Zara: IT for Fast Fashion

Problem/Issue Statement

The question in front of Zara is whether or not to upgrade a currently functioning system, based on the fear of falling behind the technological times. The age old comment is “if it ain’t broke, don’t fix it”; but how could a Company in 2003 continue to use an out of date, DOS operating system for their retail point of sale (POS) terminals. DOS was no longer supported by Microsoft at this time and the Company’s vendor for POS terminals advised Zara that they were the only company that continued to use the “ancient” operating system. While they [the vendor] had no plans to change the POS terminals in such a way that DOS would no longer function on them, Zara management could not get this in writing.

The main issue was that DOS and the applications Zara had built to run on the system worked well. There were hardly ever any calls to IT and the stores were running quite smoothly with the existing infrastructure. Where the existing POS terminals and applications were lacking were in terms of the individual stores inventory management. When a sale was entered into a terminal, there was no way to track that drop in inventory. Inventory was monitored by store managers manually by walking around the store and actually hand counting the number of items that were still on shelves in order to determine what items should be entered into their bi-weekly order forms.

Terminals were also using floppy disks with no networking. One terminal at each location was connected to Zara’s headquarters via a dial-up modem. Employees would need to copy daily sales onto a floppy disk from each of the other [non-networked] terminals and bring it over to the terminal with a modem to transmit sales information to headquarters.

Situation Assessment

While the process that Zara has in place is working just fine for now, the Company is growing at a rapid pace, adding 24 stores from 2001 – 2002 in various different countries. There is no reason to believe that this expansion and growth would cease in the near term. That being said, continuing to use an ancient system with no vendor support runs the risk of having more issues down the road when the Company has even more stores.

The decision criteria for Zara are not necessarily about the cost of the change to a new operating system in 2003, but what the difference in cost would be if they are blindsided by an issue further down the road. The Company will need to evaluate where they see the most risk and combine that with the cost of an upgrade.

Alternative Courses of Action and Evaluation

Zara really only has two main choices in front of them – whether to keep their existing DOS operating system for their POS terminals or to switch over to a newer, supported operating system. They have 3 choices for which Company to use for a new operating system; Microsoft, Unix or Linux.

Zara does not have any cost hurdles to overcome and does not typically use cost-benefit analysis for justifying IT decisions, however their decision criteria should be to evaluate the cost of each of the three providers for a new operating system; running that analysis will give management an idea of the costs in front of them at the present time. They will also need to be very realistic about the probability that terminals will not be able to use DOS in the future.

Management should also consider benefits of upgrading in their decision. New terminals will have the ability to be networked not only within the store, but with other stores and Zara’s headquarters. The terminals would be able to handle returns (currently only done on PDAs) as well as track theoretical inventory with each transaction. Individual stores would also be able to see if other Zara stores had an item in stock, as opposed to calling another store to see if they have a specific item. Also, there would be no need for floppy disks and dial-up modems. With networking sales could automatically be transmitted to headquarters each night. A new operating system would bring about many efficiencies.

Evaluation of Alternatives

Alternative 1 would be to do nothing. While this would cost the Company nothing currently, this runs a very high risk of having issues down the road that will need to be taken into consideration. If Zara’s terminal vendor were to make changes to the terminal that would prohibit the use of DOS going forward, this could delay Zara from opening any new stores. If the Company were to kept the existing growth trend, averaging one new store every two weeks, this could end up costing Zara millions of dollars in lost sales.

Alternative 2 is to choose a new operating system. Here the Company will need to evaluate the three operating systems, mainly on cost. Microsoft, Linux and Unix will all be able to provide the Company with an updated, vendor supported operating system that they can use for all retail stores into the future. All three will have networking capabilities, the ability to better monitor inventory and continue to be used for point of sale transactions. The main difference will lie in the upfront and annual costs for all three.

Recommendation
Choosing Alternative 1 and doing nothing currently is really just postponing the inevitable. DOS is not going to be around forever, the one person at the Company who built the DOS applications may retire and the last thread of support that the Company had will be gone. Zara should choose a new operating system with the decision of which one being based on cost as all three options have the functionality that the Company will need.

Presentation

The presentation should reinforce that while DOS is currently working for Zara, it is an ancient system. Work flow diagrams showing how processes could be more efficient would be helpful. Higher levels of efficiency could tie to better inventory management which in turn leads to higher sales and revenue for the Company.

Junk Van Reflection

Mr. Kingo

I just wanted to follow-up regarding our consultants presentation on Tuesday night of the new proposed IT infrastructure for our organization. I feel that listening to their analysis combined with further review of the Platform as a Service and System as a Service functionalities, has confirmed my initial recommendation for this alternative.

The Platform as a Service / System as a Service alternative will provide the Company with the tools that we need to run the business as well as grow the business in the future (through franchising).

Case: 1-888-Junk-Van

Problem/Issue Statement

Marcus Kingo entered the waste collection business in 2008 and his company grew at a rapid pace.  However, his current IT system was causing information handling errors which was leading to a loss of customers.  Kingo needs to find an affordable IT system that would meet his operational requirements (keeping the virtual business model) and allow the business to grow.

Some of the symptoms of Kingo’s problems: errors in customer contact information, forgotten emails, manual calculations and billing mistakes were causing negative customer interactions – with the most serious issues stemming from the data clerk.  Incorrect versions of the Company’s database were sent to the morning call operator on several occasions causing major delays since only one version of the database could be used at a time.

Most Canadian waste collection businesses were small models, typically operating with one truck.  Customers tended to have many options of who they could use for their waste collection.  Knowing this, Kingo needed to fix his problems before he lost too many customers. 

Situation Assessment

The context of Kingo’s problem lies in the fact that customers were becoming dissatisfied with the Company’s service. 1-888-Junk-Van grew rapidly from 2008-2009, doubling their sales from $300k to $600k, but their operational model was not following suit.  Kingo believed in his virtual model and not having a central office location, however having a database that needed to be e-mailed back and forth without the ability to be used by multiple employees at a time was causing issues. 

The decision criteria for Kingo in the new IT system were as follows:

1.      There needed to be a centralized database which could be accessed remotely since everybody would be working on it simultaneously from different locations.  Internal information should no longer be e-mailed back and forth between the call operators and the data clerk.

2.      E-mails to customers should be automatically sent from the system in order to avoid mistakes and resulting delays.

3.      With no IT background and a business too small to justify hiring a dedicated IT worker, the solution needed to be easy to implement and operate.

4.      The system needed to be flexible and robust enough to handle evolutionary changes in the market or the business.

5.      Vendor support was essential; Kingo wanted to be able to rely on someone for support for as long as his Company was using the system.

6.      Time to implement was critical.  The new system needed to be up and running as soon as possible.

7.      Last, but certainly not least, Kingo was on a budget.  The system needed to be affordable.

Alternative Courses of Action and Evaluation

After some research, Kingo came up with five options.  Here is a list of each of the options with their benefits and pitfalls.

1.      Enterprise Resource Planning (ERP)

a.       Pros:  ERP systems were built around a central database, they were designed to be accessible remotely and claimed to integrate business processes by covering all aspects of a business.

b.      Cons:  An ERP system would be something for a larger organization; even small business quotes were for 20 to 25 users and were typically $2,500 per user per year with additional upfront costs close to the same amount.  Kingo read online that a starting package for a business with 4 user licenses was actually $12,000.  While it was nice to have a system that would encompass a whole business, ERP systems seemed mainly focused on production and finance modules which were not top priorities for Kingo.

2.      Microsoft Access. 

a.       Pros: Upgrading from Works to Access could be done on a budget and in a short time frame.  Access could be installed on individual machines or remotely through the internet and accessed through a secure virtual private network.  Licenses were $179 each and Kingo felt that he could use his personal time on nights and weekends to install the needed software on individual machines.

b.      Cons: While Microsoft Access would seem easy to implement, has vendor support and could be implemented in 2 weeks, in order for the system to be a central database on a remote server would require Kingo to most likely hire some additional IT support which could be costly and time consuming.  MS Access also does not e-mail directly through the system. 

3.      Google Docs

a.       Pros:  Google Docs offered online applications to easily create text documents, spreadsheets, slide presentations and forms.  Forms would be particularly useful to Kingo as they could be easily created and shared with employees.  Employees could work collaboratively on the same file and e-mail distribution was supported.  The cost was relatively low as well.  For Kingo it would be approximately $50 per user per year.  Google Docs could also be implemented in a matter of a few weeks.

b.      Cons:  Kingo knew of some friends who were afraid of using cloud computing, storing sensitive company data on tools and resources that were not completely in Kingo’s control.  Also, data would have to be in one large spreadsheet, forcing everyone to see every field.  Google Docs did not support the idea of a relational database where tables can reference certain information or fields in different tables. 

4.      Custom Application. 

a.       Pros: Kingo could have someone completely customize an application for his business.  It could be web-based, which would be a central database and provide remote access.  The development could take approximately 4 weeks which may be longer than Kingo would like, but still a relatively short time period.

b.      Cons: While this seems like a good alternative, this could be very costly.  King received an initial estimate of $2,000, however this did not include data migration which would be an added cost.  Maintenance would also be an additional $60 per hour per developer and there is no way to estimate how much maintenance would be required.  Another risk with a custom application – there is no way to preview it.  You simply explain to the developer what you want and get an end result; there is no way of knowing if his needs are actually being met.  Also, “vendor support” is billed by the hour post-implementation.  This could easily add up, again with no way to estimate how much.

5.      Platform as a Service (PaaS)

a.       Pros:  PaaS was defined as the provision for computational resources, namely storage, hardware, network capacity and some basic software functionality.   With PaaS, users could use common applications, as well as build their own unique applications using a shared computing platform.  After a trial by a PaaS provider, Kingo felt he would be able to build forms and connect tables himself.  The system was fairly robust and easy to use. Also, implementation, including data migration would take only 3 days. This could be a system that could grow with the Company, and there was no long term contract required, Kingo could increase or decrease his service as needed, even having the ability to cancel with one month’s notice.

b.      Cons:  Similar to Google Docs, PaaS was on a cloud computing infrastructure bringing about the same hesitance in terms of sensitive client information being stored in the “cloud”.  Service packages for PaaS ranged anywhere from $300 to $600 per month, depending on how much storage space, the number of user licenses and the number of applications needed.  Also, if customization was required, there would be an additional charge billed at the rate of $180 per hour. 

Evaluation of Alternatives

In looking at each of Kingo’s alternatives, it is important to look back at the drivers for his decision.  1-888-Junk-Van’s new IT system needs to have remote access, be a central database, have e-mail functionality, be implemented in a short time frame and not be excessive in terms of cost.   Each of Kingo’s 5 alternatives should be ranked for each of his decision criteria. After the ranking, Kingo should see which option comes out as a top choice in the majority of the decision criteria.

Recommendation

I would recommend going with the PaaS system.  While the system could cost $300-$600 per month, implementation would only take 3 days and the system has the resources necessary to have a centralized database and forms.  After the onsite trial, Kingo felt the system was easy enough to use where he could build the forms and tables himself, without the need for additional IT resources.  It is also beneficial to Kingo that there is no long term contract required.  If he felt after implementation that the system was not as straightforward to use he could cancel with only one month’s notice and try to find a different solution.

Presentation

For my presentation, while I think my recommendation may not be the least costly I think it is the most effective in terms of the business processes and where Kingo would like to take the Company in the future.  It would be important to show the pros and cons of each alternative, but reiterate to the Company’s management that they need to have a good system in place that is able to grow with the business.  It only took one year for their existing system to start causing problems.  While cost is definitely an issue and a key driver, a good reliable system is going to come with a cost.  I think Kingo’s statement, “people do not fail, only bad systems do” is important to mention here.  We don’t want to establish another bad system that will only cause more delays and customer complaints in the future.  As mentioned under Evaluation of Alternatives, a table showing each option with each of the decision criteria may be helpful for management to easily see the pros and cons of each alternative. 

P&G Case Reflection

As a follow-up to last night’s presentation from  our consulting team, while I think a leap into the digital age in 2001 is a hurdle we will need to get over, I feel that of our alternatives, the Web enabled EDC will assist the most with our main problem – time to data lock for drug trials.  Looking at our two other alternatives (enhancements to the paper based model and digital imaging), while improvements over our existing method, are not substantial enough to really cut down on the time to data lock.  These methods while not significantly cutting time also come with added costs; express shipping for paper based enhancements and significant data storage costs for digital imaging.

As we all know, for each day a drug is not on the market, there is possibly $1MM in revenue that we are missing out on.  The evidence has proven that although we will need to get some sites up to speed with the EDC technology, over time we can expect to cut the time to data lock by approximately 4 – 5 weeks, which could increase revenues by $28MM – $35MM per trial.  The EDC model will also be beneficial in cutting close to $500k in costs (per trial) just on paper and shipping alone.  It would appear that from a time, revenue and cost perspective EDC is the option to choose for P&G.

CASE: P&G -- Electronic Data Capture and Clinical Trial Management

Problem/Issue Statment:

• Procter & Gamble’s Health Care division completes clinical data trials as a requirement in order to receive approval to market a prescription drug in the United States.  The problem for the Company was what they refer to as the time to data lock.  As defined in the case, the “time to data lock was measured as the elapsed time between the collection of the last piece of data on the final patient in the study (at the site) and the locking of the database.”  It was quoted that for the average prescription drug, each day of delay in market entry for the product costs the sponsor roughly $1MM in lost sales.
• The main problem as mentioned above is the time to data lock.  The longer it takes, the more money the Company is losing from not having the given drug on the market.  The symptoms are what are causing the delay in data lock.  The symptoms here are in the paper based process, the need to complete double entry of data for reconciliation purposes, incorrect data entry which would need to be re-done, etc. The case focuses on the paper-based process, digital imaging and Web-enabled data capture as three possible altneratives to assist in aiding with these symptoms.
• The scope of the problem would be the entire clinical trial management process.  Obviously, clinical trials are necessary in order to have prescription drugs approved for marketing in the United States, the scope of P&G’s problem is looking at this process from start to finish and analyzing all of the areas where the length of time may be shortened in order to speed up the process, without affecting the results. 

Situation Assessment

• Thinking about the context of the problem, it would seem almost ludicrous that clinical trials were taking place on paper and not through some type of electronic technology; how can technology aid in the clinical trial process and decrease the amount of time necessary to complete the trials.  D’Alonzo realized that there is only so much you can do to quicken a paper process, can digital imaging or web-enabled electronic data capture help here?
• The decision criteria are actually quite simple, will the offered alternatives decrease the length of time to data lock while at the same time not raising costs.  Basically, will these process improvements add value to the organization by having the ability to bring drugs to market faster and not increase costs in the meantime.

List of Plausible Alternative Courses of Action

• The case evaluates improvements to the paper based process including using express mail shipments from sites on a daily basis and increased staffing to perform site monitoring and source-data verification more rapidly.  This alternative tries to cut down on time, however there are still many people that need to touch the data and there is only so much that can be done in order to cut down on time.
• The second alternative was for the use of digital imaging.  In this alternative, as opposed to case report forms (CRF’s) being maintained on site in a binder, they would be faxed after verification and stored digitally.  However, this alternative still followed the paper based process, other than the digital image being captured.  Again, this alternative is working toward cutting down time, however the data still needs to be captured on paper and faxed for entry into the back end database.  The data still goes through a double entry process for reconciliation and now there is the cost of storing this data.  Thinking about very large studies, the cost of storage could add up significantly while not really cutting down on time.
• The third alternative was for web-enabled electronic data capture (EDC).  The process allowed for CRF data to be captured into a web based data management system on site.  Predefined validation rules were built into the system, meaning there would be no need for double data entry.  This alternative is the most viable in terms of the ability to cut down on the time to data lock. 

Evaluation of Alternatives

• In order to evaluate the alternatives, the Company should use process flow maps to see where there may be overlap or duplication of duties/efforts where additional time can be saved.  There should also be an evaluation of the costs of each alternative compared with the amount of time that the Company will save.  The evaluation of each criterion will lead to a decision of whether or not to move forward with the alternative.  The evaluation should not be imaginative, but realistic in how much money the Company could be saving and how much more in revenues they could be earning by decreasing the amount of time to data lock.

Recommendation

• A logical recommendation would be to choose the alternative or alternatives that would cut the most time since that is the biggest problem here, but the quality recommendation would also include the actual costs associated with each alternative.

Presentation

• The best way to sum up the case is to go through the clinical trial process and why it was taking P&G so long to complete a trial.  Some good visual aids may show the actual millions of dollars that are being lost during the process.  Selling the recommendation will rely on proving the best alternative saves time and does not add significant costs to the process.  This could tie back to the visual aid showing the amount of money being lost with a new version showing how much more money the company could be earning when cutting time in half.

MS Visio

Dear Mr. D

I would just like to offer my help with any upcoming projects that might require the use of MS Visio.  I have experience using Visio and can assist with any questions your group may have in using this program.

In terms of my experience and background, in my former role as an analyst in the Risk Management department, I was part of a team that was responsible for setting certain Investment Limits and Guidelines as well as trying to automate reporting and processes around those Limits and Guidelines.  Our team worked with the IT department for automation, but it was up to us to come up with process flow diagrams to explain exactly how limits should be calculated.   These process flows could be different depending on what asset class we were working on and what type of limit we were using.  It did not seem that drawing these workflows on a napkin and providing it to the IT department was the best possible scenario.

MS Visio is a program that one of the other members of my team was familiar with and taught the group how to use.  The program is a highly effective way to graphically show the flow of information or processes or even when explaining complex calculations which need to be done using inputs from various systems.  While my stint in the Risk Management unit has passed, I've recently come across more usefulness for Visio in my current role.

The Investments Department has just announced an initiative to begin third party asset management within multiple asset classes -- one of which is the group I currently work in.  Just this past week those involved in the new initiative have been working with our Operations Department to come up with some work flows for possible third party accounts.  Both my group and our potential investment partners need to fully understand the process flow for this new business.  Who will be responsible for investment decisions?  How will data be transferred between our two companies?  Among many, many more questions. 

While most of the questions involved do not necessarily have simple and/or straight forward answers, Visio is helping us to determine what the proper process should be.  Documenting and working through each process with a visual Visio diagram can also show where there may be duplicative efforts and could lead to a more streamlined process overall.  

This new initiative, and with the aid of Visio has caused our department to think outside the group.  The investment process does not solely take place within our unit, we work with various other departments throughout the organization and while we may believe that a process is working just fine from our perspective another group a little further down the chain may have a completely different view.  For instance, I just found out that in order for one of our trades to show up on our accounting system, someone in our Back Office actually has to fax a trade ticket to the firm that is responsible for our books and records.  Yes, in this day and age, we still need to fax information as opposed to sending something electronically or, even better, having an automatic feed of some sort.  My point here is, without working through the process from start to finish and using Visio to see the actual flow of information, this would have never been brought to light.

This just gives a little background and shows some instances of where Visio has been useful for two departments within our organization and with the new third party initiative moving forward with your department as well, Visio could be very helpful.  Please feel free to let me know if I can be of assistance.

Should we be Blogging?

Dear Ms. Hirschhorn (Chief Marketing Officer)

To take the words right off of our intranet, “transforming MetLife into a customer-centric organization is a cornerstone of our strategy”.   Our customers are at the heart of everything that we do and the latest way of reaching our customers is through social media.  MetLife has a Facebook page and a Twitter account however we currently lack a blog which could be a highly effective way of reaching out to our customers.   

In order to be more in tune with our customers and the issues they may be encountering, Executive Group members have been reaching out to customers and personally walking through their issues.  If EG members are individually reaching out to customers, a blog could also be a good outlet to reach our customers.  Customers can share both positive and negative feedback about the organization, while MetLife collects the information and contacts those customers to try to help them.   

Not only for customer feedback and response, a blog could also be a good way for the Company to explain a little bit about each of our products, who may be eligible for them and what might be required in order to apply for coverage.  This may be something that we already do on our website, however in this context customers could post comments about their experience with each product as well as any questions they may have.

After doing some research, I’ve realized that each and every blog post that MetLife would create is an individual web page with our information.  That would mean that each web page is an additional opportunity for search engines like Google and/or web users to find MetLife.  According to a chart on the website http://headwaythemes.com/why-blog-beginner-blogger/ the more indexed pages on Google, the more monthly leads a Company tends to receive.  Having multiple pages on a blog that are updated on a regular basis could cause a significant increase in the amount of customer traffic we see.

Lastly, one other feature that is different about a blog compared to other social media – it is something that MetLife owns and controls.  If, for some reason, Facebook or Twitter were to be shut down tomorrow, we would lose the information that we have on those sites, including any Friend Lists, Followers and information of the sort.  With a blog, the organization would not have to rely on other sites being available or causing us downtime if they are having issues.  We also completely control the layout, content and functionality of the site itself.

Overall, I feel that a blog is yet another way to get our Company’s name out there for web users to learn about our reputation, experience and history.  It is also another way for us to be more customer-centric, reaching out and listening to our existing customers while trying to earn more customers in the process.