Zara - Case Study MTI14-AE - Arquitectura Empresarial

José Luis Godoy

Eduardo Romero

Fernando San Martín

Eduardo Ahumada

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1.(a) Zara Business Model

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1.(b) Key Differences• Zara doesn't spend a lot of money on publicity and

advertising (0,4% V/S 4%)• Most of the investment of Zara is focused on their

stores.• Zara customers are young people, looking for new

fashion styles (almost unpredictable), then its production cycle takes 3 weeks, other need 6 months for design and 3 for production.

• 11,000 New items versus 2,400• Production is Just in time, no stocks• Stores choose their items, they know their customers

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1.(c) Weaknesses?• Customers can’t use the web to purchase items.• Centralized Distribution (Spain).• Stocks don’t fit 100% of the estimated demand.• IT dependence, POS system is based on an old

technology

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1. (d) Scalability

• Zara model is scalable they open almost one store every day.

• They are capable to replicate their stores and plug it in the same Logistic Chain without IT support.

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2. What information does Zara need to run its business model?

From the demand

They need information about what is hot in fashion and new tendencies before they become popular (to anticipate competitors by reducing the time to market).

From the offer

A critical point in the information flow is the communication between the store and the commercials, basically they need the offer for every store and the order back based in the manager requests.

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3 Zara Operating Model

• Replication of Core Process• Orders• Deliveries• Design and manufacturing

• Different data, stores don’t coordinate between them

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4 Zara Operating Model

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5. Zara EA maturity stage?

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5. Zara EA maturity stage?

Standardized Technology Architecture

• Providing IT efficiencies through technology standardization and, in most cases, increased centralization of technology management.

Why?

• They shared common infrastructure.

• They have the same technology on all the stores (PDAs,POS, etc).

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6. Zara’s present and potential weaknesses in regards to its IT infrastructure and IT strategy

• Present• Systems doesn’t fit all the needs from stores• Some core process are complex due IT legacy systems

• Potential• POS aren’t provider doesn’t assure a future stock• DOS is not supported by Microsoft• Legacy Systems can’t evolve• There is not a corporate telecommunications network.

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7. POS/IT upgrade decisionsPOS upgrade

• YES to Upgrade without modify core process ( maturity )• The POS are made by IBM ( picture attached), so the risk

is not the obsolescence for supply, is for dependency for IBM for restrictive prices for legacy products.

• Some countries validate the POS standards ( Chile, SII 2004 regulations), that probably not accomplish.

• Estimated startup project costs (according to Anexo 12) for 1300 offices: € 17-18 Millions (0.8% Costs 2002).

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LAN deploy• Not necessary, just wireless options is most easy for

maintenance, considering new PDA devices are coming.

7. POS/IT upgrade decisionsEmployee access to inventory

• Some Retail industries adopts as standard in applications, without create access or profile schemas. The advantage is for the client for not loss of sale opportunity and choice another Retail store.

• Not include as POS process, for avoid latency in people attendant, only like as separate module.

• The interface must be basically, search by SKU and product name, showing quantity in local stock, not anymore info, because delaying the Cash line with more questions, and Zara don’t deliver 100% of CD requests according to the paper.

• Overhead of data access to a central (risk)13

7. POS/IT upgrade decisionsEmployee access to remote inventory

• Option possibly if you has a online access.• Overhead of data requests and confiability of real

remote inventory (i.e loss of product)• Useful if you have near stores in the same city.

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