Zara

Our Team Group H Ang Ruixian U096845Y Chia Joo Leng Jasmine U097028B Nah Zheng Xiang Philson A0067379M Tan Hong Chuan Julian A0067407A Tan Jian Yue A0075054J Wong Chih Yong A0075128E

Presentation Agenda Introduction Competitors Updates Challenges Recommendations

Introduction

About Zara Founded by Amancio Ortega In 1975, the first Zara  store was  opened  in  La  Coruna, Spain   Inditex  was  formed  as  the  holding  company  atop  of Zara, other  retail  chains  &  a  network  of  internally owned  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. 

About Zara Focused on opening stores in prime city locations Rapid response to market demands Offer new clothing styles faster than its competitors  Inditex has become one of the world's largest clothes makers in the fast fashion industry 1,671 branches in 78 countries worldwide Shortest lead time of 21 days

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 demand First, 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 where automated conveyor belts facilitated the ongoing task of receiving bulk quantities of each garment from factories then 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 months Maintains control over its product design, manufacturing, distribution & retailing operations

Competition

Competitor Closest competitor Hennes and Maurtiz (H&M) Founded on 1947, Sweden Innovating around design and distribution Supply Chain Phases Design, Production, Distribution and Retail

H&M’s Supply Chain Production Phase Outsource production process 60% in Asia, 40% in Europe Low production cost to maximize profit at Asia Implications to Zara No production outsourcing Higher overall production cost

H&M’s Supply Chain Distribution Phase Implications to Zara Distribution center(DC) located at every country Daily replenishment to increase stock turnover rate Able to meet customer’s demand on time Implications to Zara 2 Large DCs located in Spain Slower replenishment rate Unable to meet customer’s demand on time

H&M’s Supply Chain Retail Phase Implication to Zara 40% lower product selling cost compared to most competitors Implication to Zara Higher product cost due to higher production cost

Competitors Challenges Zara faced against H&M Higher production cost Slower replenishment rate Slower at meeting customer demand

Updates on Zara’s SCM

Updates on Zara’s SCM Retailer’s Work Process Distribution Network and Centre Inventory Management

Retailer’s Work Process Shifted to third party logistics providers Shifted to factories Enhancements made to PDA

Distribution Network and Centre Consolidated transportation across Zara’s different brands DCs are equipped to handle small scale customer orders

Inventory Management Implemented sophisticated inventory allocation model

Challenges Faced

Challenges Limitation of company wide interconnectivity Obsolescence and Limitation of Technologies used

Challenge 1 Cannot determine order requirements accurately No comprehensive overview of the overall inventory and sales information POS Terminals used in store were not interconnected via any in-store network Slow transmission of data Inaccurate data Sales tallied and audits done manually POS terminals/PDAs could not share information Inefficient store operations Inaccurate stock information Unhappy customers Telephone to check whether a nearby store had a particular item Discrepancies between orders and sales data More time and energy spent on administrative work

DOS outdated, no longer supported Challenge 2 Any upgrades for existing machines rendered DOS-incompatible No guarantee from vendor Core operations at risk DOS outdated, no longer supported Zara disadvantage Store managers need more functions Business continuity at risk Limited capabilities Unable to find vendor to supply or service hardware Hard to find developers for outdated platform PDA becoming obsolete

Mobile Enterprise Applications

Our Recommendation Run complete OS software Gradually Replace PDAs Useful functions for SCM execution Gradually Replace PDAs The 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.

Benefits Timeliness and Correctness Employee Responsiveness Instant access and updates Improve cycle time & efficiency Employee Responsiveness  Better “reachability” Scalibility & Updates  More functionalities Mobile 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 Responsiveness Employees 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 Updates One 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.

Challenges Addressed Obsolescence of PDA Systems Limited Connectivity Technical support issues Limited Connectivity  Information Sharing Data Discrepancy The 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 Connectivity POS 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.

Feasibility Evaluation Cost Require customized apps Time Training for personnel However, 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.

Upgrade POS Terminals Slide1 Next, let’s move on to our next recommendation, which is the upgrading of ZARA’s POS terminals.

Our Recommendation Intuit-HP Retail Solution HP’s POS Software Full fledged Mouse & Keyboard Industry-proven software Gradual replacement of DOS systems  Phased Approach Slide2 Our 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.

Benefits Interconnectivity between stores Merging of data into one system Precise measurement of stocks Global trends and developments Real-time information sharing React faster to sales information Improve decision making Slide3 The 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.

Challenges Addressed Limitations of Existing Network Automatically collect and process data Reduces need for calls & manual checks Increasing obsolescence of DOS Modern, widely supported OS Reduce reliance on sole vendor Future-proof their operations Slide4 The 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.

Feasibility Evaluation Staff adaptability to change Need to ensure sufficient training Empower staff to fully utilize system Risks associated with change Use phased implementation approach Test stability on pilot stores Slide5 However, 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.

Conclusion

Conclusion ZARA’s competitor (H&M) ZARA’s SCM updates The need to stay competitive ZARA’s SCM updates Importance of continual innovation Challenges & Recommendations Innovations through cutting-edge technologies Slide6 In 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.

Questions & Answers Slide7 Thank you for your attention, and we will now open the floor for Q & A