Zara It Analysis

Published: 2021-08-15 14:30:08
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How would you advise Salgado to proceed on the issue of upgrading Zara’s POS systems? 3 -Should the company upgrade the POS terminals to modern operating system? 3 -Should the company build in-store networks? 4 -Should the company give employees the ability to look up inventory balances for items in their own stores? 4 -Should the company give employees the ability to look up inventory balances for items in their other stores? 4 What is the Zara “business model”? How is it different from the business model of other large clothing retailers?
What weaknesses, if any, do you see within this business model? Is it scalable? 4 In your opinion, what are the most important aspects of Zara’s approach to information technology? Are these approaches applicable and appropriate anywhere? 6 References7 Brief Summary of Zara Zara is a fashion brand that was founded in 1975 by Amancio Ortega, who believed that retailing and manufacturing must be closely linked to provide a speedy response to consumers’ demands. Unlike other fashion chains, Zara did not invest extensively with advertising and marketing to generate sales, instead, they set up their stores in prime locations.
Zara’s selling strategy relies on fast turnover of their merchandise, aiming primarily at seasonal fashions. Their decentralised approach in decision making, allows store managers to make decisions on which items should be on sale, and which items should be replenished based on their experiences and feedback with local customers. The commercial team also observed local trends and communicated with store managers as to which line of clothing would sell, and so transferred those items to other stores where they would sell well.
Zara did not try to produce clothes in the high end market. Their clothing had a short life span and was not extremely durable. They aimed at the speedy supply of top fashion trends, while continuously creating new items, including new designs or altering the design of existing clothes. Because of their rapid turnover in garments, Zara shoppers knew that they would have to purchase the clothes when they first came on sale, or take the risk of missing out. In terms of its operation, Zara established a three step approach: ordering fulfilment, design and manufacturing.
Store orders included re-stocking of existing items and requests for new garments. Each store uses its handheld devices to order by walking around the store and “beaming” the garments. Headquarters were able to communicate with store managers, utilising the device for availability and lists of new garments. In terms of order fulfilment, Zara’s commercial team matched the aggregated orders which were requested from all of the stores (demand) and the inventory levels (supply) in the SKU at the same period.
If the supply and demand were met, shipments would be fulfilled. If not, the commercial managers needed to make a decision on the quantities of store allocation, based on the history of sales patterns. In terms of design and manufacturing, Zara used vertically integrated manufacturing operations to allow it to introduce new items constantly. Its own network of production facilities and workshops enabled speedy production turnaround time, thus enhancing the capability for Zara’s ever ready response to the constantly changing fashion tastes of its customers.
The network provides flexibility of production, thus allowing Zara’s commercials to simply make estimation as to how well the garments would sell. Store’s orders indicate the level of production needed, therefore the company did not have to rely on sales forecasts. (Mcaffe, Dessain, Sjoman, 2007). How would you advise Salgado to proceed on the issue of upgrading Zara’s POS systems? I would advise that Salgado should initiate an IT project, upgrading POS systems as well as the hardware to support it.
Also an upgrade of its internet capabilities, because without the speed of the internet, data will not be transmitted quickly enough. With an IT technology upgrade, manual intervention would be eliminated, thus promoting operational efficiency (Moore, 2009). * Should the company upgrade the POS terminals to modern operating system? 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. * Should the company build in-store networks?
Yes, the company is missing out on communication and information sharing within the store network system. The in-store network allows connectivity and provides daily sales totals, also ordering in “real time “processing. It allows POS terminals to talk to one another and allows viewing of up-to-date data at any time. * Should the company give employees the ability to look up inventory balances for items in their own stores? Absolutely, as it will save time during the ordering process. Also by knowledge of the inventory level enabling the stores personnel to carefully plan the ordering of each item.
Store managers will also be able to utilise the system to see inventory balances and make decisions on ordering. * Should the company give employees the ability to look up inventory balances for items in their other stores? Yes, not only will it allow inter-store transfers, but also provide better customer services, and to let the customers know from which store the items will be available. It not only retains the sales within Zara, but also the customers in the long term. Happy customers will always return. What is the Zara “business model”?
How is it different from the business model of other large clothing retailers? What weaknesses, if any, do you see within this business model? Is it scalable? Zara operated on a Vertical Operations Business Model, controlling every level of value chain: factories, workshops, processing, and distributions centre. It carried out virtually no advertising, relying heavily on store images. Zara was very brand centric. Its website only as showed a few garments at any time. Also it did not have internet shopping facilities as current DC did not cater for shipping small orders and handling returns of garments. Mcaffe, Dessain, Sjoman, 2007). In addition to its own fashion launch twice a year, Zara constantly created new garments and the quantities needed were practically driven by customer demand. This approach would not be achievable without the support of back end manufacturing process and distribution facilities. Both Zara and other larger retailers shared a similar mission: that is a speedy reaction to alter changes in tastes or customer demands, however their business models are a contrast, (e. g. H&M), and others relied heavily on advertising and outsourcing its production.
They instead carried out their forecast for sales and marketing achievements, also installed a more robust website on which they were able to provide more functionality such as garment launch, customer loyalty programs, online ordering and customer feedback (Pahi, 2008). The weakness of this model could be that Zara did not run an efficient scale of economies as they produced a too varied a range of garments in a small quantities. Also it did not utilise the website well to communicate with customers and promote its products. Probably not so back in 2007, however, in hindsight, internet shopping has proven an epic shake up.
The spending patterns have changed and consumers prefer to have instant access to style and fashion advice as provided on the website. Because of its current distribution infrastructure, Zara could not handle internet shopping, and would need to look at its current IT infrastructure to enable the changes to keep up with the shift in the fashion paradigm. (The business of fashion,2013) The business model could be scalable by upgrading IT technology to be more compatible, also to suit current consumers need while providing a speedier / real time response allowing a more competitive edge amongst its competitors (World Press, 2012).
In your opinion, what are the most important aspects of Zara’s approach to information technology? Are these approaches applicable and appropriate anywhere? Zara’s approach to information technology was very light. It obviously did not utilise leverage of its IT technology to reach their business requirements, or to maximise their efficiencies. They could hardly call themself an IT savvy firm. The senior management had affinity for IT and were not strategically committed to its use. Minimal investment was placed on information technology, but instead they invested heavily on the back end processing.
Their IT department wrote most of its applications and all of their IT support was carried out in a central location. Current DOS-based systems to support POS would be a risky in the near future as it may not be compatible to technological changes and revised improvements. Throughout the value chain, the most utilised automation was the DC. From ordering to ordering fulfilment, stores used the dial up modem for business connectivity and information sharing. There were no standardised interfacing to interact all of the applications, e. . stores sales patterns and inventory levels should be linked to the head quarter’s inventory management system thus leading to ordering proposals and transfer of goods. The order quantities could then be decided based on garment availability. Plant production could also make use of the information to run optimal production in a short period of time. Lack of these IT platforms not only provided incorrect data, but also delaying the decision making process.

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