10 ZARA: IT for Fast Fashion

10 ZARA: IT for Fast Fashion

Zara: IT for Fast Fashion

Executive Summary This concise summary will introduce and also !riefly analy"e and summari"e the case at hand: Zara: IT for Fast Fashion and the issues #r$ Sal%ado and #r$ Sanche" are facin% alon%side the rest of Zara and Inditex&s mana%ement$ The 'ro!lems introduced are all ma(or concerns that are currently affectin% or ris)in% to 'otentially affect the com'any in the future$ These include issues with the current o'eratin% system and 'oint*of*sale systems the com'any o'erates$ They 'rovide limited visi!ility throu%hout inventory levels resultin% in customer and em'loyee dissatisfaction alon%side inefficient time consum'tion due to len%thy 'hysical inventory counts$ Additionally these systems force the need for +,A usa%es which 'rove to !e ineffective due to their small screens and trou!les with customer returns$ -ecause of this we !elieve the com'any should waive the first two of the three alternatives which descri!ed no chan%e in the current systems and a %radual chan%e !y area system res'ectively and should 'ursue the third 'rovided

alternative which consisted of an immediate im'lementation of new 'oint*of*sale systems and o'eratin% systems com'anywide$ .e !elieve the !enefits of customer and em'loyee satisfaction im'roved inventory information 'otential for hi%her 'rofits and overall hi%her levels of efficiency will far outwei%h the costs and ris)s associated with the im'lementation of these new systems$ Statement of +ro!lems/0auses There are a num!er of 'ro!lems identified !y Sal%ado 1head of IT2 and Sanche" of Inditex re%ardin% 'ro!lems in their Zara line of stores$ These 'ro!lems have created inefficiencies within Zara and throu%hout the entire Inditex or%ani"ation 1as Zara is a ma(or 'ortion of the or%ani"ation2 which must !e solved for the !usiness to remain a leader in the fashion industry$ The ma(or 'ro!lems revolve around the 'oint*of*sale system that is currently !ein% used !y Zara around the world$ These 'ro!lems that will !e discussed further include: a lac) of visi!ility throu%hout the system for mana%ers issues with orderin% and data transmission to head office and issues re%ardin% returns$ The first issue with the 'oint*of*sale system is the lac) of visi!ility throu%hout the whole system$ This is in 'art due to the limitations of the #S*,3S system they currently use$ To show how outdated the system really is hard drive manufacturers are %oin% to sto' su''ortin% the 4+ o'eratin% system !y 5015 1-rownlee 50102$ -ecause 4+ is si%nificantly newer then #S*,3S it will also no lon%er !e su''orted !y these new hard drives6 this shows the challen%es Zara will face if they are to continue their current +3S system 1-rownlee2$ The lac) of visi!ility results lac) of inventory )nowled%e across store networ)s lac) of stoc) )nowled%e 1stoc) counts can only !e measured !y 'hysical counts2 and also shorta%es of )nowled%e re%ardin% !est*sellin% items$ In turn this lac)

of !oth internal and external visi!ility creates further issues with 'roduct orderin% and also customer service$ For exam'le if a customer comes into the store loo)in% for an item that mi%ht currently !e out of stoc) at the 'resent location the mana%er or other store em'loyees cannot sim'ly utili"e the current +3S system to chec) for other store&s inventory$ Em'loyees must call around to other locations which are also not ca'a!le to chec) inventory unless 'hysically searchin% their store$ This 'roves to !e a hi%hly inefficient techni7ue that 'rovides limited customer service as consumers are forced to wait inconvenient 'eriods of time whilst em'loyees 'hysically search for desired merchandise$ Further em'loyees also cannot see if a s'ecific item that is currently out of stoc) will !e delivered at a later date or if that 'articular Zara location was not selected to receive a limited item$ Evidently this system 'rovo)es frustration and dissatisfaction from !oth the em'loyee&s and consumer&s 'ers'ectives$ The next ma(or 'ro!lem consists of orderin% issues and data transmission to the head office$ 8ee'in% in mind that 'art of Zara and Inditex&s strate%y is to %ive orderin% 'ower to the store mana%er Zara needs to sim'lify the 'rocess for all involved while not ta)in% control away from the mana%er$ 0urrently store mana%ers and em'loyees need to use their +,A which has a small screen and can !e difficult to ty'e on$ Em'loyees in char%e of their desi%nated section of the store are to com'ile a list of items that need to !e ordered$ This order is then transmitted to the mana%er who com!ines the list dou!le chec)s it and then sends it off to the head office$ 9ot only is this all done on the +,A !ut it is done !y a num!er of em'loyees and must !e done twice a wee)$ .ith an im'roved system this 'rocess could !e streamlined so it is not only less la!our intensive !ut also more accurate in terms of num!ers ordered$ :imitin% num!ers ordered can !e very

im'ortant in an or%ani"ation that tries to limit their inventory$ 9ext is a similar 'ro!lem with data transmissions that must !e sent to head office on a daily !asis$ An em'loyee must wal) a!out with a dis) to each +3S location collectin% the day&s data !efore finally com!inin% the information on the machine that is connected via modem and sendin% it off to head office$ This a%ain is time consumin% for the em'loyees and is a 'rocess that could vastly !enefit from drastic im'rovement$ The last 'ro!lem occurs when a customer wants to return a 'roduct to the store$ As a result of the 'oor +3S system em'loyees must use their +,A to hel' customers return 'roducts to the store$ ;3ne of the few com'laints store mana%ers had a!out the +,As was that it was time consumin% to use their small screens and styluses to accom'lish returns 1'a%e 10 Zara: IT for Fast Fashion2$< This issue returnin% 'roducts creates frustration for the em'loyee !ecause they must utili"e a small and inefficient screen and the customer !ecause they may need to wait a lon%er 'eriod of time to com'lete the return$ .hile 'erha's seemin%ly minor to some customer satisfaction is very im'ortant in any !usiness$ 8ee'in% the customer ha''y must !e 'rioriti"ed even when the customer is com'letin% a return6 it could ultimately !e the difference !etween them returnin% to try a different 'roduct or sho''in% at a com'etitor$ It is clear that Zara and Inditex still have a num!er of 'ro!lems that they need to resolve in order to have Zara runnin% at 'ea) efficiency and 'rofita!ility$ =owever these 'ro!lems have solutions which will !e tal)ed a!out in the ensuin% section$ Alternatives As we have discussed a!ove the 'ro!lems lay with the +3S and 3S that Zara is usin% to transmit data externally and internally$ The solutions that we see overcomin%

these 'ro!lems include re'lacin% the +3S and 3S system with more current o'eratin% systems and information systems$ Therefore we have !elow %uide lined the three alternatives to their 'ro!lems: 1$ ,o nothin% and remain with the current 3S and +3S system 5$ Start to re'lace systematically the 3S and +3S systems !ut not all at once >$ Re'lace all the 3S and +3S systems com'anywide immediately As we have seen we need to com'are these alternatives with a set of decision criterion6 thus we will outline the followin% criterion to com'are our alternatives$ They are as follows: 1$ Time for im'lementation 5$ 0ost >$ Acce'ta!ility !y mana%ement ?$ -enefits yielded .e will now 'roceed on com'arin% the a!ove stated alternatives with the criterion that we have 'rovided ato': 1$ ,o nothin% and remain with the 0urrent 3S and +3S system Time for im'lementation: This would re7uire a!solutely no time constraint as nothin% would !e chan%ed in the or%ani"ation$ 0ost: There would also !e no chan%e in the cost structure at the immediate time as nothin% would !e chan%ed to the current systems$ =owever in the near future if their current systems are discontinued !y the vendor then this alternative would yield a %reat deal of ex'ense to the com'any chan%in% of the e7ui'ment as well as delays within the

com'any for unseen reasons due to com'lications resultin% from the vendor sto''a%e in IS su''ly$ Acce'ta!ility !y #ana%ement: #ana%ement should see si%nificant 'ro!lems with doin% nothin% a!out their current information systems$ -usiness is always ever*evolvin% and always chan%in% therefore if their information systems are !eneath that of their com'etitors and there is a ris) of extinction of the su''ly from the vendor then they should act 'roactive instead of !ein% reactive$ -enefits @ielded: -enefits include the cost savin%s that can !e s'ent elsewhere in the com'any as the com'any is not immediately forced to u'%rade$ Althou%h those savin%s could !e attac)ed later on if the system re7uires attention and chan%e when the com'any does not ex'ect it$ 5$ Start to re'lace systematically the 3S and +3S systems !ut not all at once Time for im'lementation: This o'tion would yield the most time consum'tion for the com'any to chan%e its systems$ A'%radin% 'ro%ressively %eo%ra'hically would ta)e time and effort and would re7uire on*site hel' from IT mana%ers while the 'rocess is chan%in% and it would also re7uire that mana%ers and em'loyees !e trained on the new system$ Al!eit due to the non*com'lexity of the system it is 'ro!a!le it would not ta)e much time to train them$ 0ost: This alternative would !e costly !ut it would also !e easily sto''ed if needed !ecause they are im'lementin% !it !y !it if somethin% does not wor) or it creates a disaster for the com'any then they can sto' im'lementin% the new systems with the least amount of dama%e$ It could !e said that !y im'lementin% the new 3S and +3S systems

%radually over time they are creatin% a dama%e control net in case somethin% %oes drastically wron%$ Acce'ta!ility to #ana%ement: .e do not !elieve that mana%ement would entirely see the !enefits to this alternative as the only ma(or one could !e its lar%est draw!ac)$ The !i%%est !enefit is that the entire system would not chan%e at the same time6 this would not affect the internal store*to*store networ)s due to the !ac) that it was nonexistent from the !e%innin% !ut if they do decide to sto' im'lementation for any reason they could !e left with a 'ercenta%e of their stores chan%ed and a different 'ercenta%e unchan%ed which could !e a de!acle$ -enefits @ielded: The lar%est !enefit is that eventually once full im'lementation has occurred the com'any will !e a!le to yield the !enefits of havin% an u'*to*date 3S system6 stores will !e a!le to identify trends and inventory from one another and it will cut the efficiency created !y 'hysical inventory counts$ The other ma(or !enefit of im'lementin% %radually is that they can test the new systems to see if they are actually !eneficial !y o!servin% on%oin% results$ >$ Re'lace all the 3S and +3S systems com'anywide immediately Time for im'lementation: This would !e very time consumin% not only durin% the lay* out 'hase !ut also caused !y all of the 'lannin% that would have to %o into the im'lementation 'lan6 a smooth transition is 'ivotal$ It would evidently !e 7uic)er than the second alternative which included %radual im'lementation area !y area store !y store$ 0ost: The cost would !e very lar%e to the com'any initially as they would have to outsource installation la!our or even send wor)ers a!road$ The im'lementation 'lan of

installin% the e7ui'ment and familiari"in% em'loyees with the new systems would evidently !e timely as well$ This could 'otentially cause a disru'tion in the 'urchase 'atterns of consumers and it may directly affect the sales of the stores due to em'loyee unfamiliarity with the new system$ The cost should !e (ustifia!le !ecause of the ca'ital that Zara does have6 currently o'eratin% cash flows estimates of over B00 million Euros so the chan%e in information systems should not salva%e their cash flow 1Inditex 50102$ Acce'ta!ility !y #ana%ement: #ana%ement would 'otentially !e uneasy with this alternative due to the enormous si"e of alteration that is re7uired to the com'any&s su!stantial o'eratin% systems$ They would have to outwei%h the ca'ital costs of this alternative with the future !enefits of !ecomin% a more sustaina!le 'layer in this !usiness$ It is clear that the com'any must alter their systems at some 'oint in order to !e com'etitively advanta%eous in the a''arel mar)et$ Therefore we would conclude that mana%ement would !e in favour of this alternative 'rovided that the 'ro'er 'recautions and a stron% 'lan will !e 'ut in 'lace in order to minimi"e ris) and ex'enses$ -enefits yielded: .e !elieve that the !enefits would !e %reat to the com'any$ 0han%in% their information systems would allow them to share data !e a!le to chec) inventories at other stores it would eliminate the inconvenient need of a +,A and eliminate the need to 'hysically count inventory levels$ The !enefits definitely out*wei%h the ne%atives and in order for one to master a !usiness one must !e a master of chan%e$ :astly another very 'ositive !enefit would !e that Zara will no lon%er have to 'hone*in orders6 the new o'eratin% system will automatically do it$ 1Retail Systems 50102 Recommended Solution C Im'lementation +lan/Dustification

=avin% thorou%hly examined Zara and Inditex&s 'osition the hardshi's they are facin% and all 'ossi!le alternate solutions to these o!stacles we !elieve that the com'any&s %oal to sustain a com'etitive advanta%e in the a''arel industry must !e directly sustained !y the third alternative: immediately re'lace all +3S and 3S com'anywide$ An efficient and u'%raded o'eratin% system accom'anied !y a 'roficient 'oint*of*sale system will !enefit Zara and Inditex in the followin% ways: ;Accurate results !ased u'on scannin% of individual 'rices6 Inventory mana%ement is made easy with these tools6 Evaluation of sale 'attern can !e easily done with the out'uts 'rovided !y these software 'ro%rams6 3ff*site access is 'ossi!le with we!*!ased +3S systems6 Finally the !usiness can en(oy im'roved sale as well as enhanced customer service with the hel' of these tools<$ 1Articles!ase 500B2 In order for Zara to successfully overcome the lon% and costly 'rocess of im'lementin% new +3S systems and o'eratin% system the com'any must carefully desi%n a detailed outline that will assure an effective transition$ Inditex and Zara must firstly choose a vendor which s'eciali"es in retail systems and could accommodate the latest o'eratin% systems availa!le as well as future u'dates and/or 'otential system chan%es$ The com'any should consider outsourcin% their installation la!our !y hirin% s'ecialists that are familiar with all vendors networ)s and o'eratin% systems 18erhulas 1BB12 This will initially !e costly !ut will ultimately cut ex'enses in the lon% run !y ensurin% an efficient and fast transition with limited set!ac)s$ =avin% the new systems installed the com'any must shift its focus on )ee'in% the existin% +3S system runnin% until they are at a 'oint where they can comforta!ly convert to the new$ 10arey 1BEB2 This is 'ivotal as whatever wor) is done in the store and whatever testin% is 'erformed current o'erations must not !e disru'ted6 this must !e

done in order to not re'el any consumers or disor%ani"e em'loyees and ultimately not distur! sales$ Finally the last ste' towards a successful and 'rofita!le chan%eover must !e a thorou%h trainin% and education schedule for em'loyees mana%ers and all users of the new systems$ Zara should 're'are all em'loyees !y 'otentially runnin% mandatory trainin% sessions or !y sim'ly )ee'in% the old systems o'eratin% whilst trainin% em'loyees on the new systems until they are all comforta!le and ready to com'lete the conversion$ This a%ain will avoid set!ac) em'loyee frustration and will ensure a favoura!le transition to the new systems$ Thus we !elieve that our recommended alternative and im'lementation 'lan will fundamentally !enefit the com'any as it will avoid the ris) sudden loss of su''ort from the current vendor it will eliminate the inefficiency of the +,As in use it will accommodate networ)s within stores and throu%hout the com'any it will 'rovide inventory and sales information increase 'rofits and customer satisfaction and ultimately 'rovide the com'any with su!stantially hi%her levels of com'etitive advanta%e$ -i!lio%ra'hy Articles!ase$ FIm'ortance of +oint of Sale Software in Effective Sales #ana%ement$F 1B Au%ust 500B$ Articles!ase$ G A'ril 5010 Hhtt'://www$articles!ase$com/software* articles/im'ortance*of*'oint*of*sale*software*in*effective*sale*mana%ement* 11>I5BB$htmlJ$ -rownlee Dohn$ =ard ,rive #anufacturers to sto' su''ortin% .indows 4+ and ,3S !y 5015$ 10 #arch 5010$ G A'ril 5010 Hhtt'://www$%ee)$com/articles/%ad%ets/hard*drive* manufacturers*to*sto'*su''ortin%*windows*x'*and*dos*!y*5015*50100>10J$

0arey 0hristo'her D$ FSite +re'aration 8ey to Successful +3S Installation$F B Danuary 1BEB$ -9ET$ G A'ril 5010 Hhtt'://findarticles$com/'/articles/miKm>0B5/isKn1Kv5E/aiKIB>EGB?/J$ Inditex$ Financial ,ata$ G A'ril 5010 Hhtt'://www$inditex$com/en/shareholdersKandKinvestors/investorKrelations/financialKdat aJ$ 8erhulas Dohn$ FAssurin% the +ro'er Inte%ration of +3S System$F I #ay 1BB1$ -9ET$ G A'ril 5010 Hhtt'://findarticles$com/'/articles/miKm>0B5/isKnBKv>0/aiK10L010E5/'%K5/M ta%Ncontent6col1J$ Retail Systems$ -enefits of a Retail +3S System$ 500E$ G A'ril 5010 Hhtt'://www$retailsystems$com/!enefits*of*a*retail*'os*system$cfmJ$ Zara: IT for Fast Fashion$ 9o$ B*I0?*0E1$ =arvard -usiness School$ I Se'tem!er 500L$