Updating Pos Terminals Zara Case Essay Example

order window. Additionally, the product managers for each store can now access more reliable and current sales figures. This empowers them to make more effective decisions when transferring products between stores. The commercial team responsible for aligning overall supply with demand from each store will demonstrate improved decision-making abilities, especially when distributing inventory among stores during SKU shortages.

The enhanced inventory figures will lead to improved production scheduling and planning, closely aligned with changing customer demand for various SKUs. Another advantage would be enabling employees with access to inventory balances for their own stores to check the balances of items in other stores. This would provide store managers with better control over their inventory and the ability to quickly respond to unexpected increases in demand for certain items. If the commercials at La Coruna fail to deliver the full amount of a specific ordered item, the store manager can promptly seek help from stores that have excess inventory, capturing potential sales that would otherwise be lost.

The Zara "business model" revolves around connecting customer demand to manufacturing and distribution. This means that Zara must rapidly respond to the ever-changing preferences of their target customers, who are urban, fashion-forward individuals with dynamic tastes. Unlike other major clothing retailers, Zara does not heavily rely on advertising and marketing, allocating only 0.3% of its revenue towards these activities compared to the 3% to 4% that others spend. However, despite its unique approach, this business model does have some potential weaknesses. Its scalability is a factor to consider, and Zara requires certain pieces of information to effectively operate this model.

The clothes at Zara have a short lifespan, with approximately 75% of

merchandise being sold within 3 to 4 weeks. Zara operates with a decentralized decision-making system, empowering employees to determine which garments are stocked in stores. This differs from other companies that rely on a small elite team for design and production. Weaknesses within Zara's business model include the lack of buffer stock due to short lead times, and the centralized logistics arrangements at the head office in La Coruna, making Zara susceptible to accidental incidents.

The role of store managers in determining product stocking is crucial, but their lack of expertise may hinder their ability to choose popular items, resulting in missed sales opportunities. To effectively operate under this business model, accurate and up-to-date sales and inventory data is essential for the store managers. This information enables them to make informed decisions regarding product orders and availability. It is also important for them to be aware of inventory levels at other stores. Additionally, timely inventory balance is crucial due to the tight order deadline with La Coruna, allowing store managers to plan re-order points and determine optimal order quantities.

Q3. What are the weaknesses in Zara's current or potential IT infrastructure and IT strategy? Zara's IT infrastructure is reliant on outdated operating systems (O/S) and hardware technology, which could have a significant impact on normal operations if these critical services were to fail. The in-house POS system in Zara is implemented on an unsupported O/S, meaning that no official fixes will be provided for any identified system or software bugs, potentially leading to an unstable system or security breaches. Using outdated O/S also limits compatibility and extensibility with improving software and hardware, hindering Zara's ability to sustain

business growth by enhancing scalability of services through better hardware architecture or networking capabilities with other IT software/inventory systems. Additionally, the rapid pace of improvement in IT hardware means that legacy components may no longer be available for purchase by Zara. Furthermore, obtaining a commercial license for the unsupported O/S may also pose challenges.

Having unconnected terminals between headquarters and POSs can lead to issues with information sharing, particularly for time-sensitive data like inventory. This can cause delays in sharing information and slow down response times to customer inquiries, both of which are harmful to real-time sales. Zara, a Fast Fashion Business that prioritizes Inventory Management as their competitive edge, fails to understand the potential improvements that IT can bring in achieving this advantage. For example, they do not improve communication channels for instant delivery of inventory data to front line sales. Additionally, Zara does not recognize the importance of IT in gaining a competitive edge and lacks continuous improvement or innovation. As a result, this could transition Zara from Strategic Mode to Factory Mode, especially as other companies adopt similar strategies.

Zara lacks dedicated roles for IT operations planning, decision making, and leadership. While the General management team may share these responsibilities, they are unable to fully focus on IT incident management and lack current knowledge and technical exposure for strategic planning, expansion, and upgrade decisions. To address this issue, Zara should hire a Global CIO (Chief Information Officer) and/or a Chief Operations Officer for overall planning at a global level, while also assigning local CIO/COOs per region for local incident management and business process improvement. Additionally, Zara lacks a solid plan for continuously updating their

IT services. Ensuring evergreening of IT services would involve keeping their IT assets compatible and up-to-date with the latest operating system and hardware, as well as promptly locating vendor support or human expertise for service failure resolution or consultancy on service improvement. As a result, there is a lack of regular strategic alignment with the company's goals.

Regular strategic alignment is crucial in adjusting Zara's IT direction. It plays a significant role in optimizing the IT workflow by ensuring constant operational improvement. This continuous improvement is essential for reducing unnecessary IT overhead and enhancing service responsiveness.
Moreover, Zara should periodically review system usage to reshuffle hardware resources. By doing so, they can enhance hardware utilization and consequently improve Zara's ROA (Return on Assets).

-The key to the success of information sharing is enhancing extensibility. To improve Zara's ability to perform data analysis or forecasting and to achieve fast responsiveness to fashion change or new sources of marketing statistics, a strategy should be implemented that emphasizes great flexibility and readiness to interface with different data sources.