Zara Case Study

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Table of Contents

Executive Summary3
Issue Identification4
Environment and Root Cause Analysis6
Alternatives and Options8
Recommendations9
Implementation11
Monitor and Control13
Conclusion13
Exhibit 1214
Exhibit 415

Executive Summary
Salgado of the IT Department of Zara has decided that he must go ahead and replace the existing POS Software which is currently running on a unsupported DOS operating system. In doing so he has also decided to upgrade the software and POS Terminals to include better inventory and sales management.

However, it is noted that the current system is working quite well and he must ensure any upgrades do not affect company performance, which is quite favourable compared to competitors; Gap, H&M and Benetton.

Salgado has outlined a number of alternatives or options for the upgrade and has further provided recommendations and implementation plans. By implementing this plan he must ensure it continues Zara's basic business model of demand manufacturing distribution. Also related to this business model is the ability of the company to produce fashion items based on demand to distribution in three weeks must be maintained.

Zara's success is based on a business system that depends on vertical integration, in-house production, quick response, one centralized distribution center, and low advertising cost all of which made it so successful thus far. Zara does not try to forecast clothing trend per say but tries to react quickly based on information from store managers. He must ensure the new current system allows Zara to continue with its current success. Issue Identification

Immediate Issues
The main short term issue facing Salgado is whether or not to replace the POS (point of sale) software. This software is currently running on DOS operating system which has not been supported by Microsoft for a number of years. Replacing the POS software then goes hand in hand with should they also replace the POS terminals, which would be newer and offer more features. Systematic Issues

Some of the systematic and long term issues are directly related to the immediate issue of the POS terminals/software. Currently the Zara nor the parent company of Inditex have a IT (Information Technology) department supporting the stores. The current POS terminals/software are quite user friendly and reliable thus requiring negligible support. If they change to new software and terminals will it be as user friendly and reliable. If this is not the case will more support be needed thus requiring an expanded IT department or outsourcing.

Another issue at hand is stores do not have an accurate inventory system. As Salgado maintained "Having, 100% control is most the time just too expensive. Being 95% right is pretty good, and often you don't need more accuracy". The current system does not accurately track inventory into the stores nor returns.

Along with the inaccuracies of the inventory system the current system does not allow internal communications between stores. This means the stores cannot look up current inventory at another store. There is no computer network connecting each store and each store does not have any type of computer other than the POS terminal and the PDAs. This means in order for a store to find out if another store has an item available they must call that store.

The current POS terminals have to be backed up daily using floppy discs, this then is used to tally up total sales. Floppy discs are now antiquated and even in 2003 were on their way out. They were known to be unreliable and could be easily damaged.

Zara is also looking to continue to expand especially into Italy. There current supplier of POS terminals has said they will continue to supply these types of terminals as Zara is one of there biggest clients. However "Salgado had gotten nowhere when he had tried to include such...
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