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ZARA IT for fast fashion Case Solution
During the last few decades, Zara has emerged as one of the leading clothing brands in the fashion industry, primarily because of its fast-growing network. Usually, in the fashion industry, popular retail brands introduce their new collections twice a year or at max thrice a year, but Zara, since its early days, is in a practice of introducing new collections in the market almost 10 times a year. All direct competitors of Zara on average bring 2,000 – 4,000 new items in the market, in a single calendar year; whereas, Zara introduces more than 11,000 new items, in the market. This practice of introducing almost three times more items than competitors has earned Zara a considerable competitive advantage within the industry. Normally, a customer visits a fashion brand retail store four to five times a year; whereas, Zara customers visit their stores eight to nine times a year i.e. almost double. The main reason behind the higher number of visits is the rapid inflow of new fashion clothing items, in the store. Zara has managed to continue this practice, primarily because of its strong supply chain and distribution network. Within three weeks period, a new concept is designed, manufactured, and distributed to all retail stores, around the world. Such a short turnaround time allows Zara to introduce a higher number of items in the market.
Following questions are answered in this case study solution
How is Zara’s model different from others in the industry?
What information does Zara need to run its business?
What are the most important aspects of Zara’s approach to I.T.? Can these approaches be used in other industry contexts? Why or why not?
What are some weaknesses in the Zara IT infrastructure and IT strategy?
How would you advise Salgado on the issue of upgrading the POS system? In-store networks? In-store inventory look-up? Look-up inventory in other stores? What other issues of concern?
Case Analysis for ZARA IT for fast fashion
1. How is Zara’s model different from others in the industry?
Another major difference between Zara’s model and other industry brands is its manufacturing approach. Zara has vertically integrated its manufacturing operation across the board. A new concept is formalized and sent to manufacturing facilities that then provide the final item within two weeks period. The manufacturing facilities of Zara are built in a flexible manner so that new items can be produced within a short period. The final product is then sent to Zara’s local facility where scrutiny of items takes place. Later, these items are shipped to the respective distribution centers depending upon their local demand. From distribution centers, these items are then delivered to different retail stores. This entire process takes merely 20 – 24 days; hence, customers get the opportunity to buy new items every time. Apart from this, another implication of this model is that Zara’s top management has to spend a minimum amount of time in forecasting sales of its products. Managers at Zara rarely involve themselves in forecasting sales for the short term, let alone a long term period. Quick turnaround of inventory takes away the headache of forecasting, which is an important function at other fashion retailers.
2. What information does Zara need to run its business?
For any fashion brand retailer like Zara, it is crucial to have the right type of information available to not only top managers, but also with designers so that they can successfully promote their brand within the market. First of all, Zara needs to have an up to date knowledge regarding changing trends and customer preferences, in the market. The new generation is considerably different from past ones. Earlier, it was easier for fashion brands to determine the source of inspiration of the young generation, but now the spectrum has become so wide that it is nearly impossible to determine sources, which inspires everyone. In Europe, there is a different fashion trend as compared to the United States and similar is the case with the Middle East and the Asian countries; therefore, it has become increasingly important for Zara to determine preferences of customers and new evolving trends within the market, so it can design its products accordingly.
Secondly, Zara needs to know about the sales break-up of its items store wise. It is crucial to know which item is popular in which area, so the supply chain managers can ensure the availability of those products in their respective stores. Apart from this, important information required by Commercials at Zara is details of the most popular product so as to reproduce them during the next cycle. At Zara, inventory is replaced almost every month, and only those products are reproduced, which are of high demand. The third crucial information required by managers at Zara is regarding the in-store demand, which is currently being managed by the Offer – Order process. Store managers provide details regarding the demand of stock-keeping units (SKUs) so that product managers and commercials can fill in with the required inventory.
Moreover, Zara needs to have a piece of comprehensive knowledge about disposable income, exchange rate, local economic situation, etc., in order to set prices. Currently, Zara is operating in more than 45 countries, around the world where more than a half dozen different currencies are valid; therefore, managers at Zara are faced with a tough challenge of setting a reasonable price, which is not only suitable according to the local currency but also high enough to provide reasonable profits to the company.
3. What are the most important aspects of Zara’s approach to I.T.? Can these approaches be used in other industry contexts? Why or why not?
Zara’s top managers have undertaken a very simple and straight forward approach towards its information technology infrastructure. Zara prefers quick delivery of information and a decentralized decision-making process; therefore, managers are provided with only a limited set of data, which is useful to them for the decision-making process. Despite the fact, that much new technological advancement has taken place during the last few years, Zara is satisfied with its current information technology approach mainly because it is stable and does not cause any issue to the company. The entire information system was developed in-house with the support of the hardware vendor. In addition to this, the current staff within the IT department is just around fifty people, which is not even 0.5% of the entire Zara’s workforce. Moreover, the current system allows major feasibility while opening new stores i.e. the store manager can easily set up the point of sales terminal within a few hours with the help of 2 floppy disks. Rarely any external IT support is required, and in times of need, the IT department of the company, which is based in Spain, provides all the necessary support to all retail stores, around the world.
During the past few years, the use of technology has spread to such an extent that it seems almost impossible to even imagine the existence of a large-sized business, in any of the global industry sectors. The use of information technology systems has simplified various business functions like inventory management, analysis, sales breakup, forecasting, financial management, etc. Though these functions can be performed manually with similar accuracy, it would take more time to achieve results. Hence, it would not be feasible to implement a similar approach like Zara in any other industry context.
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