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Module 8: Zara Case Study Mind Map - Coggle Diagram
Module 8: Zara Case Study Mind Map
Timeline
Introduction
Marketing, Merchandising, and Store Design
Financials and Growth
Operations Cycle
Information Technology at Zara
IT Systems Across at Zara
Key Problem
Switch from DOS?
1 more item...
Zara is using outdated DOS software. Microsoft no longer supports DOS and the vendor states that Zara is the only customer on DOS. If the vendor discontinues support, Zara's business and operations can be disrupted.
Systems at HQ handle ordering, inventory tracking, and distribution. Factories/Distribution centers rely on Zara's conveyor software. The stores do NOT use a network and transfer ALL data physically.
Zara doesn't really have a formal IT structure. They have no CIO and no budgeting process. The IT department has 50 people and develops software/systems internally to increase speed and reduce complexity.
3 Key cycles. Ordering, fulfillment, and design/manufacturing. Stores place ORDERS two times a week and gets them filled within TWO days. The stores don't really keep inventory and are constantly restocking.
Intidex operated in 45 different countries. Zara generated most of its sales and profit. The company continued to grow with its profits tripling from 1996 to 2000. Countries that prioritized fashion made expansion easy because they had preexisting infrastructure and distribution
Zara doesn't spend a lot on advertisement. They focus on store location and visual presentation. They frequently redesign stores and set prices based around the euro. Their products have very short life cycles, which encourages customers to shop their more frequently. They also avoid online sales to avoid high return rates
Zara's commercial teams operate with a high level autonomy. Store product managers act as the main connection between the stores and headquarters. They decide which stores receive which products and can move the inventory between stores without management approval. This helps Zara stay ahead and flexible
Relevant Facts
Inditex
Zara and Other Companies Under Inditex
Zara's goal to sell to a difficult customer base that wants fresh and new.
Power and decisions distributed through companies rather than a small group of decision makers.
Chain that links Stores, Fulfillment, and Manufacturing.
Ordering
Fulfillment
Design and Manufacturing
Aimed for faster updates to styles and inventory than competition.
Hard deadlines for orders that occur twice a week getting inventory in fast.
Orders through PDAs in every store
IT Approach
No CIO
No formal way of creating IT budget
No formal way to justify IT efforts
No cost benefit analysis being done
POS becoming outdated
DOS no longer supported
Upgrades have been requested where updating the system could allow them.
Running Dial-Up Modems and Floppy Disks to Transfer Data
Application Development Handled In-House
50 Person department primarily local college grads
Little attention to employee retention, only one person has left the company in the last decade.
All Inditex IT support comes from this group.
Possible Solutions :
Keep Current POS System
Continue using DOS-based POS since it’s stable and supports fast store openings.
Pros
No training or rollout costs
Zero downtime or risk of bugs
Very reliable and simple
Cons
DOS is outdated and unsupported
Harder to scale in future
No real time data
Purchase Extra Current Hardware as backup
Buy and store enough existing DOS-compatible POS terminals to use for several years while pallnaing a future upgrade
Pros
Buys time before upgrade
keeps operations consistent
Reduces immediate risk of vendor changes
Cons
Costly to store unused hardware
Delays the real problem
Doesn't really improve functionality
Upgrade POS software to Modern OS
Rewrite the PoS appliaction for a newer, supported operating system.
Pros
Easier to find technical support
Allows adding modern features such as real time data
Built to last with new technology
Cons
Risk of messing a stable system
Slower store rollout during transition
High development cost
Full Modernization
upgrade the OS and link all stores with networking so we get real-time inventory, quick store-to-store transfers, and faster communication.
Pros
Live data across stores and better stock control
Happier customers with faster service
Sets Zara up for big growth worldwide
Cons
Costs a lot and gets complicated
Could slow things down in stores during the switch
Staff need more training
Key Problems
Outdated POS technology
Limited System Connectivity
Scalability and Growth Constraints
Data Inaccuracy and Operational Blind spots
Risk of Business Disruption
One of the biggest issues that could arise for Zara is if their hardware vendor decides to stop supplying DOS-compatible hardware. This scenario could bring massive operational disruptions. Without a modernization plan in place, this could disrupt daily operations in the store. Overall, relying on old technology exposes the company to long-terms risks that can throw off Zara's fast-fashion business model.
Because data transfer is all done manually, inventory data is more than often theoretical rather than real-time. Because of this many of the store managers had to walk the stores and manually count all the stock in the store to record it. Doing all this made it a waste of time and very inefficient because it can lead to errors in the data. This lack of accurate and timely information can cause missed sales opportunities or inefficient stock distribution
Zara's outdated IT equipment and systems limit how easily operations can expand even if they are opening one new store per day. The DOS-based system does not integrate well with newer logistics and accounting tools in the market. The small IT department is also constrained because if they were to upgrade the scale would be a tremendous task.
Zara stores are not connected/networked together and many of the stores rely floppy disks and dial-up for data transfers. This prevents real-time visibility across stores and headquarters which forces employees to manually share information or call other stores to check for stock. This lack of integration slows down many of the decision-making processes and also limits the speed that Zara's fast-fashion business model depends on .
In the Case study, it is stated that many of the point-of-sale systems are still running on MS-DOS, which Microsoft has long dropped support for. The continued use of MS-DOS presents serious risk issues if the vendor of the POS stops making DOS-compatible terminals, as this would cause Zara to be unable to open or maintain their current open stores. Additionally, the outdated POS systems are vulnerable because of the lack of security updates and patches, which can leave the systems vulnerable to future failure and data issues.