In-Class Case Study:
1 Introduction: Background Information
1.1 Company overview
The firm Zara is a Spanish clothing and accessories retailer based in Galicia, northern Spain. In 1975, founder Amancio Ortega opened the first store in La Coruna, Spain. Zara is the flagship chain store of the Inditex group (Industria de Diseno Textil), encompassing many self-designed different fashion styles from daily clothing to formal suits, evening dresses and business wear. Their stores feature low-costs lookalike products of popular high-end clothing fashion. The Spanish corporation Inditex is the world`s largest fashion group, running over more than 5400 stores in 73 different countries all over the world. In 2010, Inditex achieved total revenue of 12, 5 billion €. Currently there are 1283 Zara stores worldwide, mainly located in Europe. Besides their flagship chain Zara, Inditex owns 6 other brands like Massimo Dutti, Bershka or Pull and Bear. The company almost designs and manufactures every product itself. Zara has often been called as a highly innovative, prosperous concept, mainly due to the fact that the firm just needs about 2 weeks to design a product, manufacture it and get it into their stores (average in the industry is 6 months).
The Case Study is about the item “Fast-Fashion”. We will give a short explanation of this term, so it might be easier to understand the developments/changes and the implementation of IT system. “Fast-fashion” is a term used to describe cheap and affordable clothes which are the result of catwalk designs moving into stores in the fastest possible way in order to respond to the latest trends.
Business Strategy: “Cutting-edge fashion at affordable prices” Operations Strategy: builds on quick response
Quick Response: similar to what just-in-time manufacturing has meant to the auto industry (Hammond and Kelly 1990)
1 The Initiative
Zara’s IS implementation
Zara targets technology investment at the points in its value chain where it will have the most significant impact. This not only assures that every dollar spent on technology has a payoff, but also means that Zara’s IT expenditures are relatively low by fashion industry standards. In every step of the value chain, there are specific implementations of information systems that increase Zara’s profitability.
The usage of PDAs (personal digital assistants) allows employees to ask the customers directly about feedback on existing products and ideas for new ones. The PDAs are linked with the POS (point-of-sale systems), which also collect data from cash registers and store checkout systems and capture customer purchases data. The data goes directly to the headquarter, where the designers can plan new products by using the given information about customer preferences. This also decreases the risks of guesswork and allows the designers to concentrate on the customer’s needs. Manufacturing
Zara’s production consists of 23 highly automated factories, where robots cut and dye the fabric. This capital intensive production means that the product quality can be kept consistently and that the efficiency is relatively high. By using just-in-time manufacturing, Zara can reduce its storage costs, because no product is kept in the storage more than three days. Logistics
The five-million-square-foot distribution center in La Coruna uses ceiling-mounted racks and customized sorting machine. The Logistics system is designed by Toyota and includes overnight parcel services with mobile tracking systems. The clothes are ironed in advance and packed on hanger with security price tags affixed, so the store employees only have to move them from the shipping boxes to the store racks, which allows them to spend more time in value-added functions like helping customers. Retailing
Zara produces most of...