Zara is renowned clothing brand based in La Coruna, Spain. It is one of the several clothing brand owned by Inditex and Zara accounts for the majority portion of profit of Inditex. Zara was founded by Amancio Ortega, who is the largest shareholder of Zara and is also one on the richest man in Spain. Zara believes in linking customers demand to manufacturing and manufacturing to distribution and follows this exact business model, as stated by the CEO of Inditex José María Castellano Ríos, that, “The original business idea was very simple. Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by.” Since the time Castellano joined Zara, he has stood upon the firm belief of Ortega who believed that computers were critically important in enabling the kind of business they wanted to build over time. Since then Zara has been growing at tremendous rates and is now way too ahead compared to their counter parts or competitors in the industry namely GAP, H&M, Benetton and many others. It is believed that Zara's innovative approach towards integrating IT with it's business has helped them achieve astonishing heights in the industry and there are way too many Zara stores in the world compared to its competitors, Zara has a business in almost all the major countries and continents of the world.
Not just the affinity with IT, but Zara also focused on responding quickly to the demands and likes of fashion dwellers who were generally the youths. They knew that fashion was something where a trend today can almost fade tomorrow and that fashion misses often occurred. Even spending hefty amount on launching marketing and advertising campaigns didn't guaranteed that fashion misses can be eliminated. This was something that Zara learned from its competitors, who even though spending hefty amounts weren't able to cope up with the changing
CASE STUDY - ZARA: IT FOR FAST FASHION 1
trends. Secondly Zara's senior managers and executives would often take opinions from its employees and store managers during decision making stages, rather than taking into consideration only from small group of people. They even gave much power and responsibility to store managers that it was totally in their hands about what to sell and what to not. Store managers were given the rights to sell the products according to their wish which was something totally opposite compared to it's competitors where everything was controlled from the head office. This way Zara was able to quickly respond to the changing trends and would only take 2 weeks of time for any new design to reach the shelves of the stores.
Moreover Zara had special group of people called “commercial” who are responsible for deciding what would be designed and produced. In contrast to other brands where designs are created only by a small set of teams, while in case of Zara, collections are created, then extended and modified over time by such teams of commercials. Zara's collections are divided into three categories namely, women's, men's and children's. Designers at Zara also prefer to travel in order to determine what's going on on the streets of cities and drawing inspirations from them new collections and designs are produced. Such approaches allow them to develop designs and stay in connections with their customer base. So basically Zara gave enough powers to store managers and people in commercials, which allowed them to draw endless imagination of designs for garments. Also Zara didn't believed in over looking such decisions through senior managers or executives, as it would compromise the company's speed and decentralized decision making.
Zara was consistent when it came to IT, however they did not have any chief information officer or formal processes for setting IT budgets, investments or projects. Instead Salgado and Castellano would often be set at steering wheel of IT department and mostly took decisions all by themselves when it came to determine what new systems to install, software requirements, POS, PDA etc. There were no formal justification for the IT efforts, nor there were evaluations conducted for cost/benefits analyses.
Zara went to such an extend where they didn't even bought commercially available software or used public libraries, they thought that the company's operations were so unique that they would have to make enough updating and modification that it would become time consuming. So
Salgado and his colleagues wrote their own softwares and applications including code for internal operations like ordering, fulfillment and manufacturing. It became a fact that Zara had business all over the world and thus writing a code for unified currency was better thought of as developing software internally rather than buying what was available in the market.
Application development and other IT related operations were now a responsibility of Information System department at Zara which was approximately a team of 50 members, all of them recruited from local universities based in La Coruna. These people were divided into three teams namely Store Solutions, Logistic Solutions and Administrative Systems. These teams were responsible for almost all the issues of Inditex related to IT. La Coruna was the headquarters for Zara's retail business as well as for all IT operations. Several internally developed applications were used to prepare and fulfill the orders of the all the stores located in the world. One application would prepare and receive the orders while other would determine and aggregate the supply available in the inventory. In a situation where demand exceeded the supply (would happen most of the time) it was the decision of commercials who would determine about which garment should go to which particular store. These decisions were often influenced and made according to the success a particular store would bring to the table, stores which would sell more garments would be highly considered.
At the end of each business day, POS (point of sale) terminal would send all the details of business of that particular day to the head office in La Coruna using modem connected to one POS terminal in the store. Errors in these systems would obviously result in inaccurate data, data loose and in short would depict the poor reflection of reality. However even the senior managers and executives didn't expected the system to be 100% accurate but wanted it to showcase at least 95% of accuracy as stated by Salgado that, “Having 100% control is most of the time just too expensive. Being 95% right is pretty good, and often you don't need more accuracy.”
Zara used minimal amount of computers inside factory, in-fact the only sophisticated computer that they used was particularly used to cut the garments in patterns so as to minimize the scrap and use most of the cloth. Relatively simple computers were used inside factories which
did not even contained complicated mathematical applications and instead managers were only provided with the information like due dates and quantities. Cut fabric were then sent to Zara workshops where sewing and sticking takes place.
Distribution Centers (DCs)
Here we can say that Zara heavily relied on automation and computerization as DCs contained miles of conveyor belts where one could notice continuous lines of Zara garments moving from one locations to another. Information systems keep track of each garment and aligned its route to a specific location in DCs according to the orders received from different physical stores present in the world. Human intervention was needed at the end of conveyor belts so as to remove the order from the belt and drop it inside the cardboard boxes or hang it on the hangers, after which the order is ready to be sent to logistics department. These applications which facilitate automation of conveyor belts inside DCs are developed internally in coordination with vendors of conveyor equipments.
Every Zara store contained PDAs (personal digital assistant) and POS terminals that allowed store managers to basically communicate with headquarters with the help of modem that was connected with one of the POS terminal. At the end of each business day, data from all the POS terminals were collected into a floppy disk and transferred to the terminal which was connected with the modem. Computers were not interconnected with each other within a store and hence requirement of floppy disk to transfer data was essential. PDAs were given to several employees of the store that allowed them to keep track of garments that are sold as well to maintain their inventory and stock. These PDAs also helped managers to return the faulty garments as well as order and receive new stocks of garments from the headquarters. However, since PDAs and POS terminals were not interconnected, managers had to sometimes call other manager of nearby Zara store and ask if they had a stock of a particular garment that was in demand. Had it been interconnected, manager would easily notice details about garments in nearby store and order from there itself rather than ordering directly from headquarters. Zara stores used DOS operating system which in 2003 was no longer supported by the Microsoft. Even then Zara used this operating system in combination with their own internally developed
applications because they felt that this combination has proved to be beneficial, stable, effective and easy to roll out and maintain over time. For example, when opening a new store, manager would just have to insert two floppy disks that contained necessary applications and the store would start functioning. Even in the case of serious IT problem, managers were only required to restart and reinstall the applications and that would solve the whole issue, as a result there was no specific needs of a store in order to open it and also it didn't require any sort of major IT staff to be working after it and handling issues.
From the case study we can say that thought IT was a huge success criterion for Zara but still Salgado and Sánchez were worried of implementing and incorporating modern OS, POS terminals and PDAs. Had it been improvised, there would be lot of encouraging possibilities for store managers. For example, store manager often complained that it was difficult to order using small screen PDAs and styluses. So incorporating modern tablets and smartphones would certainly make their task much easier and enjoy every functionality within the reach of they finger tips. Also it was stated that Zara used floppy disks to transfer data from one POS to another while modern POS terminals would not require as kind of external hardware support as it can facilitate wireless transfer of information within the interconnected PCs. Also modern terminals comes with advance networking technologies that can allow store managers to be connected with the headquarters at every second and thus allowing access to real time data of the stores. Moreover, even the nearby mangers can ask for help and assistance online rather than calling each other and thus establishing an environment where seamless transfer of information and business can take place. Also just because the combination of DOS and internally developed applications were proved effective does mean that they should be left as it is, Zara should move ahead with the world and advance themselves with the new technologies as it is this IT that has made possible for Zara to enjoy tremendous amount of success.
McAfee, A. (2007) “Teaching Note to Zara: IT for Fast Fashion,” Harvard Business School Press. Cambridge: MA
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