To answer the question whether or not upgrading Zara’s Pos system, we must agree that the Pos system should help the company to use information wisely to add value to their performance in some critical fields such as financing, marketing, operation and so on. Moreover, the Pos system ought to be suitable for 3 dimensions including organization, technology and people.
(1) Should the company upgrade the POS terminals to a modern operating system?
At present, Zara’s Pos system gives support to its daily operating and management. Managers and employees in headquarter as well as vendor members all over the world use it well. However, there is a contradiction we can’t ignore. Zara’s POS system runs on DOS without assist of the supplier, Microsoft, which leads to a trouble that Zara doesn’t have POS software that works with its POS hardware. In other words, Zara faces a dilemma. Some hold the viewpoint that it’s not necessary to update the POS terminal to a modern operating system. One reason is that members in information system department are able to compile DOS-compatible programs. Another reason is that upgrading POS system may push store managers and employees in a mess and it takes time to adapt to the new one. In addition, Zara is a big customer for DOS. That’s to say Zara has the power to bargain, which means a lower cost.
However, POS system walks on two legs, the software and hardware. In the long term, Zara needs to upgrade it. Since Zara is becoming more and more global with increasing trend in revenue, profit and branches around the world. For further development, Zara had better keep pace with international conventions. After all, from technological angle, Zara’s system falls behind. What’s more, no one can promise hardware with incompatible software will always run smoothly. What if it breaks down? No support. You can imagine the damage to Zara.
Naturally, the transition needs a specific plan. Maybe, the process from point to surface, taking external and internal environment into consideration, is a good choice.
(2) Should the company build in-store networks?
Yes, it should build in-store networks. Now, the POS terminals were not connected to another one via any in-story network, so employees copied daily sales totals from each terminal onto a floppy disk, the carried these disks to the one modem-equipped terminal to accomplish the transition. And modern POS terminals, since they were really modern PCs, could accommodate even more sophisticated capabilities, especially networks within stores and across the company. Wireless networks were particularly intriguing since they were much cheaper to install within a store. With a wireless network in place, it would no longer be necessary to carry floppy disks around the store at the end of each business day to tally up total sales. In a word, building in-store networks can save more money for the company, and improve its efficiency.
(3) Should the company give employees the ability to look up inventory balances for items in their own stores?
We think the company should give employees the ability to look up inventory balances for items in their own stores.
Now in the company, ordering is standardized around the world. Store personnel cannot look up their inventory balances on any in-store computer, so canvassing the store was the only way to learn about stock levels. In this way, only the store managers know what had been sold.
The company should give employees the power to check inventory balances for items in their own stores. Firstly, the employees will know how well they work. If they have finished the achievement well, they will do the work enthusiastically. If not, they will make efforts to realize goal. Secondly, if the employees know what kind of garment sells better or worse, they will take the different strategies when they sell the different kinds of garments, what will earn more money for Zara. Thirdly, the employees can give suggests to store managers about ordering, which will improve the employees' satisfaction and participation.
In a word, if the company gives employees the ability, Zara will be more likely to make a big difference and realize the business strategy.
(4) Should the company give employees the ability to look up inventory balances for items in other stores?
Our team holds the opinion that the company should give employees the ability to look up inventory balances for items in other stores. The reasons are as follows: 1) It would promote the company’s internal information change. 2) Each branch will have more access to participate in the operation.
3) It will make great contribution to providing much more useful information for shop goods transfer among nearby stores.
4) We also believe that the automated lookup can be trust---whether online inventory balances are generally accurate in retail environments. Each branch also wants to show the local consumer’s demand with the real sales date.
2. What is ZARA’s business strategy?
Its business strategy is mainly differentiation integrated with cost leadership.
The differentiation reveals on: the rapid response for the market demand, the fashionable design within extremely short period compared with its competitors, the constantly changing shop layouts and the art- designed window display.
In terms of cost leadership, it provides products with relatively reasonable price, which just “can be worn 10 times”, by conducting little advertisings and vertically integrated manufacturing operation and distribution system based on information system.
3. How Zara realize the strategy?
As far as we are concerned, we think Zara realize the strategy through three aspects: Business model, Operations, IT. Then we will expound these aspects.
Business Model (I) The business idea----retailing, manufacturing and apparel industry integrated. (II) System formed in early time
Holding company（Inditex）→
Zara→information technology
Internally
owned suppliers
Retail chains
(III) Business model of Zara
Detail analysis of the Zara business model will state in three aspects, as following： First, the two beliefs of the administrators ensure the speed and decision making. One is that responding quickly to the demands of target customers based on special marketing position, instead of simply relying on the persuasiveness of marketing to push clothes. And the other is that taking advantage of the intelligence and trusting the judgment of employees, instead of relying on a small set of decision makers. The details of this decision method are as followings： 1. Store managers have more responsibilities;
2. The two “commercials” is a feature of Zara, such as having 2 designers and 2 production managers of every team, and the store product managers served as La Coruna’s main interface with Zara stores;
3. Employees within the commercial function exercised autonomy; 4. Emphasis on decentralized decision making.
Second is the marketing, merchandising and advertising. We can summarize it as the five main strategies.
1. Virtually no advertising, placing ads only twice a year to announce the opening of new stores;
2. Paying attention on the location; 3. The price setting’s regulation;
4. No producing “classics”, always in style; 5. Never selling clothes over the Internet.
The last point is about financial and growth. For example, Zara generated 73.3% of the group’s sales, continuing a trend of rapid and profitable growth, and have ample room for growth existing within its current markets. So it would not be necessary to build entirely new production and distribution networks in order to support future growth.
Operations
Zara established three cyclical processes-ordering, fulfillment and design and manufacturing to operate well. To order, every major section of a Zara store placed an
order to La Coruna twice a week, and the order included both replenishment of existing items and initial requests for newly available garments. To fulfillment, there are commercials at La Coruna, and their job was to match with the supply of finished clothes coming from factories into the DC with the stores’ demands for these items. To design and manufacture, Zara’s vertically integrated manufacturing operations enabled the constant introduction of new items and also ensured short lead times. Production requirements were distributed across a network of specialized facilities that quickly produced and delivered the required goods. IT
Store solutions Logistics support Administrative systems
First, they were divided into 3 groups, which you can see from the chart above clearly. Then at La Coruna, several information systems were used to support the operations of Zara. Applications kept track of the “theoretical inventory”. And they have some good equipments and sophisticated technologies in factories and DCS, which can help Zara get more benefits. Finally, all Zara stores had had identical handhelds-the PDAs and POS systems. After putting into use, no IT support was required to open a new store, nor was it necessary to run a large IT support organization to assist the stores. One POS terminal at each store had a modem, which was used at the end of each business day to transmit comprehensive sales information and other data to La Coruna. One PDA is also used to receive the offer and transmit the order.
Conclusion
However, Zara was building an increasing bigger company on top of a more and more obsolete operating system, there was still a problem: whether now it was the time to give up the ancient operating system-DOS. There are some more sophisticated capabilities, like wireless networks. Zara should make decisions carefully after thinking seriously and deeply about their purpose of the organization they head, about the strategies, IT and people’s comprehension.
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