Zara: IT for Fast Fashion This case is part of the course Managing in the Information Age (MIA) at Harvard

Business School.

Managing in Information Age IT Categories

IT Category Function IT (FIT)

Definition IT that assists execution of discrete function or task

Example Simulators Spreadsheets CAD/CAM software Statistical software Enterprise Resource Planning (ERP) systems Supply chain management (SCM) systems Customer Relationship Management (CRM) systems Sourcing/procurement software

Enterprise IT (EIT)

IT that integrates multiple functions by imposing new work structure

Avoid being too specific about any details.Network IT (NIT) IT that integrates multiple functions without imposing new work structure E-mail Instant messaging Wikis Social Media EIT Capabilities: • • • Design and redesign of business processes. For closely knitted clothing-industry. Monitoring of activities and events. However. Responsibilities: • • Selecting IT based on desired capabilities. Adoption is defined as preparing both the technology and the organization before the “go live” date. Adopting the new technology by putting in place appropriate complements. • 1. typical features.) Zara is a large chain of stores run by Inditex. Exploiting technologies once they’re up and running to maximize the capabilities delivered. Standardization of workflows across an arbitrarily large “footprint”. . Complements to IT are organizational. What are the important points to be summarized using one or one and half pages? (Comment: This section should serve as an introduction to the entire case. They are changes in organizations’ configurations that maximize the positive impact of the new technology. Complements: “Complements” and “work structure” are synonymous. their major products. and the issue under discussion should be briefed. often in something close to real time. a multinational clothing retailer and manufacturer.

All the inventories in a retail store are geographically based. Use JIT manufacturing philosophy to meet fast changing fashion market demand and trends. They could initiate store-to-store transfers when garments selling slowly in one area were popular in another. Zara relied on those teams to decide on the fashion trends. Business Model – Vertically Integrated Retailer in apparel industry. fashionconscious city dwellers).Zara management wanted to integrate the retail and manufacturing unit of the business for Zara future successful turn-around.3% on average. and set prices for retail stores. Zara spent relatively heavily on its stores to drive business. Those teams purchased material. and link manufacturing to distribution and to retailing business. commercials decided which stores would get clothes and which would not. an outdated software. 2. dedicated to a section of the store (Men. No Advertising Marketing Strategy – Low marketing expenditures of 0. This strategy is to time fashion trends and strike while a trend is hot. and not be stuck with inventory when it dies off. Their goal is to respond quickly to market demands which are always changing. Please analyze the business model and the major strategies at Zara. These retail . in others words. Zara opened a chain of retail store outlets supported by the internally owned suppliers. Women. They decided which clothes each store would be able to order. Major business strategies at Zara include Speed – Quickly respond to the demands of target customers (young. Each design team of “commercials” consisted of two designers and two product managers. the clothes available in each store are different and most locally popular. The major issue under debase within Zara management y was whether to upgrade the POS terminals which ran on DOS. To assimilate the retail requirement with manufacturing units. or Children). but decentralized within functional groups. When total orders from stores exceeded availability for an item in any period. so that they would not be DOScompatible anymore. Those centrally located store product managers served as the main interface between centrally located design teams and Zara stores around the world. These retail stores are located in busy prime retail districts and best known streets of a town. placed production orders with the factories. Zara critically needed a network of computers. Through Inditex. Other employees within the commercial function also exercised a great deal of autonomy. The POS was stable but executives within the company were concerned that their hardware vendors could upgrade their machines or some peripheral soon. which fills the gap and helps the business onto an effective and successful path. Decentralized Decision Making – Centralized at La Coruna by a group of commercials made up of store product managers. linking customer demand to manufacturing.

window displays. and sales racks changed more frequently. Utilize team concept in design. This value chain is a horizontal view of a firm with a process-product perspective versus a department view of the firm. Store layouts were completely changed every four to five years. the issue was to make their IT stay in line with the strategies detailed above. Responsive to instant changes No staple fashions (classics). with artwork. fast turnaround of trends. Fashion Design Strategy – Low cost. Value chain analysis helps a company to find areas of weakness and ineffectiveness for making improvements. The primary activities are pertaining to the company’s core competencies of producing the good and services. These activities are differentiated into two types: primary activities and secondary activities. and new technology changes adopted by the competitors. but as the technology became obsolete. often on the best-known street. better understanding of the firm-based value chain also helps to identify areas where IT can be implemented to improve performance excellence. Utilize technology that is simple.No traditional IT department. This strategy had supported Zara operations up to this point. No elite designers. and distribution of the company’s products and services. manufacturing. pairing product managers and creative designers in groups of four to streamline the design process. The business processes of a company are usually complex. What is Porter’s firm-based value chain model? Why use this model in this case analysis? The Porter’s firm-based value chain model is a sequence of internal activities of a company involved in creation. cost-effective and easy to use for the company and does not require a lot of IT support.stores were always located in a city’s prime retail district. Produce high fashion product in limited production runs with short life span. All new store layouts were designed and tested in La Coruna. before being rolled out around the world. Product managers were encouraged frequent repeat visits to store to see what’s new. IT Management Strategy . . for the purpose of strengthening the company’s competitiveness and profitability. Secondary activities are supportive of the primary activities. The use of Porter’s firmbased value helps an analyst to break down the processes into small value-added activities for better understanding. The company’s survivability depends on the effectiveness of performing these activities. Please think: How well is Zara’s business model working? How scalable is this model to ensure a continuous growth? 3.

however. even low level employee ideas are integrated into the decision making of each store. Store layout design is centralized in the head office. What were the needs in terms of functional area. The decision-making structure is flat because each store manager has the discretion of what garments would be on sale instead of relying solely on headquarters directive. 15 meter long inventory requests. (Version 1) The primary activities at Zara comprised ordering.4. 5. This type of structure is imperative to Zara due to the fast paced changes that occur in the fashion industry. process. and standardized around the world. the stores are built according to the approved design. (Version 2) Zara’s decision making is decentralized and individual store managers are allowed to select inventory for their individual stores. the stores did not. after layouts are determined. inventory could not be shared between stores to meet localized demand if DC could not deliver in time. and decision levels for IS/IT implementation at Zara? (Information Technology on page 7) (evidence 1) Unreliable fax machines. It is interesting to note that of these processes. inefficient inventory control process. What is the value chain model at Zara? What is the decision-making structure at Zara? Support Activities: (Easy to find in the case) Primary Activities: (Easy to find in the case. Managers are dependent on the input of the employees in order to create an aggregated form being an order that gets sent back to the headquarters. Furthermore. (evidence 2) DC’s relied on automation and computerization. disconnect between the stores worldwide and corporate office in Spain. fulfillment. ordering was the most regular. (evidence 3) POS terminals and PDAs could not share information within a store or across stores. specifically. precisely defined. design and manufacturing. Design decision is the responsibility of each team of “commercials” that forecast product sales on new ideas and implement them. . This allows Zara to respond quickly to changing market trends and meet the needs of customers. Both a diagram and text explanations are required in the paper. Starting on page 5) Decision-making structure: Exhibit 10 and IT part of the case (page 7) gives details.

Please evaluate the effectiveness of IS implementation in support of a specific strategy or for operational problem solving at Zara by considering the tangible and intangible costs and benefits of the implementation. At this point Zara does not have a reliable system which would support future planning. Theoretically speaking. The greatly outdated DOS system. formal processes for IT budgets. 6. The cost of developing a new system would be quickly offset by the benefit of getting work done more efficiently and accurately. DOS was still in use and no longer supported.(evidence 4) Outdated IT infrastructure . . A perfect example of Zara’s business solvency and accuracy was their inventory control. Zara lacked a significant level of infrastructure and organization in the IS/IT area. there is no sophisticated way of scheduling. Zara preferred to invest internally within its own software development rather than buying new technology developed by external companies. One of the greatest costs of this operating system is a stressful work environment. please use the provided table structure at the class website. stopped being supported by the vendor. which could be easily resolved by adding IT/IS support. without any help of IT /IS. Theoretical inventory would be inaccurate due to several factors and externalities.Floppy discs still used in stores instead of modern day technology to increase efficiency and accuracy. Also. and inventories are counted by managers walking daily around the store. plan or estimate loses / gains and margins on particular designs. whatsoever. The distribution heavily relies on people’s work. In your paper. and investments for strategies and IT projects. the stores are opened by inserting floppies. the sales records and orders are communicated by phone instead of using emails or some kind of internal system. Not keeping up any historical data means being unable to predict any sells. There was very limited effort in applying new IS/IT to the company operations. such as basic problems of mishearing and misunderstanding. Zara had an outdated business process and implementation within their operations (IS/IT). The company followed the 95 percent accuracy rule is good enough. Telephones are less reliable than computers due to workers mistakes. The decisions for facilitating IT/IS infrastructure were performed internally through development of software and applications. While the factories do have high tech machines for cutting the material. which Zara was operating in for decades. Lastly. The company was missing a chief information officer. (Information Technology on page 7) Zara was a company that followed a very European business model to some extent.

improve internal integration.Zara needs to implement spread sheets. d. Internally developed applications are difficult to upgrade and not compatible to other applications. but there is a lot of room for improvement. The vision of implementing accuracy is more cost effective without significant distortion of the revenue. these adjustments would unite the company. Zara needs to upgrade their POS terminals as well as the supporting software to ensure that there is no more infrastructure problem. Please also provide an action plan. Student answers vary. Although. within the unique situation at Zara they felt that because of their unique business strategy that commercial applications would not be suitable for their needs. Moreover. Zara has been successful. e- commerce is becoming an essential part of today’s business competition. b. you have to analyze the implementation effectiveness using tangible and intangible costs and benefits list provided at the class website. Please provide a sound rationale based on literature review and other evidences. and other kind of communicating and transmitting data features. An example of one issue they was faced with was the need to perform accounting practices in multiple countries and currencies. In your paper. emails. Was the IS/IT implementation a good match to the business needs? What were the current and potential problems which need a system upgrade? Zara’s internally developed application is not a good match for the business needs because of the following: a. If their terminal maker changed hardware. In the current market. and help establish Zara as a long term leader in the industry. c. Zara would be on an updated system to cope with anticipated changes. Your recommendation(s) for the system upgrade at Zara. 8. Zara is a rapidly growing company with a small IT department and in-house application development will use needed IT/IS resources. Here are three examples: . Zara was not prepared for online and digital sales. 7. Zara’s IT department was five times smaller than that of the industry average.

When the implementation at the headquarter is completed. Zara should consider implementing SAP. monitor. the Intuit-HP Retail Solution could provide Zara a robust solution to also track customers. HR. Once the network infrastructure is in place. SAP application has reliable tech support and installation team available at the time of purchase. Zara must ensure the network connectivity is available at every store. Credit Card Reader. Zara must first upgrade its company’s network infrastructure from modem based to broadband based. cost accounting. Barcode Scanner. SAP is currently the leader in financial application and very compatible with most commonly used applications in industry. As Salgado had pointed out. asset. SAP is a complete industrial suite providing the capability to manage financial. The installation contract should also entail training sessions and materials for the users at headquarter. with the support of Intuit-HP professional service. The first plan is to upgrade the Information Infrastructure to support the new system. These are the missing capabilities of the current DOS POS that put Zara at a disadvantage compared to its competitors. To upgrade Zara’s current POS system. USB keyboard and mouse. The old POS system should still be kept for a short period of time after the cut-over to make sure the new system running smoothly prior to fully be shut down permanently. manage inventory. Cash Drawer. . it put Zara’s business continuity at high risk depending on Sanchez and his knowledge. Zara could decide on a cut-over day where Zara stores switched to the new system and old data being migrated to the new database. The Intuit-HP Retail Solution comes complete with: HP's Point of Sale System. and Intuit Point of Sale software. Zara should contract with Intuit-HP professional services to install the IntuitHP Retail Solution and necessary servers at its headquarter first. the new POS and training should be deployed the local stores. When all the stores get their new POS and all employees are properly trained. plant and records management. Therefore. most of the current POS system was written by only Sanchez. This solution is more sophisticated than a cash register and more durable than a PC. Zara should keep the old POS system running until the new system is ready for cut-over. SAP can run on Windows or UNIX and can be applied to their POS terminals. In addition to being a cash register. Upon the completion of the integration testing. and get business insights. Zara should perform a dry-run or integration testing of the solution after-hour to iron out some final glitches or process issues. the store managers are increasing requesting the ability to look up inventory balances in their stores and other stores. In addition to DOS not being supported by Microsoft. the industry-proven software.Zara should consider upgrading its DOS based Point-of-Sale (POS) system to IntuitHP Retail Solution. Receipt Printer. production operations and materials.

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