ZARA :IT FOR FAST FASHION

Presented By –

Akanksha Kalia

Ankit Sharma

D. Prabhakaran

Govind Sharma

Reena Panwar

INTRODUCTION

Zara is in the clothing apparel business, owned by Inditex.

It has built an extraordinarily well-performing value chain.

Right now is that the system that they use, P-O-S (Point of Sale terminals) which runs on DOS.

PDAs- ordering, transmitting information.

This case views Zara's business strategies and how IT supports their business decisions.

CONT…..

Xan salgado badas – Head of IT for inditex.

Bruno sanchez – Technical lead for POS system.

Zara uses DOS operating system for their point-of-sale (POS) terminals, which was supported by Microsoft.

POS at each store has a dial-up modem that is used to transmit sales data to headquarters.

The decision making process is based on the judgment of employees throughout the company.

ISSUES

Zara is to decide whether it has to upgrade the present system or not.

Lack of expertise in windows based OS.

Zara don’t share inventory information electronically and so inventory management becomes highly difficult and manual.

BUSINESS MODEL

1) Speed and Decision Making

Respond according to the demands

Deliver styles when still hot rather than relying on persuasiveness.

BUSINESS MODEL

More responsibilities to employees and decision making .

Asking what they need

‘Commercials’ deciding on design & production

Team = 2 Designers + 2 Product Managers

2) MARKETING, MERCHANDISING AND ADVERTISING

Advertisement only for twice yearly sales

expenditure only 0.3 percent of revenue

Random Changing Layouts

1500 sq.m pilot store to test new store layout

Prices determined by the Product Managers

BUSINESS MODEL

APPROACH

Short life spans of cloths both within stores and in customers

IMPLICATIONS ON SHOPPERS

Buy product on the spot

Visiting stores often

Clothes to be worn 10 times

OPERATIONS

ORDERING

DESIGN & MANUFACTURI

NG

FULFILLMENT

ORDERING

Most regular, precisely defined and standardized.

All major sections (Men, Women, Children) place the order at La Coruna twice a week

Replenishment of existing items + initial request for new designs

ORDERING PROCESS

Managers know this by handheld computer linked each night at La Coruna

OFFER- included description and pictures of new available items

Store manager divides the offer into segments and beamed into segments using Infrared

Manager would send completed form now called ORDER

FULFILLMENT

Main job is to match supply of finished clothes coming from DC with stores’ demands

SKU is the combination of garment + size + color + fabric

When supply and demand equaled for one SKU commercial divided inventory by a computer to one that wanted it.

Total pool of information is combined from aggregated orders from all stores and total supply of inventory in DC

CONTD…

If demand > supply, commercial determined which store would get the items

Commercials and product managers determined future production for each SKU, thus catering to the production

Commercials also sent items to stores they didn’t order, they were new garments for which Zara wanted to assess the demand

GOAL- To produce and deliver when needed, and so clothes flowed quickly from Factories -> DC -> Stores without stopping and negligible inventory

DESIGN & MANUFACTURING

New designs at start of fall/winter & spring/summer

Bought out new items + made changes in existing items

Zara introduces 11000 new items, credit given to the vertically integrated manufacturing operations

MANUFACTURING PROCESS

Production requirements distributed across network that quickly produced and delivered goods to Zara

Zara owned a group of factories around La Coruna to do capital intensive for initial steps of dyeing and cutting cloth

Cut fabric was sewn into garments in Galicia and Northern Portugal

Finished garments sent to Zara facility where they were ironed, inspected and given a machine readable tag

Sent to DC

RESULT- Consistent new design production in three weeks and garment on sales racks within next two days

INFORMATION TECHNOLOGY AT ZARA

APPROACHES & ORGANIZATION

Consistent with its preference for speed and decentralized decision making.

Applications were written by Salgado and Castelleno rather than buying commercial software.

Applications to support ordering, fulfillment and manufacturing were developed internally.

Application Development & other IT activities were the responsibility of an IS department.

Information system had three groups Store solutions Logistic supportAdministrative system.

LA CORUNA

Internally developed applications were used to prepare the offer and distribute it over the Internet to stores, receive orders and sort them.

Another application compared the aggregated orders to available inventory.

Another application kept track of inventory at each store.

Each store transmitted daily sales record from the stores POS terminal back to la coruna.

Theoretical inventory helped in allocating products.

FACTORIES

Simple applications were used to present factory managers with quantities and due dates for all production requests.

Large computer controlled equipment cut cloths into patterns.These machines minimized scrap and cut over 100 layers of fabric at a time

Cut fabric was then sent from Zara factories to external workshops for sewing.

DISTRIBUTION CENTRES

DC’s relied on automation and computerization.

Conveyor belts facilitated receiving bulk quantities of garment from factories & then recombining these garments into shipments for each store.

IS tracked location of each SKU at the DCs and then controlled the conveyer belts to pick them up & drop them off at the appropriate places.

Manpower took garments off the belts and put them on hangers or racks or cardboard boxes

STORES

Stores used identical handhelds PDAs & POS systems since 1995 for ordering, handling garment returns to DCs & transmitting information from Headquarters to all stores.

Before fax order forms were used. Unreliable fax machines, paper shortages & other similar problems caused delays in the ordering process

POS terminals using DOS was effective.

No IT support was required to open a new store as the manger simply inserted 2 floppy drives into each blank POS terminal which contained DOS and other applications.

POS & PDAs terminal was not connected to La Coruna, other stores & other in store network.

RECOMMENDATION

Zara should install modern POS terminals in each Zara store.

Train employees on the non-DOS based new commercial software.

Exchange of critical information (via store canvassing, telephone conversations, and experience-driven intuition) with non-dial up internet connections.

HOW PRODUCT CATEGORY DIFFERENT FROM OTHER NON-

FASHION PRODUCTS?

Control most steps in supply chain: design , production and retailing

Efficient Operating model

High Varieties

Control over distribution process

HOW ABLE TO CAPTURE LARGE DOMAIN & SOURCES OF

INFORMATION ?

Quick response to the demands

Decentralized decision making

Information Technology

Sources –

Commercials

Store Product Managers

WHAT WAS DIFFERENT PROMOTIONAL STRATEGY? FOCUS FOR PROMOTION?

Changing of Window Display and Sales Rack

Announcing Yearly Sales and New Openings

FOCUS – Advertisements

Opening New Stores (Best Known Streets)

HOW DID ZARA ENSURE HIGH GARMENT TURNOVER? WHY DID ZARA NOT OPT FOR ONLINE ORDERING & SALES?

HIGH TURNOVER

They were not producing classics

Clothes had shorter life span clothes

No online ordering & Sales because

Company DC’s were not configured for picking small orders and shipping them to consumers

It would be complicated to handle returns of merchandise bought online.

A website www.zara.com existed but it served as a digital display window showing few typical garments

GROWTH PROSPECTUS LIE AND

EXPLOIT FUTURE GROWTH ?

Inditex operates 1550 stores and 550 were part of Zara. So One third of total has been occupied by Zara.

Zara generates 73.3% of the group sales.

Profitable growth and geographic expansion.

Italy – Ample opportunity for growth existed with in its current market.

Western European – largely support with its current infra structure.

WHAT ARE THE ADVANTAGES IN ORDERING BY CANVASSING OVER ORDERING THROUGH

INVENTORY BALANCE?

Ordering by canvassing, ensured they could get to know new product designs and demands according to the consumer, whereas ordering through inventory only ensured that they would replenish the existing items, and could not get to know about any new trends.