Case Study of Zara It for Fashion

Case Study of Zara It for Fashion

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Case: “Zara: IT for Fast Fashion” Student ID: U00235538 Issue Zara, the flagship chain of Spanish based holding company Inditex, has grown to great prominence in the international retail fashion industry. It has done so by advantage in recognizing and responding to changing fashion. Recognizing and quickly responding to the changes in fashion trends is largely achieved through a collaborative system of store managers and mid-management level commercials.

The exponential growth of Zara has been upon the backbone of a reliable but increasingly antiquated IT system that begins to counterproductively threaten the speed by which the majority of the 32,535 employees operate. At the center of the technical issue is the Point of Sale (POS) system commonly used in each of Zara’s stores. Focal Stakeholder Opinion It is an open issue frequently in the mind of Xan Salgado Badas, the head of IT for Inditex. The current POS system exists in each store as a non networked terminal operating upon the outdated Disk Operating System (DOS).

Though incredibly stable and familiar to Zara’s employees, it proves to be increasingly lacking in functionality across the current and future needs of the expanding international chain (McAfee, Dessain, Sjoman, 2). The heart of the issue is not a debate over whether to upgrade the operating system and the POS application itself, but rather when and how to facilitate such a large modernization. Salgado’s advisor Bruno Sanchez Ocampo expresses, “We could mess it up in the process. We could turn it from an application that we never have to worry about into a real headache, for us and the stores. ” (McAfee, Dessain, Sjoman, 2).

Zara depends so much upon speed and service by both its store managers and commercials. Its fast focus on shifting fashion up and down the chain of operations leave it especially ill able to handle IT system risk, yet Zara must find a way to achieve current technological objectives. The antiquated latency of the current system puts the workload excessively onto the staff to manually accomplish, creating its own indirect cost to the company. Salgado’s overriding though is to, “wonder what approach would be most in keeping with how Zara developed and exploited its overall computing infrastructure” (McAfee, Dessain, Sjoman, 2).

Organizational Issue and Initial Short Term Action Salgado’s dilemma should not be entirely left to the IT department. The IT department has fallen victim of, “being treated as if it were different from the rest of the firm” (Feld and Stoppard, 74). In terms of Inditex corporate structure (McAfee, Dessain, Sjoman, 21); the IT department is classified under Administration & Systems. This is surprising, given that Jose Maria Castellano, current CEO of Inditex, began his career with Zara as an IT manager.

The direct link to senior management is implied in the organizational chart, but not formally defined. This organizational disconnect has resulted in a lack of incentive for the IT department to proactively talk to senior management about the concerns with modernizing Zara’s aging information technology infrastructure. To overcome Sanchez’s concern regarding culpability for IT initiative, Salgado must engage senior management to actively involve them in planning, budgeting, risks to

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expect, and sharing responsibility for setbacks or failures that might occur.

CEO Castellano is stated to believe, “computers (are) critically important in enabling (Inditex)” (McAfee, Dessain, Sjoman, 3). By engaging senior management in these IT decisions, Salgado stands to, “help them generate real value from their IT investments” (Ross and Weill, 86). Though Inditex’s long term IT goals are not particularly aggressive, engaging senior management in this modernization would be the groundwork for Salgado to establish IT Portfolio Management within Inditex. Mid Term Contingency

Regardless of whether when and how is determined in conjunction with senior management or the decision falls entirely upon Salgado’s shoulders, it is fairly certain that the genesis of solutions will originate from Salgado and his staff. The key concern defining the boundaries of when and how is to minimize the impact to Zara’s existing operations and expansion, or more simply stated: to not “mess it up” as Sanchez fears. A clear and present danger is that the sole remaining hardware vendor for Zara’s POS terminals will give no contract assurances that it will not change or halt production of the machines.

To allow greater flexibility in his defining of when Zara manages its system modernization, Salgado should give himself the safety net of purchasing a comfortable supply of the existing terminals. Long Term Options Then Salgado and his staff must focus on solutions and potential ramifications of how the modernization is strategically rolled out. Here they have incredible flexibility with the international expansion of Zara. A first option might be to go the new store-new idea route and begin the integration and testing of modernized, networked, updated OS system POS terminals on new staff at new locations.

It offers the appeal of a clean slate from the technical side and the new hire users will have less resistance to moving from an old technology. A second option is to have a broad cross system phase in approach whereby a parallel rollout is created introducing new terminals to each store and transitioning staff to the new functionality of the system with the back-up of the old POS in place for emergency use. The rate of integration can be varied, as traditional resistance and issues arise- but store managers can be incentivized to competitively achieve the updating of their stores.

A third approach would be more of the grape-vine approach whereby Salgado uses Zara’s centralized Spanish operations to the best advantage, allowing the IS department to take a shotgun pattern selection of well established stores in areas of multiple store density and begin to upgrade there. As veteran store managers, staff, and commercials become intimate with the new system and serve as beta testers to spot problems for the IS department to overcome, these trained individuals can rotate out to other stores and teach what they have learned.

Concerns and Recommendation Concerns with the new store-new idea approach can largely be that many of the new stores are international away from Inditex’s central operations. Any complications requiring direct intervention may be seriously lagged by distance of communication and failure of existing backup operations by

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experienced store managers. This sort of lag could quickly back up into Fulfillment and possibly even regional Design and Manufacturing of Zara’s design.

The cross system phase in approach sounds logical, but other industry experience has often shown trying to push changes across an entire system can lead to pockets of resistance, frustration, and resentment. As problems arise, the solutions are time sensitive and may not be equally applied to different regions. The result is often a system with substantial patchwork that has both exacerbated store managers and exhausted the IT people attempting to manage the daily problems. The grape-vine solution has its share of problems too, since it forces the change to start in the most entrenched part of Zara’s structure.

The change should be portrayed as coming from the top down to the store level as a response towards giving them the functionality they have wanted. Given Zara’s very centralized and very collaborative Spanish nature, it ultimately provides the best developmental route with the least risk to continued operations. Expert store managers and commercials can use their strong relationships to advent the change. Should technical problems arise, the delay time in response from IT can be as minimal as a car drive out to the store and late night work.

Distribution centers remain relatively close by and the store product manager commercials can become dedicated to assisting in meeting store needs should a system fail. Ultimately, these stores have a long established track record and the effects upon their business by the modernization can best be measured. It is the most fertile ground for beta-testing the system modernization and costs can be closely monitored. Examples are that doing this in Zara store dense areas will allow for testing of cross checking inventory between stores.

Give the first stores great effort and make them a success such that neighboring stores clamor for the update. Treat the initial stores as special and let word travel along the grapevine. As store staff becomes experienced, individuals can be recognized and promoted to help train other stores. This viral approach maximizes itself on the fact that Zara has such a solid social-network in place. It also sets a social network precedent for future IT initiatives. The expansion rate can be controlled and checked as necessary. Measurable results can be realized and evidenced as need be to senior management.

It provides the platform for Salgado to cultivate IT portfolio management at the level of senior management, or at the very least help lay future year tracts for the Defined and Managed stages of IT portfolio management by centralizing the projects in one database, tracking spending, and using financial metrics in evaluation. (Jeffery and Leliveld, 43) Resolve to Conclusion With understandable hesitation, Salgado faces the road to a modernization that he knows is overdue. Behind him he has a “hands-off” senior management that is not accustomed to worrying too much about IT until it becomes a problem.

Salgado, for the sake of Zara and his own career, cannot wait for it to become a problem. Nor does he want to be responsible for

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fulfilling Sanchez’s fear that IT does “mess it up”. The decision on how to modernize should not be left up to the IT department, yet Salgado must actively lead senior management through the technical realities of various approaches, explaining what could go wrong and putting emphasis on what could and should go right. In the end he will most likely select the course of action, and needs to help management come to the same conclusion, thereby sharing the responsibility.

Even if not an objective of the modernization, some benefits should come naturally such as increased efficiency is corners of the system. Inventory control may not jump from 95% accuracy to 100%, but it is certain to see an improvement from the system efficiency. Salgado know the status-quo approach advocated by Sanchez will ultimately dead-end and hurt the company. Stressing that the update should improve the functionality of the people and the transparency of the company on a day to day basis as a whole, he has to take the first steps to senior management and begin the journey too long ignored.

References: Charlie S. Feld and Donna B. Stoddard. “Getting IT Right”. Harvard Business Review. February 2004. Mark Jeffery and Ingmar Leliveld. “Best Practices in IT Portfolio Management”. Sloan Management Review. Spring 2004. Andrew McAfee, Vincent Dessain, and Anders Sjomain. “Zara: IT for Fast Fashion” Harvard Business School Publishing, Boston, MA. c. 2007 Jeanne Ross and Peter Weill. “Six IT Decisions Your IT People Shouldn’t Make”. Harvard Business Review. November 2002.

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