Table of Contents
Environmental and Root Cause Analysis
Alternatives and Options
UPS Global Logistics
Recommendations and Implementation
Monitor and Control
EasyInternetcafe was started by the easyGroup in the midst of the Internet boom in the United Kingdom. The mission of this company is to provide customers with access to the internet at the lowest possible cost. After the Internet Investment bubble burst, easyInternetcafe is experiencing a loss in profits and is struggling to survive. The original business concept was to have large, stand-alone cafes with 250-800 PCs per store. After the initial internet boom phased out, a decrease in profits and loss of business was happening. A re-structure of the company is required in order to keep the company operating. The company decided to downsize and are operating smaller franchised stores, consisting of only 20-30 PCs, and no staff on-site except for regular maintenance. With less involvement in store operations, easyInternetcafe is able to concentrate on activities of outsourcing all non-core management activities. EasyInternetecafe is finding that their current locations operate with too many PCs for the amount of business they receive, and they have no real strategic operating plan in place for new franchises that are opening, especially when it comes to their logistics system. The company has to determine whether they should outsource their logistics activities for store openings. Four alternatives are taken into consideration to help reduce overall logistics costs and to help the business become successful, 2 of which are considered pure logistics service providers, and the other 2 are categorized as integrated supply chain solution providers. Upon analyzing these options, it is recommended that easyInternetcafe should hire Ingram Micro to help them manage their supply chain activities and help them reduce their logistics costs.
The group’s early emphasis was on the rationale that high sales volume would quickly cover set-up costs, therefore they decided to open as many stores as quickly as possible. Many of the locations including London and New York City, had between 250-800 PCs at a single café, which resulted in a major profit loss as the demand for internet cafes declined. As losses mounted, management decided to re-evaluate their strategy and close some of their large money-losing stores and focus on franchising the operation, which calls for reducing the number of PC’s to 20 to 30 terminals. The company is facing an issue with supplying their new franchisees with equipment and furnishings to open their cafes. This has led to a critical logistics issue about how and from where to supply the stores, while still following standard opening operating procedures. By not having a strategic operating plan in place, there has been an increase in costs associated with setting up the new stores, logistics, and transportation. There have also been bottlenecks with logistics as they are only able to open stores based on the lead times outlined in their project plan.
Environmental and Root Cause Analysis
In their attempt to downsize their internet cafes, easyInternetcafe is adopting the franchise business model by opening smaller stores with fewer PCs, and only hiring staff for basic maintenance. The franchise owner will be responsible for the property costs and the hardware, and all franchise locations should look the same with identical signage, PC terminals, furniture, etc. EIC believes that by being less involved with the operations of the stores, they can focus on their core competence and outsource all non-core activities. Their core competence is their yield management model associated with the “Easy” brand, and the concept of giving value for money. EIC’s goal is to open 10 stores per week over the next 2-3...
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