MIS ch 3 - Zara

what are the advantages and disadvantages of vertical integration?

contract manufacturing is cheaper but can take a long time and can go against child labor laws and environmental issues.

personal digital assistant (PDA)

handheld computing devices meant largely for mobile use outside an office setting—to gather customer input, staff regularly chat up customers to gain feedback on what they'd like to see more of.

what are the 5 components that make up an information system? which one is the hardest to change?

hardware software data procedures people hardest one to change is the people because others are just code and rules

radio frequency identification

small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to dressing room can read the tag and recommend other accessories or outfits related to the item you have can allow customers to instantly see inventory of other options

bullwhip effect

small wrist movement causes a very pronounced result VARIABILITY in order size and order timing increase at each stage up in the supply chain natural dynamic occurs due to multistage nature of supply chain reduces overall profitability of supply chain EDI (electronic data exchange) and open access to consumer-demand information will stop bullwhip effect

Firms often hedge the risks that could shut down operations by

spreading their facilities throughout the globe (think weather, natural disaster, terrorism, labor strife, or political unrest in different locations)

Zara has been able to eliminate costs related to advertising, inventory missteps, and markdowns because of

technology helps Zara identify and manufacture the clothes customers want, get those products to market quickly, and eliminate costs related to advertising, inventory missteps, and markdowns.

return on investment (ROI)

the amount earned from an expenditure

logistics

A subset of supply chain management that focuses largely on the tactics involved in moving products along the supply chain.

operations

Activities necessary to convert the inputs provided by inbound logistics into final product form. can involve the development, execution, control, maintenance, and improvement of an organization's service and manufacturing procedures. optimize operations with software, scheduling strategies - (Zara pre irons and tags clothes so store employees don't waste time) EX: Machining, packaging, assembly, equipment maintenance, summing, ordering, averaging, grouping, comparing

contract manufacturing

Outsourcing production to third-party firms. Firms that use contract manufacturers don't own the plants or directly employ the workers who produce the requested goods. AVOID this - produce as much as possible in house only use for items with longer shelf lives (t-shirts and jeans)

vertical integration

Practice where a single business controls the entire process of a product, from the raw materials to distribution buy and own most of their own supply chain zara can dye most of their own clothes last minute as they choose because they make their own dye and fabric (responsive to fashion shifts) risky

how does Zara's approach differ from the conventional wisdom in fashion retail? How does Zara's strategic use of information technology influence design and product offerings, manufacturing, inventory, logistics, marketing and profitability?

The firm uses PDAs and POS systems to track customer preference rather than guess on styles. It uses vertical integration and technology-oriented suppliers, just-in-time manufacturing, and logistics to get designs to store in weeks rather than months. Low IT expenditures because they know where to target the value chain. Zara takes advantage of a wide array of data. They do not have sales but turn their inventory over really quickly. Everything is produced in-house with green management for environment. Designers in "the cube" are not famous but straight out of school.

what are the advantages and disadvantages of contract manufacturing?

Vertical integration allows you to own many parts of your business but can be a very expensive expenditure.

what happens when a retailer has too much or too little inventory?

When a retailer has too much inventory it loses value and the firm loses money. If the retailer has too little inventory products can't be sold and they cannot make money, customers take their money somewhere else.

how does Zara's approach counteract specific factors that GAP has struggled with for over a decade?

Zara is better at moving inventory and getting designs into stores 12 times faster than Gap. Gap guessed wrong on style and did not change with the trends. Zara was able to look at customer preference and change design inventory to optimize transactions and create "elite" clothes. At Gap all the clothes were the same nationwide while Zara had a wide array of style and options offered at different stores. Also, Gap had way too many discounts compared to Zara's lack of markdowns.

information systems (IS)

Zara's essential advantage - able to react very fast allow Zara to design, produce, and distribute products to stores within weeks, not months. -Fashion trends leading edge -Low inventory costs -Reduced risk of producing unwanted products - Responsive and agile manufacturing Exist to help organizations achieve their goals an objectives. It should support the company's competitive strategy.

just-in-time manufacturing

a process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials at the precise time they are needed on the production line low inventory=low costs

how has Zara's parent Inditex leveraged a technology-enabled strategy to become the world's largest fashion leader?

a. Vertically integrated, quick inventory turn around, customers analyzed, gather a lot of data, stores worldwide and quick designs

Why is inventory management so important?

because inventory is lost money if it is not sold.

margin (gross margin)

difference between a product's selling price and the cost of production. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company. higher margin = more money made$$$

point-of-sale systems (POS)

gathers important data from cash registers and inventory Trends analyzed and production decisions/ alterations are made Production decisions communicated to manufacturing Product then shipped to the right stores based on demand profile