Zara: It for Fast Fashion

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I. Executive Summary
Zara produces of-the-moment fashion and has developed a very successful vertically integrated company which can design, manufacture, and distribute garments to retail stores in as little as three weeks. Zara's target market is comprised of urban, fashion-conscious consumers who shop frequently for the latest trends. Currently under debate is a proposed upgrade to the POS system throughout the Zara chain. With over 550 stores, this would be a huge undertaking for Inditex, Zara’s parent company. The current DOS-based system meets the needs of the company, and despite some of the benefits of upgrading, we feel it is best to continue with the current system in place. Zara’s POS system runs on DOS, which hasn't been supported by Microsoft in many years. Some argue that this is a concern and that there is an urgent need to upgrade. While an upgraded system would provide more functionality and convenience, it is not essential to sustaining the core competencies that Zara currently excels at: “fast fashion.” Upgrading to a networked, Windows, or Unix-based operating system would be very costly and would require training as well as implementation support and continued systems maintenance. The only obvious benefit of upgrading the system at this point in time would be to provide real-time inventory tracking and the ability to see other stores’ inventories. Even though this networking functionality would be of help to customers and store managers, it would deviate from the company's extremely effective business model. We recommend that Zara maintain its current systems operations. Zara’s business platform is one of trendy, affordable fashion. By upgrading, Zara puts itself at financial risk with potential loss of sales, increase in overhead (additional IT staff), and the potential for adding complexity to a relatively simple operation. DOS is a very stable operating system and Zara has few to no problems with it. Therefore, we suggest that Zara take the necessary steps to ensure future supply of their current terminals and to continue to use the POS system in place.

II. Overview
The first Zara store opened in 1975 in La Caruna, Spain. By 2003, Zara's parent company, Inditex, had 1,558 stores in 45 countries. Inditex opened an average of one store per day across the world. One reason they were able to do this was the use of an uncomplicated POS system. The POS terminal used DOS, a stable, effective, and easy to maintain operating system. Zara programmers had created a simple POS application that fit on two floppy disks and could be installed on a blank POS terminal at any new store without the help of IT. In addition to the POS terminals, each store was issued several PDAs with which stores kept inventory and received the offers of new products. PDAs were upgraded as technology increased and older models became obsolete. Zara Business Model - Zara clothing stores sell trendy clothing for young, fashion-conscious city dwellers. As such, their business model is designed to respond quickly to rapidly-changing fashion trends. They do not seek to create classic clothing and expect that their product will be worn only 10 times. Their production process is vertically integrated so that clothing can be designed, manufactured, and placed in stores within three weeks. Management at Zara is decentralized. Teams known as "commercials" assess current trends and decide which clothing should be designed and produced. Store managers decide which items will sell best in their stores. They also relate to headquarters what their customers are wearing and what additional items they think will sell in their region. Twice weekly, a document is sent to store managers called "the offer." It includes pictures and descriptions of newly available items and items available for replenishment. The stores do not keep stock on the premises, so everything must be replenished from the distribution centers (DC). The factories...
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