Zara: It for Fast Fashion Case

Zara: IT for Fast Fashion Case

Supply Chain Management Module 1

Date: October 7th, 2009

Executive Summary

My decision is to upgrade the POS terminals used by Zara to ensure the company is current with technology and compatible with the hardware vendor's machines. January 1st 2004 is the scheduled date the POS terminals will be upgraded and running in all Zara stores around the world. The upgraded POS terminals will include more applications for store managers such as the ability to look up their own inventory balances and the inventory balances of other store locations. This factor alone is considered an advantage by store managers as it will allow each store to look up what they have been selling the most as well as avoid having to canvass the store at the end of each day. Secondly in the event Inditex's hardware vendor upgrades their machines Zara's POS terminals will be up to date with current technology.

Key Assumptions

It is anticipated Inditex's hardware vendor may update their machines in order to stay current with technology. Inditex has no control over whether or not their hardware vendor will update their machinery therefore it would be wise to stay current with technology to avoid disrupting their largest chain of stores (Zara). Updating the POS terminals is not a guarantee of easing or rather improving current operations, however the statement of issues provided in the next section will elaborate further on why staying current with technology will offer Inditex's largest chain of stores more functionality and networking capability.

Statement of Issues

Zara is an international fashion retailer which originated in 1975 by a man named Amancio Ortega. Mr. Ortega opened his first store in Spain after a German wholesaler cancelled a large lingerie order which almost lead the company near bankruptcy. Founded by Inditex, Zara currently has over 650 stores located in more than 50 countries and continues to grow each day. Inditex is one of the world's largest fashion distributors and assists Zara with its textile design, manufacturing, and distribution. Zara's design and production center is conveniently attached to Inditex headquarters in La Coruna with three halls which consist of the women's, men, and children clothing lines. Zara stores may be found in countries such as Africa, America, Asia, Europe, and the Middle East whereby customers can find new products every week but in limited supply. Although Zara stores are geographically dispersed each store location adheres to strict deadlines with respect to order fulfillment and supply for example store managers in Spain and southern Europe place orders twice weekly by 3:00 p.m. Wednesday and 6: oo p.m. Saturday.

Zara's possible competition may include H&M, Gap, and Benneton's or any men's and women's fashion retailer. Mr. Salgado is the head of IT for Inditex and is concerned that the point-of-sale terminal used for Zara must be upgraded in the event their hardware vendor decides to upgrade their machines. If the point-of-sale terminal is upgraded Mr. Salgado will also face the issue of explaining to Zara they cannot open any new stores because the company does not have the point-of-sale software to support their own point-of-sale hardware. Another issue the point-of-sale terminal may present aside from Zara not being able to open any new stores is keeping up with the company's request and or demands. Store managers of Zara are asking and suggesting for point-of-sale to include more applications such as inventory balances in their own stores and other locations.

Zara's "marketing task" is the constant development and design of fashion items to continually attract customers as well as create a sense of urgency to buy "right now". In order for this marketing task to be successful the supply chain infrastructure must be well executed so items are shipped and arrive in time to meet the demands of consumers as well as provide a means for store managers to communicate and submit their orders. Inditex's IT department plays a crucial role in this business as all Zara's stores sales are recorded around the world and transmitted through their point-of-sale terminal every day. In other words Mr. Salgado faces the issue of whether or not updating the point-of-sale terminal will help or hinder Zara.

Courses of action Mr.Salgado could take that would run contrary to management and perhaps shareholders is to upgrade the point-of-sale terminals in the event POS is not compatible with DOS or to leave the POS terminals as is. The critical issue Mr.Salgado must decide as mentioned previously is whether or not updating the point-of-sale terminal will help or hinder Zara later down the road. The decision is urgent as Zara's supply chain is organized in such a way that it carries fewer inventories while maintaining a higher profit margin on sales as well as continued growth in sales.

Also the issue of CEO's Castellano and Chairman Amancio Ortega thought on computers or information technology; both individuals strongly believe technology is critically important enabler for Zara. With this in mind, Mr.Salgado must further weigh the decision to upgrade the company's point-of-sale terminal so it reflects the interest and concern of Castellano and Ortega.

Further beliefs CEO Castellano and Chairman Amancio Ortega share is the ability for Zara to respond quickly to the demands of the target customer and to welcome the knowledge or rather judgement of its employees throughout the company. Both beliefs of acting quickly and trusting the judgement of Zara employees presents the issue for Mr.Salgado to consider more advanced and up to date information technology and point-of-sale terminals.

Criteria

In order to succeed in my marketing task I must adhere to Ortega's lesson when he opened the very first Zara store in 1975 "you need to have five fingers touching the factory and five touching the customer." In order to continue this task, effective and up to date IT infrastructure is needed to take control of the company's product and customer demands. Secondly criteria to consider which may or may not ruin things for my decision is whether or not I chose to explore the advantages and