1 Executive summary:
Zara runs its software system for the point-of-sales (POS) terminals off of Microsoft DOS system, which Microsoft stopped supporting in 20001. Zara is Inditex’s largest chain store and Sanchez believes upgrading the system will not be beneficial to the company, as the system presently runs perfectly smoothly. (See Appendix 3 and table 1) The main purpose of this analysis is to explore effective avenues and present an alternative to the present system that will allow the company to have a more user friendly, faster and more efficient system that will benefit its managers and customers in every Zara store around the world. (See table 1) Ultimately, the alternative solution brought to the forefront of this report is to upgrade the system in a timely manner.
2 Problem Statement
Zara’s main issue with the system is that the hardware vendor for their POS terminal could upgrade the systems or some peripherals for them but then the company would not be DOS-compatible anymore. This is important to the Zara stores because computers are critically important in enabling the kind of business that the company wants to build.2 Not upgrading may be temporally manageable but in the long run prolonging the upgrade could lead to shortage and/or problems that Microsoft cannot help them with or any other software company.
3 Environmental and Root Cause Analysis
Zara is one of the largest international fashion companies. It belongs to Inditex, one of the world’s largest retail distribution groups. (See appendix 1). “The customer is at the heart of our unique business model, which includes design, production, distribution and sales through extensive retail network.”3 The average middle range income family is Zara’s main customers: children, men and women with a high fashion sense. Zara needed to be able to respond quickly to the demands of these targeted customers.4 The company is able to introduce 11,000 new items within a year; competitors such as H&M, GAP etc. averaged 2000-4000. (See table 2). Zara continuously brought out new designs for their customers, about 75% of merchandise in the average store was changed over three to four weeks.5
With rapid changing inventory comes Zara’s first causal factor; there was no way for employees or managers to look up inventory balances in the store or other stores. This was due to the lack of memory space in the operating system. DOS could only consume 8 MB of installation space.6 The process of going through the store having to count inventory is time consuming for the employees. If a garment was not available at a certain location, employees would call another location, and the employee would have to check the store for the specific garment. PDAs could not share information.
Every Zara location used PDAS, primarily for ordering and also for tasks such as handling garment returns to DCs7 and transmitting information from headquarters to all stores. Causal factor number two, which is a quantitative factor as well is that the Zara store constantly had to upgrade the store PDA’s. Throughout the days, months, years, technological advances take place and devices are discontinued. At the end of each business day employees would have to connect via dial up, to beam information and use floppy disks to tally up total sales. Decisions on what to order and which garments to put on sale was based on these numbers and was the responsibility of managers which made inventory count less accurate.
Causal factor number three is dial-up. Dial up can encounter many problems such as sudden disconnection and sometimes it may take 3-4 retries to establish a connection. This is caused because you are using the same line as your phone and calls are being placed through that same line.8
A separate team was responsible for inventory of each SKU9 at each store. Shipments to different stores around the world allowed for the inventory to increase but sales would decrease it. This is causal factor