Inditex and the use of ITs.
Este trabajo final lo realizamos (fuimos un grupo de 5 personas) en Dublín para la asignatura de
"Information Technology". En el estudiamos la cadena de valor de Zara y recomendamos una
serie de tecnologías para mejorar su productividad, eficiencia, imagen y la comercialización de
sus productos. Tuvimos la mejor nota de la clase.
It was a final project for the subject "Information Technology". In this project we studied the Inditex´s
value chain and we had recommended some technologies in order to improve the productivity, efficiency,
image and the commercialization of its products. We obtained the best mark in class.
Inditex and ITs
Why due to the ITs Inditex is the world´s largest fashion group?
Word count: 2816.
4 compañeros y yo (No pongo su nombre
debido a la LOPD).
4 classmates and me. I can not put their
names due to the Spanish privacy and data
protection law.
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Index:
1. – Introduction……………………………………………………………………………………Page 2-4
2. - Supply chain management as competitive advantage…………………….Page 5-6
3. – Recommendations………………………………………………………………………Page 7-10
3.1. - Energy efficiency in logistics centers
3.2.- Eco efficient stores
3.3. - Environmental strategy in the production chain
3.4. - Zara Publicity
3.5. - RFID System
3.6. - Services for smartphones
4. – Conclusion………………………………………………………………………………….. Page 11
5. – References. ……………………………………………………………………………….Page 12-13
6. – Minuted notes of group teams. …………………………………….…………..Page 14-18
7. – Contribution of each member. ………………………..…………………………Page 19-20
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INTRODUCTION:
According to Monllor (No date), all of this began in a small shop called “La Maja”
where Amancio Ortega worked for 17 years as a dependent. Later, along with his uncle gowns
start a company that was successful for its competitive prices. When the company grew, it
went to Barcelona in search of suppliers. This is how the first company founded with the seal
of Ortega, GOA, arising in the early 60s.
Inditex, rather than pricing based on production costs, as the majority of companies,
adjusted its costs to the amount that it wanted to sell. In 1975 he opened the first Zara store in
La Coruña, where they began operating the Group. Nowadays, in the central services of the
company is based in La Coruña. In 1985, Zara enters the fast fashion business. He joins José
María Castellano, a school teacher and business technology lover, as Amancio Ortega's right
hand, making the company as a logistics model. In 1988 Zara opens its first store outside Spain,
in Portugal. (Inditex, 2012, pp. 4-5)
Today Zara, is present in 87 countries with a network of 6000 stores. The ideal location
,of the stores, is in major cities. Zara is part of the Inditex Group, one of the leading fashion
retailers in the world, with eight sales formats - Zara, Pull & Bear, Massimo Dutti, Bershka,
Stradivarius, Oysho, Zara Home and Uterqüe-.(Inditex, No date)
The Inditex Group has more than one hundred companies associated with the
different activities in the business of designing, manufacturing and distributing textile.
The uniqueness of its management model, based on innovation, flexibility and
achievements, have made Inditex one of the largest fashion retail groups.
The shape of Inditex, to understand fashion, creativity, quality design and a quick
response to market demands, has resulted in fast international expansion and excellent
response to the sales of the brands. (Inditex, 2012, pp. 14-21)
To understand why Inditex uses a certain management models, we have to see to its
mission and vision, to view the source of managing your business through the information
technology.
The company's vision is a concise statement of what purports to be in the long term,
the future of business visualization. Zara's vision is: "sell clothes of latest fashion at affordable
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prices throughout the world." At first glance, the vision is like that of any textile company, but
we must stress the word "fashion" is where Zara differs from its competitors.
The mission, however, is the statement of the reason for the company and should
include the definition of business model. Zara's mission is simply to bring solutions to the
problems that arose in the textile world: "Fashion is expensive and reserved for the few. The
more modest pockets could not pay high prices for clothes at the end of the season were
outdated. ". Through its mission, which will provide a good price trends, Zara can achieve the
vision.
Previously, we refer to the value that Inditex adds to its customers, now we talk about
his success. Now we will focus on what value are these concepts. As a clothing company, Zara
seeks an image, a place in the textile sector is not necessarily related to the status (for that
Inditex already has brands as Massimo Dutti or Uterque) but with the quality of the fabric to
achieve customer recognition. But at the end, of the clothing brands, all have an associated
image. Furthermore, Zara price goes beyond.
Figure 1: Brands of Inditex´s group.
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Figure 2: Contribution of each brand of the group.
If we analyze the different sales channels, we note that Zara is, by far, the largest
contributor of profits to Inditex. Like not seek status, nor seeks to differentiate on price
dramatically, seeking competitive prices but Inditex already has other chains like Bershka and
Stradivarius, which offer lower prices still.
Zara creates value for its customers that it is adapted to them in an effectively and
quickly way. So Zara logistic and distribution are essential in the business model. It is true that
the design is also important, but is determined by the client. (Inditex, 2012, pp. 14-21).
Feedback
Figure 3: Inditex´s Value Chain
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SUPPLY CHAIN
MANAGEMENT AS
COMPETITIVE ADVANTAGE
According to Cuc S. and Tripa, S. (2007, pp. 2521-2525) , the main competitive advantage
of Zara is found in the supply chain and more specifically in the pull system, which is one that
start the production reacting to the demand of the moment. More specifically Zara uses JIT
(Just in Time), located within a pull system. It tries to reduce lot sizes to a minimum and
eliminate waste and unnecessary inventory accumulations. It was noted by Sanchez, K (2011,
p.11), JIT is a philosophy that satisfies the necessity of organize Toyota Company for
operations that involve manufacturing; Toyota Company includes this model stock
management in the “lean manufacturing” philosophy.
It was said by Briasco, G (2010) that Zara was the first company worldwide in the fashion
sector to include this model, for it had the help of Toyota. Lean manufacturing is a model to
improve and optimize operational processes with reductions of inventory, wastes, timeouts,
transports, storages, machineries, people, etc. with it seeking to have shorter reaction times,
improve quality, cut costs and improve customer satisfaction.
The lean manufacturing has allowed Inditex to create a flash fashion, it lets you to send
merchandise every two weeks including new models, can send merchandise to other European
stores in 24 hours and in Asia or America in 48 hours. This system reduces the rate of items
that end up failing, causing more frequent deliveries and shorter in volume. The ability of this
system is that you can take advantage of economies of scale in production in Asian markets.
For example, only the basic line of Zara is produced in China, the rest of the collection in
Arteixo (Spain) or Zaragoza (Spain). This system can adapt supply and demand immediately but
to do so, information must be transferred quickly between the different agents of production
process (store, design, manufacturing and production). (Inditex, 2011, P. 46)
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The Spanish company needs 3 weeks to design and produce the product and 7 days to
take it to the store, while the competition requires on average six months to design and
produce and three months to place it in the stores. (Inditex, 2011, P. 82).
According to Diaz Solaga, P.(2010, pp 60-68) to achieve all this, It is supported by
another competitive advantage favored by its hybrid information system, which uses both
human capital and information technology (IT), every time you purchase an item in one of
their stores, the item has to pass by a point of sale terminal, this device register the
information of each sale, such as the colour, size….
It was noted by Martinez Barreiro, A. (2008), to expedite this information between
Inditex´s stores and head office in Arteixo, Spain. Entries come from store managers that
record daily sales and order clothes twice a week through a personal digital assistant (PDA),
they are all the time observing trends fashionable and high-demand products, that is, if a piece
of clothing sells better in one country or in another shop. Inditex is responsible for moving the
stock between different stores. This information is sent to about 300 (The Economist, 2009)
internal designers, through Zara's intranet, to create computer-aided design (CAD) based on
the recommendations of store managers and market researchers. These designs and
production volume are sent to suppliers and factories (Since Inditex has a system of vertical
integration). These designs are produced, processed, assigned to various stores Zara, and sent
to factories that cut, finished and ironed each garment. Then they are delivered within three
weeks of ordering to more than 6,000 stores worldwide. Owning to this, between 90%-95% of
the production goes directly to the stores, saving storage costs.
Another strong point of the uses of technologies by is “Casiopea”. This device allows
the store managers, to know in real time their sells, their stock and the stock of the rest of
stores in the same country, and then If a client is interested in one piece of cloth, the store
manager will request it for another store and provide it to the costumer, in a few days. It is a
good example of how Inditex uses the I.T.s to give a better service. (Nuñez, M, 2007).
Figure 4: Inditex´s building in Arteixo
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RECOMMENDATIONS:
3.1. - Energy efficiency in logistics centres
The Kyoto Pro Inditex project aims to reduce CO2 emissions associated with the
transportation and distribution activities of the company. They use renewable energy-efficient
to reduce by 20% greenhouse gas emissions until 2020.
In 2011 has been taken audits of transport for optimizing routes and has been made an
acquisition of a fleet of electric vehicles and bikes for use within the logistics centres.
Another example, that they make, is the reuse of the cardboard boxes used to
transport product between the logistics centres and the stores, which are reused between six
and eight times. In shops the boxes are filled with plastic hangers and alarms, also, these are
reused or recycled again in the case that they are not useable. (Inditex, 2010, P.47)
Inditex should establish an artificial intelligence delivery route for the trucks. This
would take into account the traffic in each road, the best weather for the journey and where
the truck has to deposit garments or pick up boxes, hangers… With all of this, Inditex could
reduce C02 emissions and save money, at the same time, while improving the image of the
brand in front of the stakeholders.
3.2. - Eco efficient stores
The stores incorporate latest technologies to be more efficient, for example to reduce
emissions of carbon dioxide. In stores open before 2005 are held 'economic reforms' which
achieve power reductions of up to 30% (replacing normal lamps for high-efficiency lamps and
changing air conditioner machines for others more efficient).
Plastic bags are made with d2w, which make easier the biodegradation and recycling.
(Inditex, 2010, P.48)
One improvement, to be more eco efficient, is to install solar panels on the roofs of the
stores and use the solar electricity collected by them, to avoid consume energy of the
electricity network. It will be based in implement light sensor systems (that take into account
the light in the street), the people in the store (more light in the hours of more people) and the
prices of the electricity in each hour. All this information should be sent to a computer that will
use the accumulated energy in the best moment.
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3.3. - Environmental strategy in the production chain
In 2011 several actions have been initiated in order to measure and assess the
sustainability of products throughout the value chain. (Inditex, 2010, P.128)
Inditex Code Green Project
This is a project that responds to specific objectives as detailed knowledge of specific
environmental issues in every stage of production.
There are two phases: include the development of process analysis of effluents and
waste management, and design tools for evaluation and control of suppliers, and establish
environmental improvement plans with on-going assessments in the production chain.
(Inditex, 2010, P.128)
Our recommendation, is in the last stage of production, Inditex should eliminate the
three labels of each piece of clothe and change them for an ecological Bidi label, this may help
to reduce the paper consume with the corresponding cut in costs. Furthermore, it can avoid
the discomfort caused by the three labels in the people.
3.4. - Zara Publicity
Analysis by Pérez Pintos, L. (2010) said that it is really surprising that one of the brands
with the highest billing do not use any advertising. It never will see a billboard, an
advertisement in the press or on television of Inditex. This causes us to rethink the key of its
global hit.
Although Inditex doesn´t use advertisements, their marketing techniques work
perfectly. Here are some points, related with technology, that they might improve in publicity:




Inditex should create panels for the streets that were happening models with seasonal
clothing, this panels has to show the articles that the people of this area are looking at
this moment in the shop online.
As major brands as Google or Paramount. Inditex should advertise on YouTube and
other Internet sites. Ads should be designed taking into account the pieces of clothes
that this user saw, previously, in the shop online.
Another way to do publicity, Inditex could put rotating panels in its stores, that show
the clothes that are receiving more views in the shop online, so calling costumers
attention, promoting their entry into the shop.
Inditex should have led screens in showcases and inside the stores. When a costumer
with a smartphone is near of one of these screens, the screen will show clothes
according to the latest purchases of the costumer. This application can be turned off
by the costumer.
 Another good option would create a program to design a different type of bag, each
week, according to preferences of costumers.
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3.5. - RFID System
It was noted by Elizalde, I. (2011) that Inditex has implemented Radio Frequency
Identification (RFID) to manage its production in an exponentially faster way. So that it can
create an inventory of stock in 1 second. This technology has a cost of about 15 cents labeling
per item.
RFID
Automates
eliminate human
mistakes in the
process
Increases
Improves
Reduce
Easiests
Quality Control
Information
Management
Operation on
costs
Data collection
Profitability
Management and
manterial
handgling
Production costs.
Identification of
products
Efficiency
Customer service.
Inventories.
Productivity
Figure 5: RFID´s Advantages (“¿Qué es el sistema RFID?” 2006)
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3.6. - Services for smartphones
The Zara mobile app is quite complete. A possible area for improvement is to know the
stock of stores, in real time. With this, you know where you have to go to find the item you
want to buy.
Thanks to the speed that enables RFID system, Zara knows instantly stock. It would be
a breakthrough uses this information by including it in the app.
The application can warn you each time Zara has a new collection, through
notifications or emails.
I Insert QR codes (Quick Response Code) on the labels of the clothes so that if you go
to the store and you don´t find your size. Then, you can read the code with a Smartphone,
with this information, the app direct you to the website, to buy online or to tell you which
Figure 6: QR Code.
store near you has that garment in stock.
Inditex can place augmented reality systems in major stores, a costumer can scanned
his body and link it to his online user in Inditex. After that, anytime that you see anything in the
webpage, you can see how the clothes fit in your model. The people change, then you can
change some features of your model (weight, shape...)
Inditex could have an advantage in be able to link up with Facebook and create a wish
list through this social network, in this way, your relatives/friends can know what clothes do
you want to have. It could be through twitter too. To not compromise the user's privacy, this
information could be hidden, as the costumer will want.
Figure 7: Screenshot Zara´s app.
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CONCLUSION:
This assignment shows that the key factor (that provokes the global successful of
Inditex) is the distribution chain. It is due, to the information technologies used by the brand.
This technologies, allow the company to do a cheap and flash fashion clothes
according to the preference of costumers in each moment.
But, with the growth of the global competence, this brand have to follow being market
leadership in the use of new technologies, to keep the leadership of the market. To do this, we
do some recommendations that, in our opinion, are available and accessible for the
organization (Inditex has €3,464 million in cash (Romera and Gomez, 2012), it means that is
the biggest cash between the Spanish companies of the IBEX35 (Vegas, 2010)). We think that
with these recommendations, Inditex's success is assured for the coming years
After doing the assignment, we think that Inditex is the perfect example of how the
use of IT can became a “new company” (It was founded in 1985) of a maturity sector, in the
world biggest company of the sector and has the highest profits (La opinion de la Coruña,
2013). For us, this example makes clear that thanks to the IT, any company could improve its
performance until unimaginable levels.
The last issue point is that the matrix of Zara, not only applies IT technologies in the
main activities, the company applies in all the fields, for example in the assignment was
competitor´s philosophy. Its efforts in this field were awarded this year by the magazine
Corporate Knights, according to this magazine, Inditex is the 58th sustainable company of the
world. (La opinion de la Coruña, 2013)
As conclusion, the main learning of this assignment is: If since the born of your
company, you are adapting your business model to the use of new technologies and continue
to incorporate new technologies that will appear; we are sure that your company is going to be
successful and have a strong performance. Furthermore, is impossible to create or keep alive a
company without the use of new technologies, because they give you some competitive
advantages indispensable for the day-a-day of any organization.
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