Zara Case Prep

Problem/Issue Statement

The main issue that Zara is facing is the outdated POS system that they currently run. Zara uses a DOS system that is becoming obsolete and not being supported by Microsoft any longer. The problem is if Zara should face the challenge to taking in risk in changing their current system or update to new and a modern system.

There are is a problem and symptoms that are found in the case. The distinction of these two is that for the main problem is that the main problem is that they currently have a system that is outdated. They are going to face a risk of changing a working system to something more up to date. Two employees of Inditex, Xan Salgado Badas and Bruno Sanchez Ocampo are in charge of the It and POS system sides for Zara. Xan is actually in support of changing the outdated system while Bruno would like to retain what is already in place because it is not broken.

Some symptoms that the case shows is the inefficiency that the store holds with the inventory control. Stores are manually calling other stores to find out what is available. Also, customer transactions could be done expedited and done with bigger equipment with larger screens and a mouse. Also, inventory was done just by walking around and seeing if the stands have enough clothes.

The scope of the problem here is if changing to a new system, Zara would need to implement costs and time to train the employees to get adjusted to the new system. Managers would also need to allow training for their new inventory control procedures. As the stores, the distribution centers (dc) would also need to develop this new technology integration for tracking shipments and inventory. These are all training and new set up costs that Zara would face. If Zara would stay where they stand, they are limiting to growth and allowing outdated technology to eventually become obsolete.

Situation Assessment

The assessment is relying on whether to upgrade to  an advanced modern technology from Salgado’s point of view and leaving it how it is because it is not broken according to Sanchez who is the pioneer of the existing system. The decision criteria is by following Salgado point of view is for enhancing stores capability to allowing control inventory to become a priority enhancement for growth, making returns and purchases a more efficient process, and allowing stores to connect with each other with real time updates. Sanchez on the other hand doesn’t see why changes should happen if the system already works.

The Alternatives Courses of Action

The alternatives courses of action is by continuing to use their old outdated systems and have the capability of keeping up with the demand using such outdated technology. This will go along with making slower progress by implementing newer systems once the old DOS will be obsolete. So buying POS systems in some stores will be the necessary choice eventually that Zara would most like face. This will leave Zara with zero chances of risk in start-up costs if it were to upgrade.  This will eliminate any external in internal training and support costs.

The other option is to follow Salgado option of upgrading to a new OS system such as Unix, Linux, or Windows. This will allow Zara to have wireless network instead of slow dial-up modems, the use of larger screens and use of keyboards and mouse rather than PDA’s, live-time data transmitting to the DC’s and headquarters for exact inventory and financial data, and being connected with other stores to be on the same page with information and inventory.

Evaluation of Alternatives

Now that the problem is known, we need to keep in mind that Zara is the only company with this old integrated system that the vendor supports. Eventually, the vendor will come to the conclusion that supporting Zara will be obsolete by gathering old equipment just to satisfy one contract/company. Also taking into consideration that growth could be beneficial for this clothing company, expansion needs updated systems to allow internet purchasing and other revenue paths. If Zara did not operate with a newer updated system, they will never enter the internet market to attract more buyers. If we do not make any changes, Zara will lose absolutely nothing at the moment because no investment is being made. Gains show that Zara is being profitable throughout the years so their current system is working. If we were to make upgrade changes, the process will be costing just on hardware and program of choice: 25,000+ Euros per store. These are just some of the start-up costs that Zara would face while having their mindset on growing to a bigger and more profitable industry such as the internet.

Recommendation

The quality recommendation is to have the upgrade be performed because of all the benefits that could occur. Useless time wasted on counting pieces on the inventory floor can become money spent saved by already having an updated inventory control with the SKU. This will eliminate data entry and manual processes.  Increased sales would occur as products will be moved on the floor and store more quickly if needed by the DCs. Any discrepancies would be caught quicker by the new inventory control and even prevent and unaccounted for merchandise at an efficient manner. Growth and expansion for Zara would be enabled with the use of quicker and more demanding service being provided and allow greater recognition through marketing measures on the internet. Internet shopping is very convenient and allows those who cannot shop at the mall because of time restraints the easy access to Zara’s apparel.  Zara could also eliminate some store hours for those who were doing manual processes while in store hours or off store hours. This could be a cost savings potential.

The logical recommendation would be for Zara to stay in business with their current OS. Zara ideally is making the figures that the HQ is aiming for and applying the risk of moderate start-up costs would enable Zara to spend money for growth that it is slowly already gaining. This will allow Zara to not incur any additional training and non needed costs to each store across the world. It would also avoid and time wasted in daily operations between channels that Zara goes through.

Presentation

I would advise that the presentation should be summed up stating the issue and the two alternatives that the company has such as the simplicity of staying with the outdated system or upgrading by spending start-up costs and having the ability to expand with moving daily operations more efficiently.

The key visuals would be a PowerPoint presentation along with a matrix highlighting the costs of upgrading for each store and each OS (Windows, Linux, and Unix).  What is also needed is a list of problem solvers with the new systems that would become the solutions to the manager’s complaints.

Having the audience understand the benefits of both alternatives is crucial but also they would need to know that there are flaws for both alternatives. Let’s not forget that Zara is willing to grow and expand, so this also needs to be stressed. Having the audience able to pick one over the other is crucial because Zara is facing the lost of ability to expand its business.