TABLE OF CONTENTS

CHAPTER PAGE

INTRODUCTION.............................................................................................................................

QUESTION A....................................................................................................................................

QUESTION B....................................................................................................................................

QUESTION C....................................................................................................................................

QUESTION D....................................................................................................................................

QUESTION E....................................................................................................................................

QUESTION F....................................................................................................................................

CONCLUSION..................................................................................................................................

REFERENCES……………………………………………………………………………………

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Introduction

Amancio Ortega opened the first Zara store in 1975 in downtown A Coruña, Galicia, Spain.
Ortega initially named the store Zorba after the classic film Zorba the Greek, but after learning there
was a bar with the same name two blocks away, they rearranged the letters molded for the sign to
'Zara.' It is believed the extra 'a' came from an additional set of letters that had been made for the
company.The first store featured low-priced lookalike products of popular, higher-end clothing
fashions. Ortega opened additional stores throughout Spain. During the 1980s, Ortega changed the
design, manufacturing, and distribution process to reduce lead times and react to new trends in a
quicker way, which he called "instant fashions". The improvements included the use of information
technologies and using groups of designers instead of individuals.

In 1988, the company started its international expansion through Porto, Portugal. In 1989, it
entered the United States, and then France in 1990.During the 1990s, Zara expanded to Mexico
(1992), Greece, Belgium and Sweden (1993). In the early 2000s, Zara opened its first stores in Japan
and Singapore (2002), Russia and Malaysia (2003China, Morocco, Estonia, Hungary and Romania
(2004), the Philippines,Costa Rica and Indonesia (2005), South Korea (2008),India (2010), and
South Africa and Australia

On September 2010, Zara launched its online boutique. The website began in Spain, the UK,
Portugal, Italy, Germany and France In November that same year, Zara Online extended the service
to five more countries: Austria, Ireland, the Netherlands, Belgium and Luxembourg. Online stores
began operating in the United States in 2011. Russia and Canada in 2013, and Mexico, Romania, and
South Korea in 2014.India in 4 October 2017. Zara introduced the use of RFID technology in its
stores in 2014. The RFID chips are in the security tags which are removed from clothing when it is
purchased and can be reused. The chip allows the company to quickly take inventory by detecting
radio signals from the RFID tags. When an item is sold, the stockroom is immediately notified so
that the item can be replaced. An item that is not on the shelf can easily be found with the RFID tag.
In 2015, Zara was ranked 30 on Interbrand's list of best global brands

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 A.Company Profile
a. Describe the nature of activities and services provided by the company

Zara is a clothing company that was founded in 1975 and came from Spain. It’s under Inditex
group which owns other brands such as Massimo Dutti, Pull & Bear, Oysho, Uterques and many
more companies. Zara grew very fast and currently in 2012 has 1,617 stores worldwide. With a large
name in the fashion industry, besides that, Zara faces tough competition internationally including
H&M, Benetton, and GAP. In order to keep up with the speed chic, Zara need to keep up also with
the information system to run their business

Zara stores have men's and women's clothing, as well as children's clothing (Zara Kids).
Zara's products are supplied based on consumer trends. Its highly responsive supply chain ships new
products to stores twice a week. After products are designed, they take ten to fifteen days to reach
the stores. All of the clothing is processed through the distribution center in Spain. New items are
inspected, sorted, tagged, and loaded into trucks. In most cases, the clothing is delivered within 48
hours. Zara produces over 450 million items per year.

Reportedly, Zara needs just one week to develop a new product and get it to store, compared
to the six-month industry average, and launches around 12,000 new designs each year. Zara has a
policy of zero advertising; the company preferred to invest a percentage of revenues in opening new
stores instead. Zara set up its own factory in La Coruña (a city known for its textile industry) in
1980, and upgraded to reverse milk-run-type production and distribution facilities in 1990. This
approach, designed by Toyota Motor Corp., was called the just-in-time (JIT) system. It enabled the
company to establish a business model that allows self-containment throughout the stages of
materials, manufacture, product completion and distribution to stores worldwide within just a few
days.

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 Most of the products Zara sells are manufactured in proximity countries like Spain, Portugal,
Turkey and Morocco. While some competitors outsource all production to Asia, Zara manufactures
its most fashionable items—half of all its merchandise—at a dozen company-owned factories in
Spain and Portugal and Turkey, particularly in Galicia and northern Portugal and Turkey. Clothes
with a longer shelf life, such as basic T-shirts, are outsourced to low-cost suppliers, mainly in Asia.

The company can design a new product and have finished goods in its stores in four to five
weeks; it can modify existing items in as little as two weeks. Shortening the product life cycle means
greater success in meeting consumer preferences. If a design does not sell well within a week, it is
withdrawn from shops, further orders are canceled, and a new design is pursued. Zara monitors
customers' fashion changes. Zara has a range of basic designs that are carried over from year to year,
but some fashion forward designs can stay on the shelves less than four weeks, which encourages
Zara fans to make repeat visits. An average high-street store in Spain expects customers to visit three
times a year. That goes up to 17 times for Zara

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B. Business Start-up
a. A brief relevant historical background on the company and how they began operations and
major key milestones of development and achievements.

The goal of the information system at Zara is to discover the best design trends. Designers
estimate what sells well by collecting vital information such as daily sales numbers. The real-time
information helps designers to decide about fabric, cut and colors when modifying existing clothes
or designing new ones. IT has shortened the time from design conception to the arrival of clothes at
the distribution centers and finally to the stores to be placed on racks. Zara use IS to track customer
preferences and sales. Store managers lead the intelligence gathering effort. This helps to determine
what ends up on each store’s racks. Personal Digital assistants (PDAs) or handheld PCs are used to
gather customer input. Staffs talk to customers to gain feedback on their preferences and issues. The
valuable data gathered helps the firm to plan styles and issue re-buy orders based on feedback. Zara
uses software like C-Design and Corel Draw. C-Design and Corel Draw Graphics Suite allows Zara
to create and market its collections quickly and efficiently.

Distribution: Zara has its own centralized distribution system. It keeps almost half of its
production in-house and uses smart technologies to have a competitive advantage. Instead of relying
on outsourcing, the company manages all design, logistics, warehousing and distribution functions
itself. It uses latest technologies to keep up with latest trends. The company manufactures and
distributes products in small batches. Using the computerized system, the company has reduced its
design to distribution process to just 10 to 15 days. The IT implementation of the operation research
requires establishing dynamic access to compute several large live databases (store inventory, sales,
and warehouse inventory) under very strict time constraints. This helps Zara to change about three-
quarters of the merchandise on display every three to four weeks and customer’s average time
between visits to its stores is more than its competitors at 17 times a year. Pricing is market-based.
Zara uses information systems for customer profiling, to analyze the purchase patterns and direct
targeting. The company quickly respond to fluctuating customer demands in fashion trends.

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Major key milestones of its development and achievements.

2016

 International recognition of our sustainability work

2015

 Zara’s reach the 7,000-stores milestone and our employees share our profits

2014

 New logistics centre in Cabanillas (Spain)

2013

 New-image flagship stores open

2012

 Another milestone is reached: 6,000 stores

2011

 Pablo Isla takes over as chairman

2010

 Zara goes online and our 5,000th store opens in Rome

2009

 Zara’s deepen coverage in China

2008

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  Uterqüe is launched and our first eco-store opens

2007

 Zarahome.com becomes our first online store

2006

 We develop our Environmental Strategic Plan

2005

 Pablo Isla becomes Deputy Chairman and CEO

2004

 We reach the 2,000 store milestone

2003

 Zara Home is created

2002

 The 'for&from' programme launches for people with disabilities

2001

 Oysho is launched and Inditex goes public

2000

 New headquarters are built in Arteixo

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C. Business Problem

a. Discuss a specific business problem, opportunity or challenge which required an IS solution.

Describe the antecedents to the problem including the social, managerial, organizational,
technological, legal or economic issues which increased the complexity of addressing the
problem or opportunity.

To maintain business competitiveness is a very important factor to consider when making a

decision regarding IS upgrading. There are benefits and problems associated with the new IT
systems Benefits to the management and organization could be that the new system will greatly
improve the efficiency, which will give a huge impact on Zara’s revenue. There also will be more
precise planning related to cost reduction on materials. Management of Zara could purchase material
ahead of time in larger quantities. This will automatically assure better pricing up front. Zara
proceeds with future upgrades as will be able to make the clothes models quicker due to more
efficient system in place. Besides that, this will allow store managers to quickly make the models
and get feedback from customers. Therefore, there will be more sales, less cost, more revenue and
more profit for Zara.

Based on this case study, Zara should have considered upgrading its DOS based Point of sale
(POS) system to HP retail solution, the production proven software. This solution is more reliable
then a cash register and it’s durable too. Besides that, it’s can provide Zara a strong solution to aslo
track customers, manage inventory and get business insights. These are the mising abilities of the
current DOS POS that put Zara into disadvantage compared to its competitors. The store managers
are increasing requesting the ability to look up inventory balances in their stores and other stores.
Other than that, the current POS system was written by Sanchez, it’s an high risk depending on
Sanchez and his knowledge only.

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 Zara also should consider implementing SAP. SAP is currently the leader in financial
application and very compatible with most commonly used applications in the industry. SAP can run
on Windows and can be applied to their POS terminals. SAP also has reliable technical support
available at the time of purchase. Besides that, SAP is a complete industrial suite providing the
capability to manage financial, assets, accounting, operations, and HR and records management. It
will be a useful tool to Zara in the long run rather than relying on its own systems. The management
would also benefit from this joint venture. we can see that Zara needs better ways in handling their
information’s system rather than relying on one person which is a high risk to the pioneers of the
clothing industry. The future of Zara would be also brighter with upgrading and innovative
information’s that will help the whole organizations to maximize their revenue and run efficiently.

In a way Zara’s success could be also attributed to their information system tools employed at
their production level. A designer checking for sketches with associates to market specialists, all the
way to cross-functional teams inspecting clothing models. All of this is possible because of the careful
ways Zara utilizes the latest information technology tools to simplify these informal exchanges
Store associates will frequently see new fashion or fabric ideas and send them over to Zara
headquaters. With constant monitoring and updating that happens gives designers a lead over the
competition in producing new styles. Besides that, Zara is different from their competitors is they don’t
outsouce their manufacturing to other nations where the labor may be lower. However, its distribution
system is advanced and that there is a few human participations required for the process. For an
example, Zara uses optical reading devices to achieve the task, which leads to a tremendous cost
savings in the form of labor.

An information system is a base in today’s business world. Everything is electronic. In various

businesses, the survival and ability to succeed strategic business goals is challenging without extensive
use of information system. Businesses improve the efficiency of their operations in order to
accomplish higher profitablity. Besides that, information systems are important tools available to

Page 9 of 15
managers for achieving higher levels of efficiency and productivity in business operations. For an
example, Zara uses the PDA technology to gather customer feedback and input.

D. Technology-based solution
a. Discuss the IS solution introduced to address the business challenge, problem or
opportunity. What process led to the choice of this solution and what other options were
considered?

Information systems can provide huge value to Zara including cost saved for the company.
Zara’s choice of IT systems and along with their stringent choice of sub-system allowed this firm to
save considerable expenditures. Reduce in workforce, operational costs and increase efficiency. The
company’s IT staff developed software which supplied 95% accurate daily sales and inventory
volumes, this is because of their in-house IT department, the company managed to write their own
software which saved the firm over 15,000 development hours and helped to provide an average of
22.9 ROE for the years 1196-2002 (Paul Krugman 2006).

With their IT system, the Zara tripled their corparate profits and in 2001, their father company
Inditex saw a 31% increase in profits by increasing their net margin from 7.21% in 1196 to 10.47% in
2001. This IT management strategy afforded Zara the second highest net margin 11.02% pf the four
highest competitors in the industry in 2002. With this Zara expanded its number of stores to 1,558 in
45 countries in 2003.Besides that, Zara provided great value to stakeholders and differentiated this firm
from its peers when they launched 11,000 new retail items a year in camparison to their competitors
whose averages range was between 2000 – 3000 items a year.

Zara’s IT system also provided value by eleminating the requirement for training because of
their current DOS system was user friendly and required no IT assistance. Their current system
allowed the store managers and personnel to make decisions by helping them regarding restocking of
inventory. The entire organization could maintain its competitive advantage in the industry without
many changes in handling or managing the daily operations. Besides that, Zara could continue its
current expenditure operations with a focus on mainstream business that is manufacturing garments as
fast as possible to meet consumer demands.

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 Another benefit or value from upgrading the systems at Zara is that communication between
the stores will be faster and allows quicker inventory snapshots. This would turn in to higher employee
output measures as will allow for other initiatives that they can take on instead of concentrating on
utilizing the old system. Store managers will utilize upgrades for better reporting and quicker
turnaround to make more informed decisions as upgrading the systems would allow more accuracy in
inventory measures.

The new system would be more dependable, accurate and efficient. The company’s managers
would be able to communicate in a better way. The biggest improvement is the accuracy of the
inventory data and the face that it will be available for many employees at the same time. Besides that,
managers use to spend time on counting inventories and making phone calls maybe dedicated to
customer service. The work enviroment will become less stressful because the load of work for each
employee will decrease. The inventory data will help with planning ahead and getting the deliveries
scheduled ahead of time. Another benefit of upgrading the system could emerge from streamlining the
on-demand order entry process handled at store level and, thus, eliminating the manufacture through
delivery process which functions as a batch process through the old system as it creates inefficiency.

Page 11 of 15
E. Addressing the challenges

To maintain business competitiveness is a very important factor to consider when making a

decision regarding IS upgrading. There are benefits and problems associated with the new IT systems.
Benefits to the management and organization could be that the new system will greatly improve the
efficiency, which will give a huge impact on Zara’s revenue. There also will be more precise planning
related to cost reduction on materials. Management of Zara could purchase material ahead of time in
larger quantities. This will automatically assure better pricing up front. Zara proceeds with future
upgrades as will be able to make the clothes models quicker due to more efficient system in place.
Besides that, this will allow store managers to quickly make the models and get feedback from
customers. Therefore there will be more sales, less cost, more revenue and more profit for Zara.

Based on this case study, Zara should have considered upgrading its DOS based Point of sale
(POS) system to HP retail solution, the production proven software. This solution is more reliable then
a cash register and it’s durable too. Besides that, it’s can provide Zara a strong solution to aslo track
customers, manage inventory and get business insights. These are the mising abilities of the current
DOS POS that put Zara into disadvantage compared to its competitors. The store managers are
increasing requesting the ability to look up inventory balances in their stores and other stores. Other
than that, the current POS system was written by Sanchez, it’s an high risk depending on Sanchez and
his knowledge only.

Zara also should consider implementing SAP. SAP is currently the leader in financial
application and very compatible with most commonly used applications in the industry. SAP can run
on Windows and can be applied to their POS terminals. SAP also has reliable technical support
available at the time of purchase. Besides that, SAP is a complete industrial suite providing the
capability to manage financial, assets, accounting, operations, and HR and records management. It will

Page 12 of 15
be a useful too to Zara in the long run rather than relying on its own systems. The management would
aslo benefit from this joint venture.

F. Lesson for Manager

a. Discuss three key lessons which managers in organization can learn from this case.

Maybe you don’t sell billions of dollars of clothing each year that doesn’t mean that there’s no lesson
to be learned from Zara’s success. If I think back to the hobby store I worked in as a college kid, I
can think of three clear actions we could have taken to keep the shelves full of hot merchandise.

 I would have changed my weekly orders to arrive on Friday. The most popular shopping day
was Saturday, with Sunday a close second. Having a fully stocked store on Saturday would
have given me a better idea of what was truly popular, as opposed to what was selling
because it was what we happened to have in. It also would have kept shelves looking full and
fresh on the busiest days. This is a great way to shorten a link in the supply chain, by
shortening the amount of time merchandise sits on your shelves – converting it to cash as
quickly as possible.

 I would have worked with a smaller, local supplier. Our deliveries came from a massive
warehouse, about five hours away. It meant that we could get anything our hearts desired, but
it added days to the delivery process, since they only sent out huge, honking shipments.
With with internet shopping having that hot item tomorrow as opposed to next week could
have been a huge selling point. Cut down on those delivery times and move faster, faster,
faster.

 I would have planned less of the store. Taking Zara’s 50% preordering to heart, let’s keep a
sizeable chunk of the best in-store real estate free for what’s hot right now. That might mean
moving the everyday items to a centralized spot or adding more display tables around the
store. Make the merchandising match the ordering process to get the most bang for your
buck. This is another way to minimize time by having designated space for rotating
merchandise, instead of reworking large portions of your layout for every new promo.

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Conclusion

As a conclusion, we can see that Zara needs better ways in handling there information’s system
rather than relying on one person which is a high risk to the pioneers of the clothing industry. The
future of Zara would be also brighter with upgrading and innovative information’s that will help the
whole organizations to maximize their revenue and run efficiently. In today’s world of business,
everything is computerized and most of the companies use the Internet and information business to
help keep their quality, save time and also cost. It also can reach out to more customers worldwide. For
an example, with a website in the internet, it would relay the message to millions of viewers worldwide
regarding the product and service that the particular company can provide and indirectly saves cost in
advertising in television and print advertisements.

An information system is any combination of information technology or support people’s

activities that support operations, management and decision-making. Information systems are the
software and hardware systems that support data-intensive applications. There are many types of
information systems such as management information system, executive support system, decision
support system and transaction processing system. This information system helps businesses make
their workflow easier and more efficient and time saving.

Management information system (MIS) is one of the important computer based information
systems. Its purpose is to meet the general information need of all the managers in the firm or in some
organizational unit of the firm. MIS also provides information that is needed to manage organizations
professionally and effectively. Besides that these system encompass three primary components, which
is technology, people, and data or information for decision-making. MIS also is designed to examine
and faciliate strategic and operational activities in the organization. Zara uses MIS to provide managers
with information system and support decision-making and provides feedback on daily operations. MIS
provides information to the users in the form of reports. Besides that, MIS generates output or reports
through accumalation of transaction processing system. MIS is integrated collection of subsystems,
which are typically organized along functional line within an organization such as Zara.

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http://www.zara.com/webapp/wcs/stores/servlet/category/my/en/zara-W2012/11112/Company
https://www.inditex.com/about-us/our-story

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