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The operational and technological processes employed by Zara in its fast…
The operational and technological processes employed by Zara in its fast fashion business model
Zara Business Model
"The original business idea was very simple. Link customer demand to manufacturing , and link manufacturing to distribution. That is the idea we still live by."
Jose Maria Castellano Rios, Inditex CEO
Key facts
Zara had a decentralized approach to IT with no chief information officer or formal IT budget.
The IS department, with around 50 people, was responsible for application development and IT activities.
Applications were used for ordering, fulfillment, manufacturing planning, and tracking theoretical inventory.
PDAs were used for ordering and other tasks, while POS terminals, running on DOS, were used for sales transactions.
Zara introduced new design collections at the start of fall/winter and spring/summer but continuously brought out new items throughout the year.
Vertically integrated manufacturing operations enabled short lead times, with the ability to move a new design from conception to stores in as little as three weeks.
The executives were contemplating whether to continue with the existing IT infrastructure or embark on changes, considering potential benefits and risks.
Stores received a digital order form less than 24 hours before each order deadline.
The offer included descriptions and pictures of new items and replenishment items based on factors like garment availability, regional sales patterns, and predictions.
Zara operated globally, with different regions replenished through trucks, air, and local distribution centers.
Applications that were used were written by Salgado and his team and weren't purchased because the company was unique
Each store had identical handhelds and POS systems
The POS terminals and PDA's weren't always connected to Zara's headquarters or to other stores
Possible solutions
They can upgrade the POS system. Upgrading the POS system presents opportunities for improved security, scalability, and compatibility, but it also comes with challenges related to resource allocation, potential disruptions, and the need for employee adaptation to the new system.
pros
Compatibility with Modern Applications: A modern operating system facilitates compatibility with a wide range of modern applications and technologies, enabling ZARA to integrate new tools seamlessly.
Vendor Support: Operating on a modern system ensures ongoing support from software and hardware vendors, reducing the risk of encountering compatibility issues in the future.
Enabling the company to have their POS systems online and talking to the headquarters all day and having data transferred right after a purchase instead of at the end of the day.
cons
Learning Curve: Employees may face a learning curve as they adapt to the new system, potentially affecting efficiency until they become fully proficient.
Legacy System Compatibility: There might be challenges in ensuring the compatibility of existing legacy systems and applications with the new operating system, requiring additional adjustments.
They can maintain their current system. The current DOS-based system has demonstrated stability and effectiveness over an extended period. This familiarity may contribute to a smooth and predictable operation.
Since the existing system is already familiar to employees, there is no need for extensive training programs. This can result in cost savings and a quicker adaptation to daily operations.
Speed and Decision Making
Solutions
Pros
Ortega, Castellano and other senior managers would like to take advantage in the decision making instead of relying on a small group set of store manager at Zara. which was given the responsibility than those at other large clothing chains. Zara's technology was also preference to decentralized decision making.
Cons
The Zara store managers would decide what garments would be on sale at their stores and place orders for the items they thought would sell rather than accepting and displaying what headquarters decide to send them. Deciding on specific technology investment or projects Salgado and Castellano sat on a technology steering committee.
Zara needs to be able to respond quickly to the demands of the targeted customers which are the young, fashion conscious city dwellers. Zara had no chief information officer and no formal processes for an IT budget, the IT department wrote its own accounting software.
Zara did not produce the "classic" clothing line Zara only produced garments that were designed and manufactured to be highly durable they were described as "clothes to be worn 10 times". Salgado and his colleagues felt that the company's operations were unique enough that commercial packages would not be suitable so they wrote their own commercially packaged software.
Pros
Other companies in the apparel business used Marketing and Advertising to promote consumer to buy their clothes. This could be a solutions however there are set backs to promoting this way such as "fashion misses". Salgado and his colleagues shared a preference for writing the applications they needed themselves, the applications supported the ordering fulfillment, manufacturing were largely developed internally.
Cons
The young fashion conscious city dwellers tastes in clothing changes so rapidly it is very hard to predict and s very hard to influence extensive advertising and the latest styles could appear suddenly and then fade quickly. Zara's approach to information technology was consistent with it preferences for speed.