Problem/Issue Statement
The problem in this case is Zara, which is owned by Inidtex,
is currently using an unsupported DOS based operating system at all of its
point of sales (POS). The company is looking to expand, but currently updating
their POS operating systems do not seem to be a top priority as a focus on
high-fashion and focus on the customer are the top priority. Also, their
providers of hardware have not made any assurances that they will continue to
support DOS with their new machines.
The symptoms of the problem that Zara faces is no support
for their DOS operating system because it is unsupported, updating equipment
will not be compatible with the OS, stores are unable to have an instant look
at inventory and must rely on hand-counting, and an inability to provide
internet shopping while having problems processing mail-order returns.
The scope of the problem reaches all 531 Zara locations.
Zara makes up over a third of all Inditex stores and its focus is on high
fashion that meets their specific customer’s needs. The company is looking to
expand its business and they are uncertain if their current IT systems and OS
will be able to provide them the growth they need.
Situation Assessment
Zara is currently using a tried-and-true method of
processing all of their sales. With very minimal software and little hard ware,
the Zara locations are able process their transactions at a terminal, store the
information on a floppy disk and transmit that information over to corporate.
This system works very well for Zara as they have no issues with having to call
IT to help trouble shoot any issues. Also, when starting up a new location,
terminal setup is just as easy as interesting two floppy disks to get the
terminal up and running to process sales. The problem that exists for Zara is
the OS that they use has become unsupported, so that they are facing a very
high risk of running into problems when looking to expand as their software and
hardware may not be available. The system that they have in place also has
problems with inventory tracking and processing returns.
The decision criteria are to see whether it is necessary to
upgrade their system or not. Does leadership believe that with future expansion
the company will not need to upgrade terminals or should they focus on changing
them now so they will not run into problems down the road. Also, the company
likes to spend it’s money on location and also inventory. We can see in their
profit margins that very little is spent on overhead and this is evident with
their technology. Management needs to see if it would be a wise investment to
upgrade its machines or focus on what makes them profitable: fashion.
List of Plausible Alternative Courses of Action &
Evaluation
1. The company can continue with its tried-and-true method
of processing sales as this has worked very well for them in becoming a
profitable and expanding company.
2. The company can upgrade its POS terminals and spend money
on building a better IT infrastructure. The company can switch over to a
supported OS such as Windows, Unix, or Linux.
For the first decision of continuing their method of
processing sales and tracking inventory using the DOS operating system, it has
very little imagination. It has been effective though for stores as they have
been able to spend less time focusing on any IT problems, and more time
focusing on the customer. They have very little issues, if any, and the system
is very easy to set up at new locations. The problem that exists is the
machines that they use that support the DOS OS may not be around as the
hardware vendor has made no assurances that the hardware will continue to
support DOS. The system is flawed with inventory at store levels as managers are
not able to look at what is on stock, rather they estimate the amount or hand
count.
The second option has more imagination as the company will
be able to “refresh” its infrastructure and operating system. With having this
new technology it will lead to better inventory control and can lead to opening
the door to online sales and processing better returns. This may cause some
headaches in its initial roll out as managers and associates were able to focus
solely on their customers and not on the technology. The company has to be
careful that any implementation of these products meets the amount of IT infrastructure
they want to have without getting too “fancy”.
Recommendation
A quality and logical recommendation for Zara would be to
upgrade their systems to a Window, Unix, or a Linux Operating System. This is
necessary because the company already doubts if their current OS will be
available in the future with current hardware. They cannot get assurance from
their supplier that the future hardware will be compatible with the OS. If they
are able to expand rapidly (which they anticipate) and then all of a sudden
their hardware is no longer able to be provided, they will run into massive
issues. The company has been able to claim a very high profit margin as well as
a healthy net income. By increasing their assets to include the new equipment
these numbers will be sure to drop, but they will be able to offset those
numbers by increasing the sales they are losing from not tracking down
inventory for a customer, having accurate and reliable inventory numbers, and
as well as creating an internet option for shopping. By “biting the bullet” and
just upgrading the system the company will be to make sure that in future
expansion they will not need to overhaul the whole system which will cost the
company millions and also lead to lost sales because of shut down operations in
order to revamp their infrastructure. The company can revamp nor or later, I
would advise doing now so they do not run into future problems.
Presentation
When presenting this case I would illustrate how much money
is being lost because of their current operating system. Yes the company is
profitable because of its current system, but they are losing out on dollars
because of inventory and also not being able to provide internet sales. Their
current system does not allow this. By being able to provide a dollar value for
these elements we can see how much the company can gain and also what it would
cost to implement this overhaul of equipment.
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