Table of Contents
Case Analysis Overview
SWOT Analysis: Strengths
SWOT Analysis: Weaknesses
SWOT Analysis: Opportunities
SWOT Analysis: Threats
Problems: Flawed Capacity Strategy
Problems: Lack of QFD
Problems: Management Focused on the "Home Run"
Potential Alternative Scenario I: Increase Product Variety
5 Lessons Learned/Conclusion
Appendix: Figure 1 Growth of Web Purchases & Online Grocery Purchases
8 Appendix: Figure 2 -- Webvan vs. Brick & Mortar Grocery, Order Size & Frequency
9 Appendix: Figure 3 Avg Daily Unit Break-Even Analysis
Appendix: Figure 4 Adding Capacity
Appendix: Figure 5 Quality Functional Deployment: House of Quality
11 Appendix: Figure 6 Potential Changes to Delivery Routes
12 Appendix: Figure 7 -- Marketing-Operations Coordination Model
Webvan was a short-lived Internet grocer that unsuccessfully entered the grocery industry in the late 1990s. The company focused its core capability/strength on highly-automated, capital-intensive and operating systems. However, Webvan showed weakness in its lack of focus on actual customer requirements and needs from a Quality Function Deployment (QFD) point-of-view. Despite typically low profit margins in the industry, the overall size of the industry, the rise in Internet usage and growth online grocery sales were predicted to be ripe opportunities. Uncertain demand was the company's main threat. Inflexible demand requirements, lack of QFD, and poorly structured management incentives proved to be problems for Webvan. It is recommended that Webvan would have benefited by implementing a QFD strategy and through more flexible, and a less capital-intensive approach. QFD would have allowed the company to base its services on actual customer requirements rather than assumptions. Flexible operations would afford the company the ability to grow with actual demand rather than utilizing a "if we build it, they will come" mentality. Case Analysis Overview
The following analysis will offer an overview of Webvan's environment and SWOT analysis during the company's brief life in the late 1990s and early 2000s. Operations problems, alternatives and recommendations will be presented from a "past tense" point of view, versus the "forward-looking" analysis which is normally found in case analysis. From these past tense alternatives, an operations recommendation will be made that would have turned Webvan into a viable company instead of another dotcom bust.
Webvan was an Internet grocer/delivery service founded by Louis Borders (Borders Book) in the mid late 1990s. The company used a highly automated operational strategy which included conveyor systems, inventory tracking, and logistical analysis/scheduling software. Webvan was very well financed through private investing. An IPO raised $800 million, making it the second-best financed Internet-based company ever. SWOT Analysis: Strengths
First, Webvan's executive staff was compensated based on the company's performance. Stock options were offered to executives to drive the company to perform. Second, Webvan's greatest strength was its highly automated approach toward warehousing, and order management. These operations functions could provide significant time and cost advantages over its traditional brick and mortar competition. Finally, Webvan offered over double the number of items that its traditional grocery competitors. To foreshadow, each of these strengths eventually created problems, unbeknownst to management at the time. SWOT Analysis: Weaknesses
First, management put very little emphasis into the design of the grocery delivery service from a Quality Functional Deployment (QFD) standpoint. The case makes only minor mention of the San Francisco test market. Therefore it is assumed that Webvan did not infuse customer-focused quality practices into the...
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