Zara Case Study

Sir,

Our biggest problem is our current IT structure.  Our POS system is using DOS which is outdated and limited in terms of capability. It is a huge risk to continue to use this system since the hardware might not be available to us in the near future.  Both Badas (Head of IT for Inditex) & Ocampo (Tech Lead for our POS system) are concerned our infrastructure is a risk to them since we are their biggest client.

A few examples of how our system is inefficient is the inability of employees to look up their own inventory or other store’s inventories in real time or spending excessive time to complete returns on the small screens on their Personal Digital Assistants (PDAs).  

This problem runs through the entire chain of operations related to Inditex’s Zara fashion stores, from the vendors to the warehouse and distribution centers to the actual store properties. 

Here is the run down the situation. 

·         Due to the nature of our business we need quick turn over on our inventory to satisfy customers with new fashion lines. 

·         We have 500+ stores with many more coming on board (one per day)—all need inventory to be updated in real time

·         Since our POS is very simple no IT support is required for store openings or any malfunctions.

·         We give store managers flexibility in what products to hold in inventory which causes unique orders and higher manufacturing costs

·         Without aggregated inventory data we miss out on potential sales.  A hot item on one region can be moved to the rest—real time inventory tools can help determine this.

Here are some of the decision criteria:

·         Fast, reliable and accurate system

·         Networked solution for real-time tracking

·         Integrated data controls for automation

·         Ability to port the POS system to retrieve data

·         Cost of upgrade and maintenance

·         No disruptions to current operations

·         Plug and play capability to make it easy for new stores to install and maintain.

·         Is time saved even with the additional functions added

Plausible alternatives:

• Current DOS POS system
• Pros
• Low up-front cost
• Employee familiarity with the system
• In-house support, maintenance and custom development
• No down-time necessary to migrate to the new POS solution
• Quick and easy to get new stores up and running
• Cons:
• Business is growing too rapidly for the IT infrastructure to maintain
• Time and costs associated with internal IT team managing the development and maintenance
• Inventory tracking system is completely manual
• DOS no longer supported by Microsoft
• POS terminals lack functionality of newer systems
• Modernize POS system including hardware
• Pros:
• Migrating to a new Operating System (Windows, Linux, Unix) that Microsoft support
• Potential to develop an online sales channel and additional revenue stream
• Additional features and capabilities of the newer system
• Real-time inventory tracking between stores
• Con
• High initial costs, potential for additional costs around customization and support of software, retrofitting the company to meet the new systems requirements
• Learning curve associated with new solution (Hardware and software
• Lack of established infrastructure

My recommendation is to address the minimum business requirements that Salgado and Sanchez identify as critical sustaining operations.  Therefore we need to make the necessary investments at this time to migrate to a more forward looking solution supported by the vendor. The new system should include all of the functionalities that employees expressed interest in, and it should allow for network connectivity and real-time inventory tracking.