Zara - It for Fast Fashion

Executive Summary

As head of IT for Inditex (Industria de Diseno Textil), I have made the decision to upgrade our Point-of-Sale (POS) terminals from DOS (Disk Operating System) to a modern operating system (OS) called Linux. This will prevent any obsolescent issues that could occur, as DOS is no longer a supported OS. Our terminal vendor has declined a contractual agreement to refrain from upgrading the terminals from a DOS environment that would leave us operating a worldwide network on an obsolete operating system. We will take this opportunity to upgrade operating features such as moving to high-speed Internet access and adding inventory look-up capabilities across Zara's network of stores.

Key Assumptions

∗ Realizing that Salgado and his colleagues would rather write and customize their own software applications than modify commercial packages, it is assumed that employees are familiar with programming and would adjust quickly to programming for Linux software.

∗ It is also assumed that the Linux service contract is €75 yearly per terminal.

∗Considering how fast technology advances I'm going to assume that the PDAs cost approximately €500 each, there are 7 per store and they are replaced every 3 years.

Statement of Issues

Zara is a company born out of desperation. When a large lingerie order was suddenly cancelled with no other buyers, the German wholesaler opened his own store near the factory and sold the goods himself. Now under the holding company called Inditex, there are over 650 Zara stores worldwide. Zara's top competitors are Benetton, H&M and Gap, but Zara super responsive supply chain allows a garment to be designed, produced, delivered and put on display in only 15 days. This is unprecedented in the fashion industry.

The CEO and Chairman both agree that computers and technology are important to the business that they wanted to build. They also feel strongly that they needed to be able to react quickly to changing demands. Currently Zara is running ordering, fulfillment and manufacturing applications in a DOS environment. There are no current issues with the way the business network is running on the present operating system and there has been little need for IT. The decision needs to be made whether to continue adding stores on a daily basis using an ancient operating environment or if the time to upgrade is now.

Criteria

In this situation, a good decision would upgrade the operating system and resolve the anxiety over the possibility of the POS vendor stopping production of DOS based terminals. The aim is to increase the speed of information transfer between end users and operations as quickly and directly as possible. The upgrade would facilitate important features that save time and add value for store managers as well as customers and product managers. Lastly, these improvements would eliminate redundant technology by having the new POS terminals replace the PDAs.

Analysis

Zara's business model is based on linking the customer demand to manufacturing, and linking manufacturing to distribution. Other companies in the fashion industry use marketing campaigns to try to influence consumers. Zara is able to design, produce, deliver and have a garment on display in 15 days. This allows the company to deliver an article of clothing while it is still current rather than rely on advertising to convince young fashion-conscious city dwellers to buy it. Zara's target market is hard to influence and predict but with the 11,000 new items introduced per year, there is always a reason to shop and purchase for the latest trends. At Zara's if you see something you like you should buy it immediately as there are small quantities available and stock-outs are considered an advantage.

Store managers place orders (the offer) twice a week on a rigid schedule, which includes re-stocking existing items and requesting new items. Staff has to walk around and physically look to see what has been sold as there was no way to check the physical inventory on their current systems. (Store staff is also unable to look up the inventory of other Zara stores) They learn about new items on a hand held PDA that is linked via dial-up modem to La Coruna (head office). This order is due back to La Coruna within 24 hours. Once these orders were received a group of people called "commercials" would collect all the orders from the stores and work with inventory to decide where product in demand would go when inventory was too low to fulfill demand. Product would arrive at the store one