Zara Case

Zara Case

In this case IT Head of Inditex, a multi-national clothing retailer and manufacturer head quartered in La Coruna, Xan Salgado Badas and his team mate Bruno Sanchez, technical lead for POS systems, are having a long time discussion on what should be done in regards to upgradation of their POS operating system that uses DOS, which has been in place for long time and currently, is successfully working worldwide helping Inditex and their largest subsidiary Zara in achieving their goals and objective of fast moving fashion.

Company’s Background and Strategy

When looking back in the history of the company it is clearly seen that the IT had been significant part of the success of their brand “Zara”. The company’s founder, Amancio Oretga, and Josie Maria who became CEO in 1997 later. During the initial days of company, they believed that outsourcing their IT function in regards to the POS operating system will not be a good idea because they anticipated that by doing so they will not have the freedom and flexibility of updating their POS OS as per the current business and their retailers and customer demands. So, instead they built their own software based on DOS.

Secondly, one can easily infer from the case that Zara since its initial days didn’t adopt the conventional way of marketing, instead they invested more on their retail stores infrastructure, location, layout, interiors and utmost important customer experience, which gave them huge presence in the markets and drove lot of customers into their outlets worldwide. Rather than investing in marketing of the product and pushing their products in the market Zara adopted the decentralize ordering and supply chain system. This gave Zara leverage to provide the right product, during the right period of fashion, at fast speed and avoid the losses of “fashion misses” which other players face until today.

This all was possible only because of the connectivity which retail stores and DC’s shared with the Headquarters. All the retail stores worldwide ordered twice a week with the lead-time of 2-3 days.

Key Issues:

• The most important and worrisome point is that Inditex’s POS hardware vendor was in position where he was planning to upgrade their machines, or some peripherals for them, so that they are not DOS compatible anymore.
• Despite all the advancement and upgradation of the current OS there were problems related to ordering^[a] particularly for the retail stores. The ordering window would open only for an hour during the end of the day and there was only one handheld computer through which ordering could be done for the retail stores for their all three sections i.e. Men, Women & Children. This at times created fuzz i.e. the stores mangers sometimes were not able to generate the order forms this would further lead to redundancy of the work at Headquarters, where people then had to calculate the order requirement based on their inventory levels and latest designs to be introduced in the particular market.
• Thirdly, as we know that the POS or PDA’s were never connected continuously among each other, with DC’s and Headquarters. This lead to lack of communication among the stores, real time monitoring of the inventory, etc... and kept Inditex deprived of the significant supply chain operational parameters.

Analysis:

Considering the change management happening at their hardware vendor end and in the industry with respect to technology, if Inditex wants to stay profitable and unique in the business aligning to their business objective and strategy they should go for implementing the new OS. The only benefit in sticking to their present OS is e.g. if Zara decides to open a new retail store anywhere in the world, using the current system gives Zara leverage to install their communication system and POS easily without any special skills needed. What if, the current hardware vendor upgrades its machines and peripherals which were no longer compatible with the DOS. This will cause huge problem for Inditex or Zara in terms of opening new stores in the future.