Zara. high manner vesture manufacturer and retail merchant. opened its first shop in Galicia. Spain in 1975. and by 2003. had grown to 550 shops worldwide. Zara is the largest retention of its female parent company. Inditex. and is measuring whether to put in overhauling its IT substructure. specifically its in-store Point-of-Sale ( POS ) terminuss which are running a DOS Operating System that is now EOL. Business Model
Zara has a alone and really effectual concern theoretical account ; it operates with a doctrine to give clients what they want faster than its rivals.
It produces “short life span” dress and can rapidly set its supply and designs to run into current client demand. contrary to traditional manner retail merchants. who design season-long dress and so advance it through heavy advertizement. Zara introduces about 11. 000 new points per twelvemonth while puting merely 0. 3 % of its gross on selling. compared to industry rival norms of merely 3. 000 new points per twelvemonth with a heavy 3. 5 % selling outgo. Unparalleled velocity in their design and production rhythm is Zara’s cardinal concern success scheme.
taking every bit small as three hebdomads from design construct to hive away bringing.
Zara’s retail shops do non transport ‘back room’ stock list. all points are placed on shop shelves or gross revenues floor. On norm. 75 % of its ware is changed in three to four hebdomads. so clients tend to purchase merchandises they like right off ( without waiting for price reduction gross revenues ) since stock may non be replenished when the merchandise runs out in the shop. This helps Zara have a higher stock list turnaround ratio and increases their gross border by selling more merchandises at original retail monetary values. Another cardinal scheme for its success is decentralized determination devising. Zara allows its shop directors to make up one’s mind which points will be on sale in their shop at any given clip based on current tendencies in their local community. They believe in fast determination devising without excessively much examination from higher degree cardinal direction. Zara’s IT & A ; Point of Sale System
Zara’s IT substructure was designed to aline their internal operations with their fast paced. extremely adaptative concern scheme. Zara felt that off the shelf commercial IT applications were non good suited for their concern theoretical account. therefore the IT section preferred to compose their ain package applications for maps such as accounting. telling. fulfilment and fabrication. Zara appears to be presently situated in the Support quarter-circle of the McFarlan grid. The IT section is reasonably stray and self-managed within the organisation. Although IT is leveraged during their daily operations. much of its critical maps ( e. g. telling ) could be conducted manually during unplanned IT outages. In general. their IT attack is reasonably minimalistic and simple for a company of this size. One exclusion is their Distribution Centers ( DCs ) which consist of extremely automated machinery and conveyer belts that sort out orders and transport them to the correct shops. The cardinal issue of the instance survey is Zara’s in-store IT and their ageing point-of-sale ( POS ) terminuss. Their current POS Hardware and Applications run on top of a DOS operating system. which is no longer supported by Microsoft.
Zara has non encountered any jobs yet and in fact the simpleness of the current solution is viewed as an of import advantage. When a new shop opens. IT sends a bundle with all POS terminuss. PDAs ( personal digital helpers ) . and needed Software on two floppy discs. The full in-store IT apparatus is fundamentally self-contained and self-deployable by the local shop directors with virtually no support necessary from the cardinal IT section. The POS units are non interconnected to each other. and merely one of the units in the shop has a modem connexion used to reassign gross revenues informations and topographic point orders with Headquarters in La Coruna. Spain. but they can non pass on with any of the other shops which limit their ability to rapidly look into for ware handiness outside their ain shop. Daily sale inside informations are collected from each terminus at the terminal of the twenty-four hours through a floppy disc and manually carried to the cardinal POS unit to be sent to Headquarters via modem.
Shop employees besides carry personal digital helpers ( PDAs ) into which stock list records are manually entered by SKU figure. PDAs were besides used to split the work of measuring “the offer” ( new ware available from central offices ) by experient gross revenues squad members. The assorted PDA input is so reviewed by the shop director in order to make up one’s mind what bing ware demands to be replenished and what new ware should be ordered following. While the PDAs were on a regular basis updated to newer theoretical accounts. the POS Hardware and O/S had non been updated in a really long clip. Zara is measuring the pros and cons associated with upgrading to a newer operating system such as Linux or Windows. While the current system is simple. stable. and has low care cost. the biggest hazard is that the POS terminus seller could upgrade the hardware so that it is no longer compatible with DOS. While the seller has verbally assured continuance for now. it has non been willing to do a contractual committedness. Upgrading their Polonium on the other manus would intend a complete revamp of their applications and a significant investing. Team Recommendations
If Zara does non upgrade their in-store IT solutions. their lone extenuation option is to carry backup POS terminuss in instance they are of all time discontinued. This is non a really sustainable scheme and would still go forth them with an antediluvian solution. the liability of which merely gets bigger as the company grows. The cost. complexness. attempt. and larning curve associated with replacing their current system are of import barriers to see. nevertheless it seems like an ineluctable contingency. and it is better to do the passage proactively. instead than reactively ( excessively tardily ) when it could do important hinderance to the company’s operations and impact its bottom line. The company should concentrate on the long term benefits associated with overhauling their current solution. Currently. numbering stock list and day-to-day gross revenues studies are manually intense procedures. which are error prone and clip consuming ( increases their OPEX ) . Keeping accurate stock list in such a dynamic environment as Zara’s is cardinal to their success and concern scheme.
Manual attacks can take to orders being unostentatious or overstated which impacts a store’s ability to transport the right merchandises at the right clip in order to maximise their gross. Shops are besides non connected to each other in any manner except by phone. This makes it complicated to look into merchandise handiness in other shops for clients. The synergy advantages of interconnecting and integration IS across the assorted shops can straight interpret to happier clients and more efficient operations. As shown in the tabular array below. we feel the hazards & A ; costs associated with proactively replacing a soon-to-be obsolete system are outweighed by the long term benefits in footings of improved operational efficiency. sustained growing. and client satisfaction. which will finally interpret into increased profitableness for the house.
Short-term. Zara should look to shift itself steadfastly in the Factory quarter-circle in the McFarlan Grid by overhauling its IT substructure and leveraging the benefits of more advanced IT capabilities in their daily operations. Such a move is cardinal for a fast paced turning company like Zara in order to stay competitory in the market topographic point and efficient in its operations. Simple IT betterments can assist the company to better prepare for future operational demands. Once the company overcomes the initial acquisition curve. they can slowly look for ways to introduce further and get down traveling towards the Strategic quarter-circle in order to genuinely populate up to its initiation concern rule for old ages to come. i. e. IT can literally assist Zara automatize & amp ; simplify the end-to-end procedure of “linking client demand to fabrication. and associating fabrication to distribution. ”
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