MIS Chapter 3
Personal Digit Assistants
handheld computing devices meant largely for mobile use outside an office setting. They were at one point computing devices, but now, they are integrated into mobile devices and tablets.
What are the five components that make up an information system? Which one is hardest to change?
hardware, software, data, process, people People is hardest to change
how to stop bullwhip effect
let all participants have access to consumer-demand info inter-organizational IS are essential to sharing data between firms ^^ EDI (electronic data interchange)
key measures for zara and gap
look @ ppt
is zara process innovation or product innovation?
process
Ration Frequency Identification (RFID) Tags
small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to. A next generation barcode.
order of supply chain network
supplier --> manufacturer --> distributor --> retailer --> customer distributor/retailer = disintermediation
Return on Investment
the amount earned by an expenditure.
what 3 things does zara use to track data of customers
-directly ask customers -POS -investigate unsold items
IT effect on SC performance
-reduce cost of buying and selling -sourcing, buyind much easier -reduce bullwhip effect -reduce inventory size and cost -iimprove delivery scheduling (JIT)
Why is inventory management so important? What happens when a retailer has too much inventory? What happens when a retailer has too little inventory?
-want a greater number of inventory turns because provides more working capital -too much = Death - causes company to lowering margins through markdowns and write-offs in order to decrease inventory -too little: firm cultivates exclusivity of its offerings, encourages consumers to buy right away and at full price, reduce to a minimum the risk of making a mistake but can mess up the supply chain when you have to order more and could miss opportunity for profit
how does zara manage their designers?
300 designers make 30k items per year, compared to average of 2-4k. constant rotation of design teams, encourages innovation young designers fresh from design school
ex of zara's VI
40% of fabric and dyes made by zara 60% produced in house (avoid contract manufacturing) half of clothes arrives undyed
no zara item stays in house for more than...
72 hours
information system (IS)
An integrated solution that combines five components: hardware, software, data, procedure, and the people who interact with the system
Logistics
Coordinating and enabling the flow of goods, people, information, and other resources among locations
Just in Time Manufacturing
Items are created to meet demand, not to create surplus
contract manufacturing
Outsourcing production to third-party firms. Firms that use contract manufacturers don't own their plants or directly employ the workers who produce the requested goods
Margin (Gross Margin)
The difference between revenue and the cost of goods.
Operations
The organizational activities that are required to produce a good or service. Operations activities can involve the development, execution, control, maintenance, and improvement of a company's service and manufacturing procedures.
What are the advantages and disadvantages of vertical integration? What are the advantages and disadvantages of contract manufacturing?
VERTICAL: advantages - more control over the production process, can be adaptive and agile disadvantages - more expensive; more exposure if demand goes down because effects more than one aspect of your business (car demand decreases, so loss in cars and tires) CONTRACT: advantages - lower prices and sell more product or maintain higher profit margins disadvantages - to get lower cost, contract firms ignore safety, environmental concerns, child labor, distressing practices - lead to brand-damaging backlash turning away customers, staff, etc
Vertical Integration
When a single firm owns several layers in its value chain
How does Zara's approach counteract specific factors that Gap has struggled with for over a decade?
ZARA: changes inventory constantly, creates fashion in the moment (minimize risk), store employees ask for shoppers opinions, buy it or its gone GAP: stable inventory, designs created for each season (ending up having to mark down a lot), fashion driven by high profile in house designers
Point of Scale (POI) Systems
a transaction processing system that captures customer purchase information such as cash registers and store checkout systems. These systems are critical for capturing sales data and are usually linked to inventory systems to subtract out any sold items
how is bullwhip effect bad for the consumer
costs increase, price increase
data driven business strategy
data -> insight -> action -> performance
dell supply chain
dell owns all manufacturing, sells directly to customers. cost-competitive strategy. suppliers from all around world push suppliers for just-in-time delivery low inventory = low costs practices demand shaping to manage inventory (shape consumers demand based on inventory)
incentive structure for employees/suppliers/customers
employees: commission customers: products gone soon suppliers: local cooperatives
How has Zara's parent company Inditex leveraged a technology-enabled strategy to become the world's largest fashion retailer?
fashion exclusivity, fewer markdowns and sales, lower marketing expenses, more frequent customer visits. Zara's design of clothing is based primarily on customer feedback. They use information systems to collect which clothes have been tried on and NOT purchased. They then ask the customer why they did not purchase the item---Allows customer satisfaction for a revised and improved item due
bullwhip effect
variability in order size and order timing increase at each stage up the supply chain natural dynamic occurs due to multistage nature of supply chain reduces overall profitability of supply chain
How does Zara's approach differ from the conventional wisdom in fashion retail? How does the firm's strategic use of information technology influence design and product offerings, manufacturing, inventory, logistics, marketing and, ultimately, profitability?
zara's essential advantage --- Information systems allow Zara to design, produce, and distribute products to stores within weeks, not months. -----Stay at the leading edge of fashion trends. Low inventory costs and reduced risk of producing products that people don't want. Alters production to meet consumer needs. - zara wins with information --- profound vertical integration --- technology-orchestrated supplier coordinate --- just-in-time manufacturing --- finely tuned logistics --- results: 10x unique products, 12x turnaround speed - zara wins with its value chain --- zara maintains an efficient value chain - Zara managing design differently --- teams of 300 designers create 30,000+ items each year(competitors average 2,000-4,000 items per year) --- constant rotation of design teams: cross-pollinates design experience. encourages innovation. --- forecast fashion trends through data analysis rather than the hunch from a heroic executive --- data sources include: directly asking customers in stores, point-of-sale data, investigating unsold item pile. --- data goes directly to the cube - Zara Managing Inbound Logistics Differently --- Vertical Integration: 40% of fabric and most dyes made by Zara itself or its own subsidiary --- Responsive to fashion shift: half of the cloth arrives undyed --- Avoid contract manufacturing: 60% produced in house --- Contract manufacturing only used for items with longer shelf lives - e.g., T- shirts and jeans - zara managing manufacturing differently --- Fabric is cut and dyed by robots in twenty-three highly automated factories --- After cutting and dying, many items are stitched together through a network of local cooperatives - zara managing outbound logistics differently --- Five-million-square-foot distribution center --- Moves 2.5 million items every week, no item staying in-house for more than 72 hours --- Inventory optimization models determines how many of which items in which sizes should be delivered to each specific store --- Chartered cargo flights serving any destinations within 48 hours - zara managing marketing and sales differently --- Little advertising: only 0.3% of revenue spent on ad, with 3.5% as the industry average --- Z-day, twice-weekly inventory delivery --- Limited product runs to encourage customers buy right away, at full price, and visit often (no sales) - zara optimizing --- Software used to schedule staff based on forecasted sales volume --- shave staff work hours by 2 percent --- Clothes ironed in advance and packed on hangers, with security and price tags saving in-store employees' time for customer services