Zara It Analysis

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Table of Contents1
Brief Summary of Zara2
How would you advise Salgado to proceed on the issue of upgrading Zara’s POS systems?3
-Should the company upgrade the POS terminals to modern operating system?3
-Should the company build in-store networks?4
-Should the company give employees the ability to look up inventory balances for items in their own stores?4
-Should the company give employees the ability to look up inventory balances for items in their other stores?4 What is the Zara “business model”? How is it different from the business model of other large clothing retailers? What weaknesses, if any, do you see within this business model? Is it scalable?4 In your opinion, what are the most important aspects of Zara’s approach to information technology? Are these approaches applicable and appropriate anywhere?6 References7

Brief Summary of Zara

Zara is a fashion brand that was founded in 1975 by Amancio Ortega, who believed that retailing and manufacturing must be closely linked to provide a speedy response to consumers’ demands. Unlike other fashion chains, Zara did not invest extensively with advertising and marketing to generate sales, instead, they set up their stores in prime locations. Zara’s selling strategy relies on fast turnover of their merchandise, aiming primarily at seasonal fashions. Their decentralised approach in decision making, allows store managers to make decisions on which items should be on sale, and which items should be replenished based on their experiences and feedback with local customers. The commercial team also observed local trends and communicated with store managers as to which line of clothing would sell, and so transferred those items to other stores where they would sell well.

Zara did not try to produce clothes in the high end market. Their clothing had a short life span and was not extremely durable. They aimed at the speedy supply of top fashion trends, while continuously creating new items, including new designs or altering the design of existing clothes. Because of their rapid turnover in garments, Zara shoppers knew that they would have to purchase the clothes when they first came on sale, or take the risk of missing out.

In terms of its operation, Zara established a three step approach: ordering fulfilment, design and manufacturing. Store orders included re-stocking of existing items and requests for new garments. Each store uses its handheld devices to order by walking around the store and “beaming” the garments. Headquarters were able to communicate with store managers, utilising the device for availability and lists of new garments.

In terms of order fulfilment, Zara’s commercial team matched the aggregated orders which were requested from all of the stores (demand) and the inventory levels (supply) in the SKU at the same period. If the supply and demand were met, shipments would be fulfilled. If not, the commercial managers needed to make a decision on the quantities of store allocation, based on the history of sales patterns. In terms of design and manufacturing, Zara used vertically integrated manufacturing operations to allow it to introduce new items constantly. Its own network of production facilities and workshops enabled speedy production turnaround time, thus enhancing the capability for Zara's ever ready response to the constantly changing fashion tastes of its customers. The network provides flexibility of production, thus allowing Zara’s commercials to simply make estimation as to how well the garments would sell. Store's orders indicate the level of production needed, therefore the company did not have to rely on sales forecasts. (Mcaffe, Dessain, Sjoman, 2007).

How would you advise Salgado to proceed on the issue of upgrading Zara’s POS systems?

I would advise that Salgado should initiate an IT project, upgrading POS systems as well as the hardware to support it. Also an...
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