ZARA: Fast Fashion

Case StudyManagement Information Systems

January 26, 2010Presented By:

Group- 1

Agenda

About About CompComp

anyany

InforInformatiomatio

nnSysteSyste

msms

AnalysAnalys

is & is & ConclConclusionusion

About the Company

ZARA Zara, the most profitable brand of Inditex SA

the Spanish clothing retail group, opened its first store in 1975 in La Coruña, Spain

operations into 45 countries with 531 stores located in the most important shopping districts of more than 400 cities in Europe, the Americas, Asia and Africa.

Zara has remained focused on its core fashion philosophy that creativity and quality design together with a rapid response to market demands will yield profitable results

FAST FASHION

ZARA- Goals

These goals helped to formulate a unique value proposition: to combine moderate prices with the ability to offer new clothing styles faster than its competitors.

ZARA- Business ModelZara’s business model can be broken down into three basic components:

1.Concept: To maintain design, production, and distribution processes that will enable Zara to respond quickly to shifts in consumer demands.

2.Capabilities: It maintains tight control over their production processes keeping design and manufacturing in-house or with some strategic partnerships located nearby . They have strategic agreements with local manufacturers that ensure timely delivery and service. Thus, maintaining the flexibility necessary to design and produce over 12000 new items annually.

3.Value drivers : for Zara are both tangible and intangible in the benefits that are returned to all stakeholders.

Tangibly Inditex, the parent company of Zara, has 11.02% net margin on operations.

Intangibly, customer loyalty and brand recognition have provided significant value to Zara.

Information Technology @Zara

DBMSA DBMS is a set of software programs that controls the organization, storage, management, and retrieval of data in a database.E.g MySQL , Oracle

ERPERP software applications to improve the performance of organizations' resource planning, management control and operational control.e.g SAP ,people soft

Centralised server managing and controlling of data and command from single pointe.g Napster

RFID Radio-frequency identification (RFID) is a technology that uses communication via radio waves to exchange data between a reader and an electronic tag attached to an object, for the purpose of identification and tracking. E.g Barcode detector

Information Technology @Zara

The blend of technology Strategy enabled Zara to break all the rules in the fashion industry

Zara’s store managers leads the intelligence gathering efforts that ultimately determines what ends up on each stores rack.

ZARA uses PDA’s (personal digital assistant) to gather customer input

PDA’s are also linked to stores POS system, showing how garments ranked by Sales

Zara’s Staff regularly take feedback from customers on what they they would like to see more of.e.g colour design etc

IS practical Implementation, showing its potential for

supporting enterprise growth

ZARA-IS Implementation

Design

The company can design a new product and have finished goods in its stores in four to five weeks

It can modify existing items in as little as two weeks. Shortening the product life cycle means greater success in meeting consumer preferences.

Zara’s capacity to adopt to new trends, understanding differences between markets was highly relied on ‘High frequency Information Systems’.

Sources of Information

POS data

Industry Publication

TV Internet

University Campuses

Manufacturing

Highly Automated and Capital Intensive factories Developed J.I.T system incorporation with Toyota

Production Scheduling Reduced Cost – Transportation and production

Material Requirement and Planning Fully Automated Order Application

Sources of Information Internal - 20 owned factories near Spain

External – HK and Barcelona

Distribution

Transportation and Logistics

– Route and schedule optimization– Queue Management Systems for turnaround and waiting period of

the ships at the docks– Air Travel (Main Costs) – Optimize routes to minimize cost and

travel time– inventory management

Sources of Information Centralised Distribution SystemMobile Tracking SystemsPDA

Distribution center in La Coruna

Factories in Arteixo

Zara’s inventory model

Advantages

Vertical IntegrationZara’s Business System through the Value Chain

Forward Vertical Integration – Reduces Bullwhip effect

Backward Vertical Integration – Reduces Cost and Improves Quality

RetailingSources of Information store manager’s decision influence on the replenishment of garments

there is a heavy reliance on historical information from the store manager

Promoting Quick response Coordination between retailing and manufacturing Sales and trend forecasting Marketing Strategies for different markets The aggregated demand is ascertained and the supply is allocated according to past

performance of the various garments at the stores

Potential for supporting enterprise growth

Enterprise growthCorrect prediction of Buying Behaviour and trend analysis

Market research on university campuses, discos, mall etc.Feedback from storesSales report

Helps in taking quick decisionsRegional managers analyse the collected feedback.Analysis used by designers to introduce new product line and modify existing onesDesigners decide with commercial teams on fabric, cut, price of new garments.

Inventory Control

Distribution

Constant stream of informationLeads to constant input in product development process.Control early investments in raw material, direct and indirect of process and production capabilities.Communication and IT are essential in maintaining constant interface of various functions of management and production control.

Enterprise growth Cont Competitive Advantage Reduced Cost Reduced time and effort Customer Relations/Satisfaction Feedback – Process Improvements

CHALLENGES ENCOUNTERED

People

Cultural Issues Language Issues Technical Issues Procedures

Solution: Provision of training. Research and analysis of various markets. Acquisition of new workforce. Recruitment of local people.

Database

Maintain huge amount of data/ data loss Organize and interpret from available data Security measures against spy Compatibility

Solution: Technological Up gradation Hire skilled employees. Acquire reliable storage devices which is a critical for the company.

Hardware/Software 18 months technology upgrade Compatibility between hardware and software. License issues Cost of equipment and technology Geographic and natural constraints

Solution: Sharing information where there is sophisticated technology. Working under legal boundaries.

Procedures

Inventory management Procedure Change with technology. Data collection procedure in different markets. Sales & Trends forecasting in new markets

Solution:

Applying large number of POS in the supply chain. Formation of Local Teams to analyze the market for forecasting.

Key Success Factors for Zara

Business is built on quick response Production responds to trends. Deliveries are twice weekly, unlike most of the competitors weekly schedule.

KSFs: Market Research Ready raw material base Multi-functional quick decision making Vertical integration to ensure control over supply chain, and proximity Technology Cost Control, despite flexibility Technology and Infrastructure

References

http://www.zara.com/ www.3isite.com/articles/ImagesFashion_Zara_Part_I.pdf www.3isite.com/articles/ImagesFashion_Zara_Part_II.pdf Harvard Business Review http://en.wikipedia.org/wiki/Fast_fashion

Thank You

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