Reference no: EM131686316

A retail company uses vertical integration to remove the middle man. By owning parts of or all of the production process a retailer can reduce the markups that a less vertically integrated retailer must pay. As described in information Systems. A Manager's Guide To Harnessing Technology. Zara a clothing retailer is so vertically integrated they produce 40% of their own fabrics and purchase most of the dyes used from their own subsidiary company. The benefits of this strategy are in enables Zara to avoid paying a markup to a fabric supplier, and a dye supplier as well as paying a factory to actually produce the clothing. The other benefit is by having such control over the supply chain in enables Zara to respond to changes in consumer clothing trends so quickly their less vertically integrated competitors can't hope to keep up. Regarding changing clothing trends customer facing Zara staff utilize mobile devices to survey customers tastes. This information as well as the sales information from the stores point of sale systems is relayed back. Armed with this information Zara is able to forecast rather than guess at what styles their customers will be looking for in the near future. Only due to the vertical integration of Zara's production processes are they able to take the data from the information systems and produce what their customers are looking for in such a short time.