5 About Zara Founded by Amancio Ortega In 1975, the first Zara store was opened in La Coruna, SpainInditex was formed as the holding company atop of Zara, other retail chains & a network of internallyowned suppliers (1985)Zara was founded by Amancio Ortega, who saw the need for retailing and manufacturing to work closely in the clothing industry where consumer demands are hard to predict.
6 About Zara Focused on opening stores in prime city locations Rapid response to market demandsOffer new clothing styles faster than its competitors Inditex has become one of the world's largest clothes makers in the fast fashion industry1,671 branches in 78 countries worldwideShortest lead time of 21 days
7 Zara’s Supply Chain 1. Design 2. Production 3. Distribution 4. Retail Consists of 4 Phases:Let’s take a look at the Zara’s supply chain which enables it to respond quickly to market demandFirst, designers converse with store managers on a daily basis to gain latest insights on fashion trends.The designers will select the cloth along with the quantity to be produced and send them to the factory.After the production of the apparels are completed, it is sent to the distribution centers for shipment whereautomated conveyor belts facilitated the ongoing task of receiving bulk quantities of each garment from factoriesthen recombining these garments into shipments to Zara’s international store locations.This streamlined process allows Zara to design, produce, and distribute new looks in three monthsMaintains control over its product design, manufacturing, distribution & retailing operations
9 Competitor Closest competitor Hennes and Maurtiz (H&M) Founded on 1947, SwedenInnovating around design and distributionSupply Chain PhasesDesign, Production, Distribution and Retail
10 H&M’s Supply Chain Production Phase Outsource production process 60% in Asia, 40% in EuropeLow production cost to maximize profit at AsiaImplications to ZaraNo production outsourcingHigher overall production cost
11 H&M’s Supply Chain Distribution Phase Implications to Zara Distribution center(DC) located at every countryDaily replenishment to increase stock turnover rateAble to meet customer’s demand on timeImplications to Zara2 Large DCs located in SpainSlower replenishment rateUnable to meet customer’s demand on time
12 H&M’s Supply Chain Retail Phase Implication to Zara 40% lower product selling cost compared to most competitorsImplication to ZaraHigher product cost due to higher production cost
13 Competitors Challenges Zara faced against H&M Higher production cost Slower replenishment rateSlower at meeting customer demand
20 Challenges Limitation of company wide interconnectivity Obsolescence and Limitation of Technologies used
21 Challenge 1Cannot determine order requirements accuratelyNo comprehensive overview of the overall inventory and sales informationPOS Terminals used in store were not interconnected via any in-store networkSlow transmission of dataInaccurate dataSales tallied and audits done manuallyPOS terminals/PDAs could not share informationInefficient store operationsInaccurate stock informationUnhappy customersTelephone to check whether a nearby store had a particular itemDiscrepancies between orders and sales dataMore time and energy spent on administrative work
22 DOS outdated, no longer supported Challenge 2Any upgrades for existing machines rendered DOS-incompatibleNo guarantee from vendorCore operations at riskDOS outdated, no longer supportedZara disadvantageStore managers need more functionsBusiness continuity at riskLimited capabilitiesUnable to find vendor to supply or service hardwareHard to find developers for outdated platformPDA becoming obsolete
24 Our Recommendation Run complete OS software Gradually Replace PDAs Useful functions for SCM executionGradually Replace PDAsThe idea behind our recommendation is that smartphones and tablet devices are smart and capable of running complete operating system software. Some apps provide functions such as control, tracking and messaging that can be very useful for supply chain management execution.Therefore, we would suggest to gradually replace Zara’s existing PDAs with smartphones and tablets, in order to support and optimize their operations.
25 Benefits Timeliness and Correctness Employee Responsiveness Instant access and updatesImprove cycle time & efficiencyEmployee Responsiveness Better “reachability”Scalibility & Updates More functionalitiesMobile Enterprise Applications can bring about many unique advantages to Zara’s supply chain.First, Improved Timeliness and Correctness of Date.Employees are able to capture and enter data instantly regardless of location or time. All the information is immediately made available on their respective platforms and is displayed via the company’s information systems. More importantly, all relevant partners in the SC can access it readily. This can greatly improve cycle time and efficiency of strategic business processes.Second, Improved Employee ResponsivenessEmployees with mobile devices can use them to improve “reachability” and responsiveness. They can retrieve precise information exactly when they need it and deal with queries and complaints from customers, suppliers and partners more quickly and accurately.Third, Better Scalability and Ease of UpdatesOne major advantage of apps on modern mobile operating systems is the ease of deploying updates. Zara will be able to push out added functionality much quickly. Updates for software on the mobile devices can also be easily downloaded for use in all their stores globally.
26 Challenges Addressed Obsolescence of PDA Systems Limited Connectivity Technical support issuesLimited Connectivity Information SharingData DiscrepancyThe introduction of Mobile Enterprise App can address some of the challenges mentioned earlier.First, the Increasing Obsolescence of PDA Systems Outdated technology like the PDA used by Zara will face technical support issues gradually as they become obsolete as compared to apps on mobile devices that are relatively easier to acquire and develop.Second, Limited ConnectivityPOS terminals and PDAs in Zara stores do not share information and can only match with updated data after they were synced. With the deployment of mobile apps to store personnel, and the connecting of the app to ZARA’s main information systems, information can easily be retrieved and displayed on the app in real time. Data entry by store personnel can also be collated real time and resolve any possible information discrepancy.
27 Feasibility Evaluation CostRequire customized appsTimeTraining for personnelHowever, there may be possible challenges and concerns with the implementation of mobile enterprise applications.Firstly, the implementation cost may be high as Zara’s unique business model requires customized apps. This would mean that Zara will need specialised developers to develop the app. Store and warehouse personnel will also need to be trained to adopt and utilise the new devices to their full potential, which can take time.Overall, we feel that the benefits of mobile enterprise apps outweigh the costs involved in the long run. Furthermore, Zara can take a phased approach or run pilot projects by implementing it in a few stores at a time. This will help mitigate any possible risks, and ensure a smooth and successful implementation.
28 Upgrade POS Terminals Slide1 Next, let’s move on to our next recommendation, which is the upgrading of ZARA’s POS terminals.
29 Our Recommendation Intuit-HP Retail Solution HP’s POS SoftwareFull fledged Mouse & KeyboardIndustry-proven softwareGradual replacement of DOS systems Phased ApproachSlide2Our recommendation is for them to upgrade to a modern POS solution such as the intuit-hp retail solution. This solution comes with a full-fledged keyboard and mouse, and runs an industry-proven POS software made by HP. We also recommend that they gradually replace their DOS systems using a phased approach.
30 Benefits Interconnectivity between stores Merging of data into one systemPrecise measurement of stocksGlobal trends and developmentsReal-time information sharingReact faster to sales informationImprove decision makingSlide3The upgrading to modern POS systems can bring about several benefits. Firstly, it facilitates interconnectivity between stores. Secondly, it enforces the merging of data into one system.This provides precise measurements of stocks, and allows for better understanding of global trends and developments.With real-time info sharing, it also means that Zara can react faster to sales information, and hence improve their decision making.
31 Challenges Addressed Limitations of Existing Network Automatically collect and process dataReduces need for calls & manual checksIncreasing obsolescence of DOSModern, widely supported OSReduce reliance on sole vendorFuture-proof their operationsSlide4The new POS systems can also address some of ZARA’s existing challenges, such as the Limitations of Existing Networks, and the Increasing Obsolescence of DOS systems.The new systems automatically collect and process data, reducing the need for calling and manual checking. It also runs on a modern and widely supported OS which reduces their reliance on a sole vendor, and hence helps to future-proof their operations.
32 Feasibility Evaluation Staff adaptability to changeNeed to ensure sufficient trainingEmpower staff to fully utilize systemRisks associated with changeUse phased implementation approachTest stability on pilot storesSlide5However, there might be some concerns which Zara needs to address during implementation. Zara needs to take into account their staff’s adaptability to change, by ensuring that they have sufficient training, and that they understand the need for the upgrading.In order to mitigate the risks involved with the change, we also suggest that they use a phased approach, and test out the stability of the system on a few pilot stores first. However in general, we still feel that it is worth the upgrade.
34 Conclusion ZARA’s competitor (H&M) ZARA’s SCM updates The need to stay competitiveZARA’s SCM updatesImportance of continual innovationChallenges & RecommendationsInnovations through cutting-edge technologiesSlide6In conclusion, we have seen the need for ZARA to stay competitive amidst strong competitors such as H&M, and we have shown you the continual innovation that they are doing. However, they are still facing new challenges every day, and we feel that they can further innovate through the use of more cutting-edge technologies.
35 Questions & Answers Slide7 Thank you for your attention, and we will now open the floor for Q & A