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Submitted By: Abhijeet Singh Dialine Lazar Manish Tuljapurkar Priya Parmar Sudhanshu Ranjan Vartika Agarwal 2012PGP004 2012PGP103 2012PGP197 2012PGP277 2012PGP377 2012PGP423

Zara Business model was – Business idea that Zara followed and they lived by was to link customer demand to manufacturing and link manufacturing to distribution • Quickly respond to demands of target customers who were young fashion-conscious city dwellers as their tastes changed rapidly


Intelligence and judgment from employees throughout the company, Zara store managers decided what garments to be on sale at their stores
Commercials– (A) A group of people had discretion in deciding what clothes would be designed and produced and Zara’s collections were not conceptualized and designed by a small team. (B) Store product managers could initiate store-to-store transfers if they saw that some garments selling slowly in one area were popular in another. Teams consists of two designers and two product managers, who purchased material, placed production orders with the factories, and set prices. Supply/demand information – when total orders from stores exceeded the availability for an item in any period, commercials decided which stores would get clothes and which would not based on data that which stores historically had a better track record It relied very little on marketing or advertising their own designs than to cash on the styles and designs that were in demand at the time. There was little inventory anywhere in Zara’s supply chain. Garments were produced and delivered only when the stores needed.

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Zara did not rely on accurate long range sales forecasts. It responded to the fast changing and unpredictable tastes of its target customers by setting up flexible factories with short lead times(time from design to production-3weeks; shipping from DC to stores- 2days) This enabled Zara to bring out new items throughout the year unlike the competition. Zara introduced 11000 new items in a year(competitors averaged 2000-4000). The company intended its clothes to have fairly short life spans, both within stores and at the customer’s end( clothes to be worn 10 times)

Information needed to operate its business model: • • The most important information is the requirement of both replenishment of existing items and requests for newly available garments sent from the stores to La Coruna in the form of order The order from all the stores was aggregated and was compared with the total supply of inventory at the DC at that time in SKU units. If demand was greater than supply sales information at the stores was used to determine the distribution of inventory. Based on demand levels future production levels were also determined. Each store provided information about the inventory available to the headquarters which helped in planning the production process

The storage and handling of each SKU at DC was done through automated systems
The stores did not have information regarding the SKU at another store which might be helpful in case of a stock-out at one stores which could be replenished from a nearby store

Various weaknesses inherent in Zara’s IT infrastructure and IT strategy were :

2. 3. 4.

6. 7. 8. 9.


They did not prefer to sell clothes over the Internet. A website was used only as a digital display window. There was no formal justification for IT efforts and no cost/benefit analysis was conducted The company had no CIO, no process for setting up an IT budget or deciding on specific technology investments. Its IT infrastructure was capable of keeping track of theoretical inventory level only and it didn’t account for theft, damage or other losses. In absence of efficient applications factories used applications that generated sub-optimal plans and schedules. POS terminals at ZARA still used DOS operating system that were outdated by then The POS terminals nor the PDA was always connected to the headquarters. Within a store, POS terminals and PDAs could not share information. POS terminals and PDAs did not contain features to know if a nearby store had a particular SKU in stock. There was a threat that if hardware vendor for their POS terminals upgraded their machines, then all of ZARA’s DOS running systems would be rendered useless.

Factors supporting the upgradation of POS terminals • Due to absence of an in-store network, end-ofday figures had to be transferred to the central POS terminal using a floppy • Store canvassing and counting were the only ways to check a store's inventory balance • It was not possible to check the inventory status at nearby stores • Information could not be stored with PDAs • It was time consuming to accomplish returns using PDAs • The current application was developed for DOS, which was no longer supported by Microsoft • In case of upgradation by hardware vendor, no future hardware support would be available Factors supporting the use of current POS terminals • Current application was stable, effective, easy to roll out & maintain • Employees could easily operate terminals • Employees could manage POS infrastructure without outside help • In case of a problem, software reinstallation was straightforward • No IT support was required (for POS terminals) to open a new store or to assist existing stores

On the basis of the above concerns, we support the upgradation of the current POS terminals being used by Zara stores. This would lead to the following advantages:1. Allowing online other-store lookup and online inventory transfer would lead to reduction in time required to enquire about inventory at other stores (no phone call needed) and an increase in sales (in event of shortage at one store, the required SKUs can be quickly procured from neighbouring stores) 2. Allowing automated same-store inventory lookup would lead to more efficient and accurate order placement 3. It would no longer be required to manually transfer data between different POS terminals 4. Upgrading to a latest OS like Windows or Unix or Linux would open up the possibility of adding more functionalities later on

The cost of using Windows upgradation is calculated in the following slide. It can similarly be computed for the other two OSes.

WINDOWS SOLUTION- PER STORE COST OF UPGRADING EXISTING STORES Annual per store cost 1. AMC 2. High-speed internet connection TOTAL One-time per store cost 1. License cost 2. Wireless router (1 per store) 3. Wireless ethernet card (1 per POS terminal) 4. Port existing application to new OS 5. Look-up of same store inventory 6. Look-up of other-store inventory 7. Inventory transfers 8. Installation 9. Establishing wireless network 10. Training staff TOTAL

30 240 270

140 180

250 843750 168750 56250
56250 4000 2000 2000 1133570