Pda 2001

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.

1. 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.
2. 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.
3. 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 for employees to try their best zeroing out the inventory regardless of its balances than focusing on selling items with higher count of inventory and neglecting the ones with low count of inventory.
4. No, because this might promote unhealthy competition between the stores. Zara has excellent supply chain management in which deliveries are made in one or two days after orders are placed. Employees having the ability to view inventory balances in other stores would be unnecessary.

1. The Zara “business model” is heavily composed of linking customer demand to manufacturing, manufacturing to distribution. This involves a great deal of iterations in clothing designs based on consumers’ demands. This demand comes from the judgement of employees throughout the company who are involved interactively with customers and receiving feedbacks constantly. Zara’s store managers are given the freedom to determine items they thought would sell. This is because each stores may have different high selling items and decisions from headquarters usually average out the data collected from all the stores which could impact stores negatively. The headquarters entrusts the judgement and store managers due diligence to managers themselves. Unless these managers have a proven track record of managing stores, the decisions for ordering items to sell may very well backfire the company. This is scalable through thorough background, education and skills research before appointing each employees to their respective positions throughout the company.
2. In order to execute the business model, Zara needs information from customer demand. This information is usually relayed through store manager’s inventory ordering. First, Zara introduces approximately 11,000 new items every year while its competitors averaged 2,000 to 4,000. The new designed collections are then introduced to the stores and store managers would order items which sells quicker. The information relayed from store managers are imperative in this industry because it is fast-changing and due to the unpredictable tastes of customers. In a way, Zara aim to continuously sense what customers want to buy and respond as quickly as they can before customers change their preferences.
3. Zara’s approach to information technology is speed and decentralized decision making. This approach has been instilled in Zara’s core operation since the early stages of the company and proved to be hugely successful. Its decision making from store managers to the manufacturing operations is fast and does not require multiple levels of approvals. However, it is not applicable and appropriate everywhere. In companies where cost of operations would be much higher than Zara’s, speedy and decentralized decision making may be detrimental to the companies. These companies would want to evaluate all data before arriving at a decision point.
4. The current IT infrastructure and strategy relies on MS-DOS which is outdated and a handheld computer which is linked via dial-up modem to information systems at La Coruna. Although this POS system is efficient, it may not be as effective compared to competitors using more advanced systems. Employees from the Zara would not be able to access to more information related to their stores if they want to. There are no access to inventory count information except through physical count of inventory. Also, Zara does not offer online purchase option to its customers. Since Zara only open stores at high-end places, there are many customers who does not have the luxury to visit the stores whenever they want. The online shopping could potentially help Zara increase its sales by a much higher margin.