MIS Chapter 3: "Zara: Fast Fashion from Saavy Systems"

What are the five components that make up an information system?

-Hardware -Software -Data -Procedures -People

How does Zara's approach differ from the conventional wisdom in fashion retail?

-Small inventory. Sell batches ASAP -2 weeks design to store. Gap=9 mo -Vertically integrated -Uses tech+info systems+fast distribution+close to airport+ fast manufacture+ fast putting up clothes -Doesn't have to guess what customers want, faster turnaround speed because vertically integrated (60% merchandise is produced in house) -Manages their supply chain with attention to the entire value chain

Why is inventory management so important? What happens when a retailer has too much inventory? What happens when a retailer has too little inventory?

-Too much inventory= money tied up No money until sold Inventory= Death -Small inventory= sell small batches ASAP (but if you run out of inventory then no money is being made, may lose customers) Zara is selling somewhere in between no too much and not too small, enough to make a good marginal profit

Supply chain

A network of organizations and facilities that transform raw materials into products delivered to customers.

Information System (IS)

An integrated solution that combines 5 components -Hardware -Software -Data -Procedures -People

How has Zara's parent company Inditex leveraged a technology-enabled strategy to become the world's largest fashion retailer?

BBBBASSSIICCALLYYYYYYY, They only purchase technology that has positive benefits on the value chain which increase revenue/profit. This allows Zara to quickly sell products due to great fashion styles, limited availability (which creates exclusivity), and low prices because of low costs of production. Zara constantly monitors its customers preferences and can quickly adjust to changes, preventing extra inventory (kiss of death in retailing)

How do we reduce the bullwhip effect? How does Zara reduce it? How does wal-mart reduce it?

By sharing consumer demand info at all parts in the supply chain. -Minimize turn around time, use technology -Zara vertically integrates itself by controlling all aspects of their supply chain. -Walmart communicates with the members of its supply chain and shares customer info so they can be prepared for changes in demand, and thus match the supply.

Explain how data, information, knowledge, and wisdom are related.

DATA refers simply to raw facts and figures, alone it tells you nothing. Data becomes INFORMATION when it's presented in a context so that it can answer a question or support decision making. It when this information can be combined with a managers KNOWLEDGE that stronger decisions can be made. The knowledge yields insight which ultimately births WISDOM

How does disintermediation affect this challenge?

Disintermediation= Cutting out the middle men, i.e. omitting wholesalers, distributors, and/or retailers, in order to reduce costs and lag time between members in the supply chain. Customers order straight from the manufacturer either by phone or website.

Horizontal Integration

EX: Mcdonalds, Burger King, Wendy's all owned by the same person (no really) When a single firm owns all of its retail outlet but does not own/control their supplier nor own/control their distributor. heh?

Logistics (Inbound)

Entails the movement of products from suppliers to companies Tasks: -Coordination of purchasing from suppliers -Inbound Transportation -raw materials -component parts -Work in process inventories and production scheduling *Basically that activities of receiving, storing, and disseminating incoming raw material or goods for use on the production line or creating the final good

How does the firm's strategic use of IT influence design and product offerings, manufacturing, inventory, logistics, marketing, and ultimately profitability?

Ex: -Zara uses PDAs to gather data to gain information - This info is used to make decisions that lead to higher profits -This idea of collecting and analyzing data to gather info and make decisions can be used at every stop of the business process in order to fine tune for max profits

What kind of data does Zara capture and how do they derive knowledge from this data?

Gathered Data by using a PDA for customer feedback (why they didnt like the clothes and what would make it better) Also gather POS data from customers by asking what they like and dont like (ex: in fitting rooms etc) POS systems show how garments rank in sales

Why is good supply chain management a positive thing and what are the benefits?

Good supply chain management allows you to react to outside forces faster (such as natural disasters, periods of high/low demand) Results in low costs, better efficiency, and ensures each member of supply chain is informed of changes. Ex: Customer needs 1000 units? We can build it by tonight. FAST TURNAROUND TIME Communications is huge key factor in preventing bullwhip effect

Personal Digital Assistants (PDA)

Handheld computing devices made largely for mobile use outside of an office setting (smartphones and tablets) Ex: Zara uses a PDA that gathers immediate customer input and feedback.

Does this mean companies should be vertically integrated?

If they can afford it and do it well, but it carries many risks as well. Good communication between members of the supply chain can cause a horizontally integrated system to be just as or more profitable.

Logistics (Outbound)

Involves managing the flow of finished products and information to business buyers and ultimately consumers. Tasks: -Coordinate forecasting how much to send out to distribution retailers -Finished goods inventory management -Warehousing -Outbound transportation -Customer Service and production scheduling *Basically the movement of final goods associated with storing, transporting, and distributing those goods to its distributors which then reaches the consumers at retailers

Contract manufacturing

Outsourcing production to third party firms. Firms who do contract manufacturing dont own the plants or directly fund workers who are producing the goods. It helps keep the costs of goods low, leading to higher profit margins.

Which is hardest to change and why?

People and procedures because it is difficult to alter the way a person works.

Just-in-Time manufacturing

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. Ex: early version of DELL

Pros and Cons of Contract Manufacturing

Pros: -Saves you time and costs -Send someone else to make it that has expertise in that field -Focus on core values of business -SOMETIMES leads to better made products Cons: -Lack control -Rely on someone and hope they make it correctly -Partners can engage in sweatshop labor and environmental abuse

Pros and Cons of vertical integration

Pros: -Control bottom up -Fast -Ability to adapt to changes to meet sudden demands quickly. -Manager posses a view of the entire value chain. -Faster turnaround time Cons: -Not diversified -In house distribution=susceptible to fuel costs -Risk is all on you -If one goes down, all parts go down since you own it. -Expansion in other countries is threat because factories and logistic centers are not close by. -More expensive labor

Vertical Integration

Single firm owns several levels in its own value chain. Such as ZARA is it's own supplier and distributor.

Typical structure of supply chain? What parties can be involved?

Supplier->Manufacturer->Wholesaler->Distributor->Retailer->Customer

Operations

The organizational activities that are required to produce goods and services. Can also involve the development, execution, maintenance, control, and improvement of an organizations services and manufacturing procedures.

Point of Sale (POS) systems

Transaction processing systems that capture customer purchases information. Cash registers and store checkout systems are example of POS systems. They are critical to capturing sales data and are usually linked to inventory systems to subtract out any sold items.

What is the bullwhip effect and how does it impact a business in a bad way?

Where variations of inventory are amplified as you move up the supply chain from consumer to end-raw-material supplier when there is a change in consumer demand and no information is being shared about consumer demand between all members in the supply chain which will leave suppliers, manufacturers, distributors and retailers with very high or low inventory. *see the effin doc