Easyinternetcafe Case Essay

Executive SummaryDue to poor fiscal performance, EasyInternetCafe has obstinate divert from self-aggrandising cafes to a franchise model with little caf sizes. Its main goal is similarly to focus on its meaning competencies such as the yield solicitude model. In order to do so, it forget be outsourcing its non-core competence activities which embroil logistics. Ingram Micro has been chosen as the logistics supplier as they offer more full service activities while remain at a deplorableer woo than its competitors. By including Ingram Micro in corporate decisions and meetings, EIC can keep Ingram Micro accountable and stay updated with issues as they arise (just as they would if they owned the logistics arm of the Company).Issues IdentificationEasyInternetCafe (EIC) was launched in 1999 below the umbrella of the EasyGroup. Their mission is to hand over customers with internet access at low be and to capitalize on the tech boom. Despite the excellent turn out and recogn ition from the public, EIC is experiencing adversity of keeping their phone line profitable after the dot com bubble burst. The first inventory was move overed in Europe with 330 PCs at a single location and this business proposal of owning umteen large cafes that could domiciliate 250-500 PC terminals at each caf has not worked. They have decided to restructure their business by downsizing the cafes. They propose to do this by using the franchise business model. These franchised rememberings get out be sm solelyer and house 20-30 PC terminals and only need provide for basic maintenance. EIC believes that by universe 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.EICs goal was to open 10 stores per week over the next 2-3 years and in order to achieve this, a cost-efficient and flexible logistics system is w hat EIC needs to have in congeal so that their franchi interpret stores ar provided with equipment and setup. Because logistics is one of the non-core activities, the present logistics system get out be critically reviewed and the outsourcing options would be evaluated. Another issue easyInternetcafe is facing is there is no real strategic operating plan on how easyInternetcafe plans to supply and open each new franchises. This is an integral part of cost knifelike to serve well with the losses that have been experienced by the company. As a result of not having a strategic plan in place, this is resulting in increased costs macrocosm incurred for the setup of new stores, increased logistics and transferee costs, and bottlenecks happening with logistics, as they can only open as many stores as they can ship to and set up. This results in a farm animal on scalability, efficiency and bottlenecks for successful growth.Root Cause and Environmental abbreviationEasyInternetca fe currently is trying to re-vamp the internet cafs in hopes to increase sugar and investments. In 2003 it was determined in order to eliminate the need for prox investments in new stores the strategy would change, and stores would now be established as franchisees, and if possible for existing legacy stores (i.e. company-owned) as well. However, kicking of the operations of franchises allow for require time and still though with this new strategy of gap smaller stores with only 20-30 PCs will still need months and resources to start. Each store opening is like a project with the ending point being the opening of the store and some of these issues being logistical ones. From the predecessors plan, we can see the timetable for each activity. Since some activities overlap but we can calculate the thoroughgoing length of time as follows. Activity A +B + C + E + F + J + K = 7 + 28 + 28 + 2 + 2 + 2 + 2 +1 = 70 This nub that the average duration it should take to open the caf is 7 0 days.The current plan in place is to have 10 stores open per week over the next 2-3 years, these new franchised cafs would be unmanned and no staff would be required at any store aside from the reparation maintenance. The cost of logistics is not calculated accurately as it is shown as roughly 1300 for opening new stores however this did not include outbound carry-over to the franchise. 602 per store was included for easyInternetcafe labor costs. After looking at calculations and the prevision of opening 4 new stores per week over the next 3 years the annual logistics costs (excluding outbound transport costs) would total slightly 270,000 which included labour of 125,250 based of 208 store openings per year.Options and AlternativesIn order to supporter reduce costs four alternatives have been found. Two of the options are catched to be pure logistics service provides and two are categorized as compound supply chemical chain solution provides. UPS requires easyInternet cafe to procure equipment and couch with suppliers to deliver it to the UPS warehouse. once equipment arrives, UPS will consolidate orders, tack equipment, kit it together on pallets and arrange the transportation to the franchise store locations. Some pros and cons of UPS Global Logistics is, UPS will provide warehousing, however UPS will not maintain billing services, and the total cost of implementing the UPS proposal is 1110 of which 477 is easyInternetcafe labour costs.Similar services are offered by outgo to that of UPS, with the addition of supplier management services. Some of the pros are Excel would appoint two dedicated personnel, a contracts manager, and an administrator, they would also manage present stock, cipher store openings, manage purchase requirements, and co-ordinate and manage gross revenue talk as well as returns. Excel would also be the point of fall into place for franchisees and manage the whole accounts. The con of this service is implementation wo uld cost 57,000 per year. Estimated costs per store would be 1,434 of which 957 was logistics costs and 477 labor cost.Complete IT supply chain services are provided globally by Globalserve, including IT procurement. Some pros in regards to Globalserve are they make Value Added Resellers (VAR) for franchises in several countries. likewise, product is directly delivered to the polar franchises. Some of the cons are cost Globalserve would stretch a transaction tap of 3.25% and a local reseller mark-up of 5%, of the equipment purchase value for each transaction. Also included would be a one-off cost for service set up amounting to 10,000 and a 2,000 set up cost per country. Total cost per store would be 1,875+ labor costs of 381, totalling 2,256 per store the highest of all three alternatives and then far.The last option is Ingram Micro which is the largest B2B trade-only wholesale supplier of technology products and services. The pros of this provider are they are a warehouse an d transportation facility and they also provide computer configuration as well as a billing facility which would direct bill to each franchise. Two options to consider with this company are Option 1 which would total 560 which included supply, stock, configure kit together, and transport and collect payments for easyInternetcafe. Option 2 which would total 1,453 would include providing logistics, but not procurement.Recommendation and ImplementationFrom the four proposals, Ingram appears to be the virtually suitable for EasyInternetCafe. Of the other options, UPS does not want any risk by maintaining the billing system. Because of this, EIC will still need to provide these services even though it is not part of their core-competencies. Exel practically offers the same service as UPS (including billing services) but includes the hiring of a contracts manager and administrator, of which, contribute to a higher(prenominal) logistical cost than UPS. Globalserve will add Value Added Resllers for the franchise in several countries. They will deliver the products locally and collect the costs of equipment and delivery charges from the franchisee directly.Although their labour cost is lower than UPS and Exel, their logistics cost is higher than the two. The last option, Ingram, provides a warehouse facility, directs billing to the franchise, has a transportation facility, and provides IT equipment. For all this, they only charge 560 GBP. If EIC buys their IT equipment separately, they will need to spend 1,357 GBP in comparison. That being said, choosing Ingram allows EIC to focus on their core competencies while using a financially beneficial logistics provider. observe and ControlIn order to monitor how well a ancestry Ingram is doing, EasyInternetCafe will need to be provided with weekly updates on inventory levels for all things EIC uses. Having these reports will allow EIC to determine where they stand logistically and can integrate their sales and operation s together to improve growth (e.g. number of franchisee openings). Further, even though the logistics portion is being outsourced, it is very important to think of them as an propagation of the body (business) and not separate. Including the logistics managers in Company meetings or huddles allows EIC to keep click of any issues that may arise.Site visits to the warehouses and operational areas will also help to maintain the relationship and show Ingram that EIC cares and values what they do. Once everything is running smoothly, meetings will be able to be moved to quarterly then semi-annually. It will be important to continue meetings so that if problems arise they will be caught in a timely manner, this will help with the success of the business as well as ensure the company remains profitable.