galician approach is nevertheless unique, compared to that of other fashion clothing regions. Among the special features at play are high levels of tacit and codi ed knowledge exploitation, integrated design, production and retailing and advanced retail feedback technology that enables anticipation of customer preference. 1. Introduction The fashion industry in Galicia presents different characteristics from that in the rest of Spain. Until the end of the 1970s, the Spanish textile industry was highly protected, oriented mainly towards domestic markets and with a very restricted...
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...Cyn Y. Ling Zara: IT for Fast Fashion 1. Being the head of IT for Inditex, a company formed as a parent company to Zara’s, Salgado plays a key role in deciding whether to upgrade Zara’s Point-of-Sale (POS) systems. a. As of the beginning of 2003, Zara has nearly 550 stores worldwide and therefore, shows just how important technologies should be integrated into its core business operations. Yes, the company should upgrade the POS terminals to a modern operating system to keep up with market demand to remain competitive with other major clothing retailers. Although the current POS terminals are stable, the operating system (DOS) running at the heart of the POS systems is outdated and no longer supported by Microsoft anymore. Upgrading the POS terminals to a modern operating system ensures Zara’s IT department in line with the current technology. b. The in-store networks enable the POS systems to be connected to the internet in real time to leverage the new shared inventory tracking capability. Therefore, the inventory control processes could be integrated with the Distribution Centers (DC) and thus, allowing Zara to exploit their expertise in supply chain management. c. The pros of employees having the ability to look up inventory balances in their own stores could reduce the potential of miscalculations of physical count of inventory. However, employees’ sales motivation might be affected variably depending on the inventory balances. It is more important...
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...Inditex – Owners of the ‘Zara’ Franchise • Summary Overview • Fast Fashion – NOT Retailing • How ZARA / INDITEX works • Their system, organisation & focus points. • The QUESTION’s asked? What should ZARA do? • Should they do it? Why? • Value Chain & VRIN Analysis – (Inimitability is Key) • TOTAL Financial implications versus the Risk. • Diagnosis of Challenges & Recommendations. • People, Processes, Technology. • A Crisis of Coordination • Implementation strategy, communications and Stakeholder Management is KEY! • Summary 2 • ‘63 = House Coat Manufacturer, to Inditex in 2003 • Vertically Integrated Network (Production, DC’s, Retail) • €3.9billion Revenues, delivering €839.3m Op profits. • 1558 Hi-Profile OUTLETS. Stradivarius 10% Zara 34% Bershka 13% Oysho 4% • 8 successful Franchises, • ZARA 531 Stores = 34% - BUT, 75% Revenues • 85% of outlets in Europe, Spain 918. • Highly Profitable - Expanding Globally – FAST. • (Note – 2012 Accounts - €15.9b sales, €3.1b operating profits) Massimo Dutti 16% Kiddys Class 4% Pull & Bear 19% 3 • Fast Fashion Industry Overview • Moving designs from catwalk to store quickly, to capture current fashion trends. • In Store experience MUST be ‘trendy & interesting’ to drive regular visits. • Enables mainstream consumers to take advantage of current clothing styles at lower prices. • Brands Include, H&M, Zara, TopShop, Beneton, Gap Design, Make, Distribute - QUICKLY & CHEAPLY. 4 • ZARA Founded ‘75, BUT 40...
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...Zara is a Spanish brand of clothing store founded by the visionary Amancio Ortega Gaona and Rosalia Mera in Artexio, Galicia. The first Zara store opened in 1975 in La Coruna, a port town near Arteixo in the corner of northern Spain. It is one of the major selling brands of one of the biggest fashion retailer of "INDITEX". Zara is now available in 86 countries with total of 1,763 stores worldwide. Zara designs, manufactures, and sells apparel, footwear, and accessories for women, men and children around the world. Offering a high level of fashion at a reasonable price, effectively appealing to the middle to middle-high class customers. Further, Inditex itself is a huge fashion retailer company that owns eight other brands such as Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and lastly Uterque. unfortunetly these other five chains that are operated by Inditex have not matched the growth capabilities or revenue of Zara. Amancio Ortega, the founder of Inditex, was established in the year 1963 has adapted a unique business model, which were innovative and flexible, making Inditex one of the biggest retailers in the world. Among Inditex other, innovations, the company is introducing new methods to enable store managers to order and display merchandise faster and adding cargo routes for shipping goods. Unfortunetly inditex is respnding to difficulte situations shared by other companies that came up with other game changing plans. eventualy competitors...
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...Case Study: Zara, IT for Fast Fashion EXECUTIVE SUMMARY The action recommended is to purchase a new POS system to support integration of all levels of the business from manufacturing to the customer. Because of Zara’s current solid financial position and leader in the marketplace, Zara will withstand the initial interruption of business to allow implementation of new technology due to their current solid financial position and leadership. KPIs are implemented to provide efficiencies within manufacturing, the DCs and sales to enhance the successful unique business model. ISSUE IDENTIFICATION The following are a list of issues/problems that must be addressed: • DOS system is no longer supported by Microsoft • In-house applications created by vendor • Writing applications versus buying applications • Transparency between stores • Order processing time • No formal IT process for setting budget or deciding on specific technology, investments or projects • Store managers scope of responsibility is high versus no discretion for store layout • No performance measures • No forecasting, buy and respond “on the fly” • Not high end fashion • High capital costs for DCs, manufacturing, and factories • Small batch production ENVIRONMENTAL AND ROOT CAUSE ANALYSIS 1. DOS system is no longer supported by Microsoft since 2003. Zara chooses to write all their applications in house. This matches the philosophy for...
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...http://upcommons.upc.edu/pfc/bitstream/2099.1/9456/1/67045.pdf IS points Communication uInformation Technology Keeps It Boiling Information and communications technology is at the heart of Zara's business. Four critical information-related areas that give Zara its speed include: Collecting information on consumer needs: trend into information flows daily, and is fed into a database at head office. Designers check the database for these dispatches as well as daily sales numbers, using the information to create new lines and modify existing ones thus, designers have access to real-time information when deciding with the commercial team on the fabric, cut, and price points of a new garment. 58 Standardization of product information different or incomplete specifications and varying product information availability typically add several weeks to a typical retailer's product design and approval process, but Zara “warehouses” the product information with common definitions, allowing it to quickly and accurately prepare designs, with clear cut manufacturing instructions. Product information and inventory management being able to manage thousands of fabric and trim specifications, design specifications as well as their physical inventory, gives Zara's team the capability to design a garment with available stocks, rather than having to order and wait for the material to come in. Distribution management: its State-of-the-art distribution facility functions...
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