ZARA: Fast Fashion

Case Study Management Information Systems

Presented By: Group- 1

January 26, 2010

Agenda

About Company

Information Systems

Analysis & Conclusion

About the Company

ZARA
Zara, the most profitable brand of Inditex SA

the Spanish clothing retail group, opened its first store in 1975 in La Corua, Spain
operations into 45 countries with 531 stores located in the most important shopping districts of more than 400 cities in Europe, the Americas, Asia and Africa. Zara has remained focused on its core fashion philosophy that creativity and quality design together with a rapid response to market demands will yield profitable results

FAST FASHION
Business Strategy
Operations Strategy
Cutting Edge Fashion at affordable Prices

Builds on Quick Response Time

ZARA- Goals
Develop a system the requires short lead times Increase the number of available styles and/or choice Decrease quantities produced to decrease inventory risk
These goals helped to formulate a unique value proposition: to combine moderate prices with the ability to offer new clothing styles faster than its competitors.

ZARA- Business Model

Zaras business model can be broken down into three basic components: 1. Concept: To maintain design, production, and distribution processes that will enable Zara to respond quickly to shifts in consumer demands. Capabilities: It maintains tight control over their production processes keeping design and manufacturing in-house or with some strategic partnerships located nearby . They have strategic agreements with local manufacturers that ensure timely delivery and service. Thus, maintaining the flexibility necessary to design and produce over 12000 new items annually. Value drivers : for Zara are both tangible and intangible in the benefits that are returned to all stakeholders. Tangibly Inditex, the parent company of Zara, has 11.02% net margin on operations. Intangibly, customer loyalty and brand recognition have provided significant value to Zara.

2.

3.

Information Technology @Zara

DBMS A DBMS is a set of software programs that controls the organization, storage, management, and retrieval of data in a database. E.g MySQL , Oracle ERP ERP software applications to improve the performance of organizations' resource planning, management control and operational control. e.g SAP ,people soft Centralised server managing and controlling of data and command from single point e.g Napster RFID Radio-frequency identification (RFID) is a technology that uses communication via radio waves to exchange data between a reader and an electronic tag attached to an object, for the purpose of identification and tracking. E.g Barcode detector

Information Technology @Zara

The blend of technology Strategy enabled Zara to break all the rules in the fashion industry Zaras store managers leads the intelligence gathering efforts that ultimately determines what ends up on each stores rack. ZARA uses PDAs (personal digital assistant) to gather customer input PDAs are also linked to stores POS system, showing how garments ranked by Sales Zaras Staff regularly take feedback from customers on what they they would like to see more of.e.g colour design etc

IS practical Implementation, showing its potential for supporting enterprise growth

ZARA-IS Implementation

Design

Manufactur ing

Distribution

Retailing

Design
Sources of Information POS data Industry Publication TV Internet University Campuses

The company can design a new product and have finished goods in its stores in four to five weeks It can modify existing items in as little as two weeks. Shortening the product life cycle means greater success in meeting consumer preferences.

Zaras capacity to adopt to new trends, understanding differences between markets was highly relied on High frequency Information Systems.

Manufacturing
Sources of Information Internal - 20 owned factories near Spain External HK and Barcelona

Highly Automated and Capital Intensive factories Developed J.I.T system incorporation with Toyota Production Scheduling Reduced Cost Transportation and production Material Requirement and Planning Fully Automated Order Application

Distribution
Sources of Information Centralised Distribution System Mobile Tracking Systems PDA
Transportation and Logistics

Factories in Arteixo

Route and schedule optimization Queue Management Systems for turnaround and waiting period of the ships at the docks Air Travel (Main Costs) Optimize routes to minimize cost and travel time inventory management

Distribution center in La Coruna

Zaras inventory model

Advantages

Zaras Business System through the Value Chain

Vertical Integration

Forward Vertical Integration Reduces Bullwhip effect

Backward Vertical Integration Reduces Cost and Improves Quality

Retailing
Sources of Information store managers decision influence on the replenishment of garments there is a heavy reliance on historical information from the store manager
Promoting Quick response Coordination between retailing and manufacturing Sales and trend forecasting Marketing Strategies for different markets The aggregated demand is ascertained and the supply is allocated according to past performance of the various garments at the stores

Potential for supporting enterprise growth

Enterprise growth
Correct prediction of Buying Behaviour and trend analysis Market research on university campuses, discos, mall etc. Feedback from stores Sales report Helps in taking quick decisions Regional managers analyse the collected feedback. Analysis used by designers to introduce new product line and modify existing ones Designers decide with commercial teams on fabric, cut, price of new garments.

Inventory Control
Distribution Constant stream of information Leads to constant input in product development process. Control early investments in raw material, direct and indirect of process and production capabilities. Communication and IT are essential in maintaining constant interface of various functions of management and production control.

Enterprise growth Cont

Competitive Advantage Reduced Cost Reduced time and effort Customer Relations/Satisfaction Feedback Process Improvements

CHALLENGES ENCOUNTERED

People
Cultural Issues Language Issues Technical Issues Procedures

Solution: Provision of training. Research and analysis of various markets. Acquisition of new workforce. Recruitment of local people.

Database
Maintain huge amount of data/ data loss Organize and interpret from available data Security measures against spy Compatibility

Solution: Technological Up gradation Hire skilled employees. Acquire reliable storage devices which is a critical for the company.

Hardware/Software
18 months technology upgrade Compatibility between hardware and software. License issues Cost of equipment and technology Geographic and natural constraints

Solution: Sharing information where there is sophisticated technology. Working under legal boundaries.

Procedures
Inventory management Procedure Change with technology. Data collection procedure in different markets. Sales & Trends forecasting in new markets

Solution: Applying large number of POS in the supply chain. Formation of Local Teams to analyze the market for forecasting.

Key Success Factors for Zara

Business is built on quick response Production responds to trends. Deliveries are twice weekly, unlike most of the competitors weekly schedule.
KSFs:

Market Research Ready raw material base Multi-functional quick decision making Vertical integration to ensure control over supply chain, and proximity Technology Cost Control, despite flexibility Technology and Infrastructure

References
http://www.zara.com/ www.3isite.com/articles/ImagesFashion_Zara_Part_I.pdf www.3isite.com/articles/ImagesFashion_Zara_Part_II.pdf Harvard Business Review http://en.wikipedia.org/wiki/Fast_fashion

Thank You