The original business idea was very simple.

Link customer
demand to manufacturing, and link manufacturing to distribution.
That is the idea we still live by.
Jos Mara Castellano Ros, Inditex CEO

Summary

Zara is a large chain of stores run by Inditex, a multinational clothing

retailer and manufacture

Zara business model: Vertically integrated retailer in apparel industry ,

linking customer demand to manufacturing , and link manufacturing to
distribution and to retailing business

Major business strategies include

Speed
Decentralized decision making
Low priority to Marketing and Advertising
Innovative Fashion Design Strategy
Cost effective and basic IT systems
Highly efficient supply chain in place

The major issue within the Zara management was whether to upgrade
the POS terminals which ran on DOS. POS was stable but was outdated,
performed very basic functions, unsure if it could support the growing
business and might lose support from hardware vendor.

IT Challenges

Low or Minimal IT Budget which is .05% of revenue compared

to industry standard of 2%

No Cost Benefit Analysis done on IT investments

Application running on OS which is outdated

No IT expertise in IS department, most of them hired from

local university

Prefer to have in house applications which limit the scope

No CTO or CIO for effective IT management

High time lag on reporting from stores due to adoption of

outdated technology (Usage of Floppy Disc and telephone
calls)

Absence of real time database, lack of communication within

stores

Business Challenges

Inventory tracking mechanism not accurate

No interaction between the stores for effective inventory

management

Work over load for store managers

Even though company have an effective supply chain, it may lose

its competitive advantage due to lack of IT investments

Major chunk of revenue comes from Spain, have high geographic

risk

Technology upgradation required for the current OS

No forecasting is done, hence while increase demand the

allocation of products are based on commercials instinct

Business Capabilities

Business Process
Primary Activities
Ordering
Fulfilment
Design
Manufacturing

Distribution centers
Stores

Current operations
Manual checking of inventories . For
ordering PDAs widely used
Shipping done on commercials instinct
Commercials decide on design based on
their market survey
Vertically integrated manufacturing
operations and effective usage of
technology like CAD
Highly automated and use internally
developed applications
Uses PDAs and POS system
Currently running in DOS OS
Usage of Floppy discs to transfer
information

APA Risk Analysis Scorecard

Architectural Risk

Complexity Risk

Database Risk

Operational Risk

Supportability Risk

Application Disposition

Low
High

IT Value
Risk

High
Low

Recommendations

Zara should consider gradually and steadily upgrading the current

operating system.

Business strategy needs to be developed as per the change in technology

Should not further invest in the current obsolete system and conduct pilot
test for the new systems

Zara should run the old and the new systems side by side, until the new
system is smooth and robust

While the cost of the new software will be a one-time charge, the
maintenance cost will be distributed over the long run.

We suggest UNIX over Windows due to low maintenance cost, its secure
and highly scalable

Zara should weigh the options of using commercial software such as CRM
and SAP.

IT System Layout

Store -1
PDA: 1

PDA :
2

Current IT
Layout

PDA: 3

Common
Network

PDA- 1

PDA-2

No communication between
stores
Unidirectional communication
with Modem

PDA-3

Store -2
Store -1
PDA: 1

PDA :
2

PDA: 3

PDA- 1

PDA-2

PDA-3

Store -2

New IT Layout

Communication between
stores possible
Bi-directional communication
with Modem

Order Fulfillment Process

Current Order Fulfillment
Process
Offer
received in
digital
format from
La Coruna

Store 1
Store 2
Store 3

Segment 1
(Men)

Store
manag
er
(Infrar
ed)

Segment 2
(Women)

Combined
Order

Segment 3
(Kids)

Order is
generated &
given to La
Coruna

New Order Fulfillment

Process
Store 1
Offer
received in
digital
format from
La Coruna

Store 2

Store 3

Store
manager

Order is
generated &
given to La
Coruna

Thank You