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ZARA: IT for Fast Fashion

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sasikanth thota

on 26 February 2015

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Transcript of ZARA: IT for Fast Fashion

Zara, the most profitable brand of Inditex SA
The spanish clothing retail group, opened first store in 1975 in La Coruna, Spain
Operations into 45 countries with 531 stores located in 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 demand will yield profitable results

Design and Manufacturing
Zara's Business Model
Speed and Decision Making
Marketing, Merchandising and Advertisement
Financial and Growth
Group 4:

Information Technology
Approach an Organizations
La Coruna
Distribution Centers
Speed and Decision Making
Distributed decision making
Autonomy multi-functional team
Consist of two designers and two production managers
team decide purchased material, placed production order and set price
Minimized high level intervention
Team's decision were not typically reviewed by higher-level manger
Marketing, Merchandising and Advertisement
Virtually No Advertisement
Average marketing expenditure is 0.3% of revenue
Invest on Place
Always located in a city's prime retail district
Often best-known street
Local and HQ's decision making
Store manager have freedom in deciding what clothes to stock
No discretion on store's LOOK & FEEL
Price were decided by HQ's production manager
Financial and Growth
Fast growing
1,558 stores in 45 counties(2003)
Average open one store per day across the world
Simple Order Processing
Placed order twice in a week with hard deadlines - No order no ship
Store manager's decision in final
Store manager received "Offer" from HQ via PDA
Store manager check the store inventory and place an order by PDA
Consolidated order from stores in world wide
No decision making in case of order and stock matched.
HQ commercial decide where to ship in case of demand over stock or manufacturing capacity
HQ commercial ship store not ordered
Design and Manufacturing
Quick cycle for new item
Introduce 11,000 new items in a year compared to competitors 2,000-4,000 items
Approach and Organization
Unique Organization
No formal IT budget setting process
No formal project or technology decision process
In-house development policy
Build, not buy
Very high retention rate of IT staff: only 1 person left the last 10 years in 50.
La Coruna
"Theoretical inventory"
Stores send daily sales result to HQ
POS data didn't reflect theft, damaged and other losses
"Theoretical inventory is not a actual inventory
95% accuracy policy
"Having 100% control is most of the time just too expensive. Being 95% is pretty good" by Salgado, head of IT
Simple Process
No sophisticated software for "optimal" plan generation
Simple MRP: factory manager decide based on information like demand, capacity, and due date.
Advanced technology for manufacturing
Computer controlled fabric cutting machine
Distribution Centers
Automation and Computerization
In-house developed inventory tracking application with vendor, conveyor, equipment.
Very basic IT
DOS based POS
No store network
Telephone+modem communication
Gather "live" data every order cycle
Eye check for in-store inventory
Gather data on the floor by PDA
The Argument and The Conclusion
Getting Fancy
The story - Xan Salagado Badas vs Bruno Sanchez Ocampo
Would upgrading to a modern operating system, enhancing the POS application itself, and/ or building networks within and between stores put at risk the robust and scalable infrastructure they had build?
What if the hardware vendor for POS terminals changed the machines in such a way that they could no longer use DOS?
Did all of this mean that it was now time to port the POS application to another OS such as Windows, UNIX or Linus?
Did it make sense to purchase enough of the current POS terminal now, so that Zara's needs would be covered in the event of sudden loss of support from the vendor?
As a occasion build new capabilities in to the software
Why stop there
Rethinking the role of IT
The Wal-Mart Story
IT becoming a commodity; IT investment can have serious consequences on operating efficiency
Investment in new technology can be risky
What should drive IT Investment
The 3 Key Words That Define Objectives of IT Investment
IT should provide new compatibilities that a firm was never able to achieve before
IT should allow the firm to do what it used to do but more efficiently - at a lower cost, in a shorter response time, and with better service levels
IT applied to ensure that common process and standard workflow are followed
5 Core Capabilities
Supply chain collaboration and integration
Centralized and decentralized decision making
Synergies across multiple supply chain
Supply chain visibility
Performance Monitoring and Optimization
IT For Fashion
Thank You
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