Zara IT for Fast fashion - Essay Example

? ZARA: IT for fast fashion ZARA: IT for fast fashion Upgrading Zara’s POS systems From the case study scenario, it would be recommendable for Salgado to upgrade the POS terminals to a modern operating system. This is the ideal decision for Zara as it is continually expanding its stores making it more complex to operate using the simple DOS systems which is increasingly becoming obsolete, and which is highly manual. Zara’s business model sells fashion more than it does apparels. To this end, speed, agility, and flexibility in responding to changing consumer demands is essential and even more important is Zara’s need to maintain its core capability so that it cannot be imitated by other competitor in the industry (Walters, 2006; Lu and Ramamurthy, 2011:937). Failing to upgrade its POS terminals could potentially make the company lose its edge in terms of speed in delivery of fast fashion to its competitors, due to obsolete ancient technology. Although the DOS system is stable, it is increasingly facing challenges and problems. First and foremost, there too many people involved in information transfer and analysis of the ordering, fulfilment and manufacturing processes which increases the probability of errors. Though Salgado does not mind a small margin in error, a more integrated system would allow easier data transfer and also ensure accuracy in such data which would enable a balance between supply and demand. Secondly, using PDAs with small screens to enter data is strenuous and time consuming. Getting to do this every day does not help in enhancing data accuracy. Thirdly, since the POS terminals are not connected to Zara’s headquarters or stores, the sales data transmitted at the end of the day, may not fully reflect changing fashion trend sales (McFee, Dessain, and Sjoman, 2007). Within the fast fashion industry, what is fashionable today may be obsolete and unfashionable tomorrow (Tesseras, 2009). Fashion changes fast, and Zara needs a system that can wholly and efficiently reflect this based on cloth’s designs, colour, and even the sizes. And finally, the very fact that Zara’s hardware vendor for POS terminals refuses to enter into a contractual agreement regarding their assurance not to change the DOS operating system, does not fully assure Zara that it would not in the future (McFee, Dessain, and Sjoman, 2007). This presents a risk to Zara’s operations. Where the costs of maintaining the ancient system surpasses or equals the benefits that the vendors gain from maintaining the system for Zara, the vendors may decide to change the machines. Upgrading the POS terminals into a modern operating system would enable development of newer capabilities into the software which would potentially enable the company to build in store networks as well as give the employee the ability to look up inventory balances in their own stores and in other stores. This would enable the store managers to understand which cloths are selling fast, and which ones they are left in inventory without having to go through the store to physically count them. Therefore it would enhance decision making with regard to what kind of clothes, in what design, colour and size are required. Furthermore, connectivity among stores which are nearer would enhance sharing of data on which products are in one store yet is in shortage in another (Caro and Gallien, 2010:261-265; Caro, et al, 2010:74-79). This would enhance fast movement of merchandise from one store to another, thus enhancing sales. Such information technology capabilities would not only streamline information flow along the supply chain in real time but also enable the headquarters to be connected to a store’s real time data sales which would be essential in making any decisions with regard to design, size and colours, as well as using actual real time data in planning and shortening cycle times for each of the stores (Walters, 2006). The real time data also would enable the headquarters to effectively estimate what quantity of products to produce in order to meet to try and meet the demand for each of the stores rather than having then miss out on merchandise due to little available supply. This in-built flexibility in information flows from the store fronts to the designers, and the quick turnaround of the products tightens the link between supply and demand and would therefore help the company manage inventories effectively (Zhelyazkov, 2011:2-3). Although Sanchez’s arguments make sense, they are more short term oriented, and lack a long time focus. In the long term, maintaining an obsolete technology in an expanding business within a volatile industry that is highly dependent on speed, agility, and flexibility in response to consumer demand, is highly risky. However, upgrading the system to a modern technology could potentially help Zara develop high capabilities in its operations. Such a system would enhance the timeliness and visibility of data where Zara would be able to quickly gain insight into changing consumer trends hence responding quickly, and they would also be able to track every single item within the distribution system at any given time through technologies such as barcodes or even radio frequency identification systems (Christopher and Towill, 2001). In addition, such new technology would provide the basis upon which tighter integration between the customers and suppliers in the company can be enhanced. This would enhance stronger links right from the customers to the suppliers, where real time data with regard to consumer changing demands would also be reflected on how the company purchases materials in real time. In deed in his research Matchette and Lewinski (2005:6) asserts that tighter collaboration between players within a supply chain due to enabling technology has generally increases sales by 45%, reduces inventories by 40%, reduces rush orders and lead time by 45%, as well as increasing stock availability by 12.%. These impact cost, flexibility, speed and quality which are critical for every company. Most important aspects of Zara’s approach to Information technology The most important aspects of Zara’s approach to information technology from the case study are that Zara did not have an official IT team but rather approached IT based on its preference for decentralised decision making and speed. Often decision concerning IT would be discussed among the between Salgado and Castellano and other technology steering team who decide on new systems required. There are no pre-planned budgets for IT projects, with most information technology projects in the company requiring little or no formal justification or cost and benefit analysis. Zara develops and customises its own software and applications rather than buy already made software available in the market. Furthermore, almost all IT operations are controlled from a central location in La Coruna, with the IS team responsible for all system support and solutions tasks (McFee, Dessain, and Sjoman, 2007: 7-8). This approach to IT not only ensures that within IT development is highly flexible and fast change, but also but also that costs are minimised in IT projects within the company. These approaches to information technology are currently not applicable or appropriate anywhere. This is because over the past ten decade, Information technology has grown to be the very medium by which organisations compete, and numerous organisation have developed their information technologies through formally structured projects which consider flexibility, speed, cost and quality as key metrics in the effective operation of such projects (Lu and Ramamurthy, 2011). An approach such as Zara’s information technology would for instance not work well in online companies such as Amazon, which are highly reliant on their IT infrastructures for effective performance. It would also not be effective in a software development company or even in a retail store such as Wal-Mart where the replenishment of products on the shelves are highly dependent on RFID technology, and where the Wal-Mart balances both on the quality and capabilities of its IT infrastructure as well as its costs, and new changing technologies in the market to ensure its IT is current. References Caro, F and Gallien, J 2010, ‘Inventory Management of a Fast Fashion Retail Network,’ Operations Research, 58, 2, pp. 257-273. Caro, F, Gallien, J, Diaz M, Garcia, J, Corredoira, JM, Montes, M, and Ramos, JA 2010, ‘Zara Uses Operations research to Reengineer its Global Process,’ Interfaces, 40, 1, pp. 71-84. Christopher, M and Towill, D 2001, ‘An Integrated Model for the Design of Agile Supply Chains,’ International Journal of Physical Distribution & Logistics Management, 13, 4, pp. 235-246 Lu, Y and Ramamurthy, K 2011, ‘Understanding the Link between Information Technology Capability and Organisational Agility: An Empirical Examination,’ MisQuarterly, 35, 4, pp. 931-954 Matchette, JB and von Lewinski, H 2005, ‘Is your Supply Chain ready to Enable Profit Growth and performance? Supply Chain Viewpoint. McFee, A, Dessain, V, and Sjoman, A 2007, ‘Zara: IT for Fast Fashion,’ Harvard Business School, September. Tesseras, L 2009, ‘Fashionable Supply Chains: Fashionably Flexible,’ Supply Chain Standard, July/August 2009 issue. Walters, D 2006, ‘Effectiveness and Efficiency: The Role of Demand Chain Management,’ The International Journal of Logistics Management, 17, 1, pp. 75-94 Zhelyazkov, G 2011, ‘Agile Supply Chain: Zara’s Case Study,’ Strathclyde University Glasgow, viewed 4 September 2012: < http://galinzhelyazkov.com/wp-content/uploads/2011/09/AgileSupplyChainZaracasestudyanalysis.pdf> Read More