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ZARA: IT for fast fashion

1. How would you advise Salgado to proceed on the issue of upgrading the POS terminals? Should he upgrade to a modern operating system? Should the POS applications be re-written to include any additional functionality? If so, what functionality? The current POS being used by Zara is effective, and easy to roll out and maintain overtime. It is users friendly and easy to operate. It does neither require IT personnel to travel from one store to another nor to set-up IT unit in each store. It allows store managers to easily install software, set-up and maintain POS infrastructure themselves. In fact, in the event of any problem, a complete reinstallation of POS is straightforward. In spite of these advantages, Zara is still facing some challenges on IS strategy that will align with its business strategy such as inaccurate inventory management, no real time sales report to the headquarters, and no real time available information of particular SKU within stores. We propose two strategies that Zara can utilize to meet its short-term and longterm business challenges and opportunities that is related to its POS. First, to achieve short-term IS strategy, Zara needs to keep current POS terminals while adding additional functionality that align with business strategy such as better inventory management. Second, in a long-term Zara will definitely need to upgrade the POS terminals to a modern operating system. This is important because Zara faces the challenges of obsolete information system, and inability to continue getting the DOS infrastructures to support the IS. In addition, it can be complex and more expensive if the upgrade is done later than now especially when the upgrade is the only choice available to sustain its business strategy. Zara can achieve the full upgrade through gradual process. POS applications should be rewritten to include all functionality such as ordering and reports provided by PDA. In addition, ability to know the information about the SKU in stocks in other outlets without making phone calls should be included as well. 2. What benefits does Inditex/Zara get from its IT infrastructure? Is it easily scalable as Zara expands into other locations? How difficult would it be for a competitor to copy it? Zara preferences are speed and decentralized decision making, and its information technology approach is in consistent with the preferences. Zara wrote applications internally to support its operation systems. This software is tailored towards Zaras business uniqueness. The application would be difficult to copy by competitors because its not commercially available. In addition, it empowers people; store managers and commercials; to make decisions. Zara also links customer demand to manufacturing, and link manufacturing to distribution. The

process could be copied by the competitors but the company unique Information capability and culture that would be hard to copy. 3. What current or potential weaknesses (if any) do you see in Zaras IT infrastructure, IT strategy, and the process used to formulate the IT strategy? Zara has no CIO or formal way of setting IT budget, or to decide on type of IT investments need to be made. Although the management is committed to sustaining IT operations, they are busy managing the different strategic aspects of the company (different chains, products, decisions, etc.). Nobody is concentrating only on this area. The current infrastructure is lagging behind the current hardware technology. Zara will not be able to sustain its growth while avoiding updating the system. How many computers can it buy for future expansion? And what happens if computer hardware starts breaking down? Zaras IT system is the backbone of its operations. It cannot afford to avoid updating it indefinitely. This is the right time to do it especially that Zara is expanding aggressively into new markets (Italy, Asia and possibly North America). All terminals must be connected to headquarters and other POSs all the time to insure the consistency and distribution of information. Future changes in the IT world may render Zaras IT mechanism totally obsolete. 4. List the different information systems mentioned in the case and the business tasks or processes supported by them. Ordering Fulfillment Design Manufacturing Distribution Centers Stores SUPPORT Store Solutions PDA for ordering and handling garments return to DCs. Transmitting information from stores to headquarters POS to send daily information about the store the headquarter by connecting it to MODEM Apple Newton device Logistics Supports Aggregate orders from stores and allocate products Theoretical inventory is tracked at each store Distribution Centers automation

Administrative Systems Manufacturing Production plan

Computer controlled equipment to cut clothes