Question 1 : What is the role IT plays in Zara's Business Model?

IT played a crucial role in Zaras Business model. IT implementation assisted Zara in terms of functional
area, process, and decision levels . Various IT implementations are listed below . :

a) Internally developed applications were used in align aggregated demand from all the stores and
supply from the production units. Another application compared the aggregated order to available
inventory for each SKU .

b) Software application was used to keep track of theoretical inventory of each SKU at each store .


c) In factories software applications were used to plan production .These applications presented
factory managers with quantities and due dates for all production requests which then managers
used to load their factories and put jobs in sequence .

d) Factories used large computer controlled equipment to cut cloth into various patterns in such a
manner that scrap could be minimized and 100 layers of fabric could be cut at a time .


e) In Distribution centers information system was used to track the location of various SKUs and to
control the automated conveyor belts to to pick them up and drop them at appropriate places .

f) PDAs were used in stores for ordering and also for tasks such as handling garment returns to
DCs and transmitting information from headquarters to all stores .


g) Each store had a POS terminals which used DOS operating system and various applications were
installed on it like accounting software package . Each store transmitted the dayss sales for all
SKUs back to La Coruna using a modem connected one of the stores POS terminals .
All the points above suggest that IT played a major role in Zaras supply chain management from
sourcing, procurement, conversion, and logistics management .





Question 2: Do you agree with Salgado's proposal for upgrading the Operating System? What
are the advantages? What are the risks (of accepting or not accepting).
Yes , we agree with Salgados proposal for upgrading the Operating System .
a) Firstly it is feasible In terms of cost . (The calculations are in the excel file ) . Calculations show
that Inditex would have to invest approximately 3% of its Net Income in 2004 if the upgradation
commences in 2004 .

b) Secondly , through upgradation will enable them to incorporate networking capabilities in the
system which in turn will allow stores to communicate with another . And if all stores were
permanently connected to the internet then every location could know the theoretical inventory of
all its SKUs as well as the theoretical SKUs in all other stores . In this scenario stores could
request inventory transfers from one another online eliminating the need for phone calls to see if
an item were in stock . Also with wireless networks it would be no longer necessary to carry
floppy disks around the store at the end of each business day to tally up total sales . The updated
POS application on updated operating system would allow the store personnel to use large screen
, keyboard and mouse to quickly execute return transactions which was a major complaint from
store managers about PDAs.These are the various advantages of upgrading the operating system
which is better than purchasing enough POS terminals from vendor because it would not address
the major concerns in the existing system .


c) Among the disadvantages training the employees could be a challenging task and planning would
be another as inditex does not have any formal IT budget as such and to make a major change in
the infrastructure a whole new process has to be spawned in the organization . Also the in-house
IT team is an expert in developing applications for DOS so new talent might be required to
develop applications for upgraded OS .