Zara: IT for Fast Fashion

Problem/Issue Statement

Zara’s largest chain of retail stores, is currently facing the decision of whether to continue running on the POS system that is DOS based or upgrade to a new operating system such as Linux or Windows. The current POS system is running on DOS which has not been supported by Microsoft for years. The main problem for Zara is that all stores are using an outdated DOS operating system which has not been supported by Microsoft since 2003. The POS system is stable, effective and easy to roll out at new locations and requires minimal maintenance.  The question has arisen: Should Zara risk continuing to run on an outdated DOS system or upgrade to a new operating system?

The following problems are faced if remaining with the DOS based system and they are as follows:

·   A major risk is posed by the hardware vendor for Zara’s POS terminals. If the vendor decides to upgrade their machines so they are not DOS-compatible, Zara cannot open new stores or purchase new terminals. Even though the vendor has assured Zara that they are not going to make any drastic changes and Zara’s is a big customer.

·  Store managers do not have the ability to look up inventory balances in their stores or other stores since the DOS system does not offer that capability. Store managers cannot determine replenishment quantities by using an in-store computer, so they rely on the store to determine stock levels.

·  POS terminals and PDAs do not have the functionality to check other stores for a particular garment. POS system is not directly linked to distribution centers for easy replenishment of stock.

·  Handheld computer devices (PDAs) are used to learn about newly available garments. The handheld computers had to be liked each night, via a dial-up modem to information systems at La Coruna. Store managers also complained that this process took a long time and the screens on the PDA’s were too small to navigate.

· The DOS based POS system does not have any in-store network so employees copied daily sales totals from each terminal onto a floppy disk. At the end of each business day, one POS terminals are used to transmit this data via dial-up modem.


Scope of the Problem

All stores would require new hardware (terminals, routers, modems etc.), operating system and a high-speed Internet connection. This would also involve assembling a highly trained IT department to roll out/maintain the new operating system and train all employees. Zara will also incur very high operating costs if the decision was made to replace the POS system.

 

The context of problem stems from two courses of action:

 

1.  Salgado believes the system should be upgraded to alleviate the risk of not being able to purchase new terminals or receiving support from Microsoft. He is taking a proactive role so Zara is not caught in a comprising position.

2.  Sanchez argues that the system is working with no IT issues and is implemented in new stores seamlessly. He is also against “fixing something that is not broke”. 

The decision criteria for both possible courses of action:

 

  Risks:  Is the risk of operating on an outdated system higher than implementing a new operating system?

   Cost: Are the costs associated with implementing a new operating system/terminals worth it? These include purchasing new terminals/POS system, assembling a new IT department, training current staff, ensuring the distribution centers/headquarters are all working seamlessly.

  Future: Can Zara efficiently and efficiently operate on the outdated DOS system? And for how much longer can the system sustain Zara’s growth?

 

List of Plausible Alternative Courses of Action

 There are two courses of action identified in case study and both options address the main problem in different ways:

 

Upgrade the POS system:

• Change operating system to Windows, UNIX or Linux system
• Eliminates the risk involved with operating on an outdated DOS system and take a proactive role.
• Inventory levels will be available to managers so canvassing the store will be eliminated.
• PDA’s will no longer be needed to replenish inventory.
• Connects stores so they can view inventory levels and will no longer need to call each store manually.
• Adds functionality, adds network capabilities, easier replenishment of stock, inventory management from stock to stock

Costs involved:

• Cost per day for programming: €450
• Training per day: €2,000
• Hardware per store: €5,230
• Internet (annual cost per store): €240
• Cost of Operating Systems (per computer/CPU):

§    Windows:  One-time costs: €140

                 Annual Costs: €30

Unix:         One-time costs: €160
                  Annual Costs: €25

§    Linux:        One-time costs: €0

                 Annual Costs: €10-150

 Maintain current POS system:

• Continue operating on DOS POS system
• Purchase extra inventory of POS terminals for new stores in the event that current vendor does not offer same terminals.
• Risk involved with running outdated system
• New stores can open and roll out DOS POS in a timely manner

Evaluation of Alternatives

As stated above, implementing a new operating system will minimize the risk of the company being caught in a position where DOS terminals are discontinued from the vendor. Maintaining the current system is proven to be effectively working with no IT problems. The growth of the company is key. The case study indicates that Zara’s website is simply a virtual window to the store’s merchandise and that selling online is not an option. If the new operating system is implemented, creating and developing a website with online sales which, will lead to additional growth and revenue.

The evaluation relates to the decision criteria developed because it analyzes the risks, benefits and drawbacks to both courses of action. Salgado and Sanchez need to decide if the current outdated DOS POS system can sustain growth in the future. From that decision the criteria can be evaluated. 

Real risk is presented with maintaining an outdated system, while extraordinary costs are unavoidable with implementing a new system. The evaluation of alternatives needs to be realistic since it affects all 531 Zara stores worldwide.

 Recommendation

After reviewing both courses of action, I recommend to Zara a two phase process: maintain the legacy system in the short term, while developing a new POS system on an upgraded operating system to accommodate for future growth. I believe Zara should remain operating on the DOS POS system. The operating system functionality is proven to be effective for running all Zara stores. The system was specifically developed for Zara and the employees are familiar with it. The system is easy to roll out and does not demand the IT department to visit each store and train employees on it. Even though Microsoft does not offer support for the DOS system, private IT vendors that specialize in DOS can be retained to help maintain the system.

Presentation
If I were presenting as a consultant to the class, I would state that I have been commissioned to identify the risks, benefits and drawbacks involved with upgrading the POS system or maintain the DOS system. I would discuss the current system’s lack of functionality but stability while discussing the high costs and training involved with a new operating system.

Visual aids to be used in presentation:

·         PowerPoint presentation for the major issues stemming from both alternatives

·         Decision criteria for Zara; and

The pros and cons of the both alternatives:

I would “sell” the current DOS system by stressing it is an effective system that all 531 store current operate on.  The company would not be incurring additional costs to maintain it and there are never any IT issues.  Installation at new stores is easy and does not require the IT department to train new employees. Even though Microsoft does not offer support for the DOS system, private IT vendors that specialize in DOS can be retained to help maintain the system

Reflection to 1-888-JUNK-VAN

After much consideration and additional research, this memo is prepared in response to the presentation by RKR team regarding five alternatives for 1-888-JUNK-VAN’s current database. I agree with the consultants and suggest that Mr. Kingo move forward with selecting a PaaS solution. As stated in the presentation, the main issue 1-888-JUNK-VAN is facing is a lack of a centralized database/software system that all company employees can access remotely and enter data simultaneously. 

After analyzing the five alternatives (Microsoft Access, custom application, Google Docs, Platform as a Service (PaaS) and Enterprise Resource Planning System), I agree with consultant and recommend Platform as A Service. Platform as a Service offers remote access and a centralized database which is key for eliminating customer errors and keeping the virtual business model. The system can be applied within three (3) days including data migration which will mitigate lost company time. The company will have access to software and applications that would otherwise be too expensive to purchase.

Kingo can create the company’s own applications and forms.   In addition, if Kingo feels the software needs to be customized, it will cost about $180.00 per hour. This system also offers two key items: varying levels of scalability and maintenance depending on the vendor.   The system has been quoted at $300- $600 per month based upon storage space, user licenses and applications. After comparison of the old business model with the new business model to understand the future profitability of JUNK VAN, and I believe we might see an increase in profit of  $ 45,000 as mentioned in the presentation.

Platform as a Service is hosted by a third party vendor, so Kingo does not need to install a server. It is also beneficial to the company that there is no long term contract required.  If Kingo feels the PaaS system is not as straightforward to use he can cancel with only one month’s notice. I believe Platform as a Service is the best alternative for 1-888-JUNK-VAN. It will help alleviate the IT issues which will ultimately help the business prosper and grow.

iPad Much, Much, More Than a Shiny Object

Thank you for giving me the opportunity to explore the use of iPad technology for our company sales team. After researching iPad technology, I believe iPads are worth investing for Amrahp sales team. During my research, I discovered that iPad for our sales team has more advantage over company laptops.

Time Saving
As you know Mr. Anderson, awhile back sales rep used to introduce 3 to 4 product but now they have to introduce 5 to 6 products at a time to physicians. Meanwhile, reps used to enjoy 7 to 10 minutes with physicians, now they average 4 to 5 minutes. One of the benefits that our sales reps will receive when they start using iPad will be, time. They always ran out of time to introduce new products to physicians.  The iPad comes alive with the touch of a button, unlike laptops which take time to boot up. It also has a long battery life and the ability to provide clinical information in a visually stimulating and interactive format at the point of contact. It is clearly satisfying for both the healthcare professional and the sales rep. Sales reps need to engage healthcare professionals – they must do it on the move, they must keep their customer at ease, and they must work rapidly to communicate complex information.

Ease of  Use
The iPad’s ease-of-use and instant-on capabilities have already made it a preferred device for salespeople. Many physicians complain about “inadequate product knowledge” and the inability to understand their needs as common issues with pharma and life sciences reps. The iPad allows those reps to access product details and company updates anytime, anywhere, and tools like Slide Shark,  make it easy for businesses to ensure field reps only have access to the most up-to-date and compliant resources. Sales reps can present their materials more easily to physicians who use iPads. The new iPad is only about 1.46 pounds, it allows sales representative to easily hold and maneuver around easily. For example, the medical rep sees a three physicians during lunch time in the same room, realizing how the physicians have limited time to spare in between seeing a sales rep and oversee patients, its so much easier to provide all three physicians a tablet at the same at time.  So each physician has a tablet to view information regarding the product being introduced and ask question if any. Physicians have limited time and sales rep has that bonus time to explain and introduce new products to them. If sales rep carry laptop it’s impossible for sales rep to keep all three doctor on same page. With the right iPad application in place, crucial feedback from the field becomes immediately available so sales management and marketing teams no longer need to wait until the end of the week for the sales reps to type in their reports to gain front-line insights. The marketing team can react immediately to meet the needs from the sales force with instant alerts and actionable insights for the sales reps, greatly improving efficiency and productivity

Improved physician interaction and productivity

As you know Mr. Anderson, new product presentations has a very strong impact on sales. Laptop presentations are boring and no matter how compelling you’re offering, a PowerPoint deck simply doesn’t do it justice. The iPad provides a rich media platform that allows multimedia to add color and interaction to the sales call, making marketing messages more memorable. One of the iPad’s most powerful assets for sales is its vivid display. Sales rep can combine images, videos, PDFs, HTML 5 and other digital assets to quickly assemble a presentation that’s relevant to a particular client.  
Standard follow up practice is to leave behind a copy of your presentation—either in hard copy, on a USB key, or sent in an email. Most of time physician lose a hard copy or USB doesn’t work. Your client expects a follow up email with materials you presented. Instead of attaching a PowerPoint deck, provide a link to an app for download. That link allows them to download to his iPad your company’s app. Within that app is your presentation, to be sure. But there’re also white papers, references, information about your company, industry data, access to your online community, and a host of other features that give you and your client a chance to engage each other on an ongoing basis. Use the app as two-way communications and content channel. Once it’s downloaded to their iPad, they are unlikely to ever delete it.

Cost Reduction
In the beginning iPad require an initial investment in hardware, technology and supporting infrastructure, but in the long term they can help lower overall operating costs.  The cost of iPad for our sales team $1.5 million and our current sales rep Laptop are in fair condition and we can sell them and get good amount of money back.  After starting sales processes digitized and virtualized the costs of physical distribution and implementation are significantly lower. In addition, the overall increase in productivity and efficiency has the potential to result in substantial cost savings. All content ranging from marketing material to training content, can be pushed to the mobile device and made available almost immediately to  sales reps. Electronic sales materials can't be altered as easily as paper, helping to prevent potential marketing violations.

Clearly the iPad is a more convenient and easy to use technological device for our company as compare to laptops.