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Zara supply chain case
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DescriptionZara supply chain case
“Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by.” –Jose Maria Castellano Rios, Inditex CEO
This is obviously the Motto of Zara, one of the major chain stores of Inditex fashion group. This successful cycle or link, led Zara to be the most innovative and devastating retailer in the world.
Zara's managers must decide whether to upgrade the retailer's IT infrastructure and capabilities. The company relies on an outdated operating system for its store terminals and has no full time network in place across stores. Despite these limitations, however, Zara's parent company, Inditex, has built an extraordinarily well performing value chain that is by far the most responsive in the industry. Therefore the major problem to the company is to decide whether it has to upgrade the present system and by doing so, risking the reliability they have with the current system or to continue with the present DOS based system which will not be compatible for future changes or improvements.
Zara’s main strategy is the ability to respond very quickly to the demands of target customers which called for identifying trends of the customer in advance. The company has been able to identify the trends and meet the demand with the help of its autonomously organized structure and its effective value chain systems. The present system followed by Zara has been very effective and very easy to maintain, which as a result has persuaded the company to continue without any change in the present system so far. The problem that Zara faces right now is that the system that they use in their Point of Sale terminals runs on DOS which Microsoft does not support anymore and any hardware change in the POS terminal will not be compatible with the current POS software. Although the sense of urgency for the change may not be that high, investing in IT infrastructure is a must as MS Dos is an obsolete technology and there is no contract or guarantee from their POS terminal vendor that they will continue supplying the same terminal without much changes in the hardware for any specific period of time.
The most important core competency of Zara is obviously its Supply Chain infrastructure relating its customers’ demand to the manufacturing facility. Store managers were given much more responsibility than those of other large clothing chains; they placed orders for the items they thought would sell, rather than simply accepting and displaying what headquarters decided to send them. Moreover, they can initiate store-to-store transfers when they saw that garments selling slowly in one area were popular in another. Decentralized decision making highlights the company’s speed and market responsiveness.
In order to accelerate and ...
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