Internet Cafe

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Monitor and Control

In order to monitor how well a job 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 operations 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 extension of the body (business) and not separate. Including the logistics managers in Company meetings or huddles allows EIC to keep track 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.

Conclusion

Because EasyInternetCafe has experienced financial hardship over the past several years, they have decided to go back to their core competencies, of which includes the yield management model. However, to focus on that, they have decided to outsource their non-core competencies which include logistics. By evaluating the 4 options available, it is determined that Ingram Micro fully takes over EIC’s non-core competence activities for a better price than the other alternatives. As a result, building a strong relationship with Ingram by keeping them accountable to EIC as well as relying on their logistics expertise will help EIC improve their business using the new franchise platform.

Reference

Menachof, David A., Logistics and Project Planning at easyInternetcafe Ltd., Cass Business School, 2005. SCMP Readings Manual

Executive Summary

EasyInternetcafe was launched in the late 1990’s by entrepreneur Stelios Haji-loannou as part of the Internet boom, under the umbrella of the easyGroup companies. Originally called easyEverything, Stelios in October 2001 changed the name to easyInternetcafe.

The mission of easyInternetcafe is to provide customers with access to the internet at the lowest possible cost. Despite the support and recognition from the public easyInternetcafe is currently experiencing lost profits and is on the verge of having the company be terminated all together.

The original concept of the cafes was to have large stand-alone cafes with 250-600 PCs per store. After the initial internet boom phased out a decrease in profits and loss business was happening. A required re-structure of the company is required in order to keep the company operating. Currently smaller franchised stores are operating with 20-30 PCs and no staff onsite except for regular maintenance. With less involvement in store operations easyInternetcafe is able to concentrate on activities of outsourcing all non-core management activities.

Some of the issues easyInternetecafe is currently experiencing are having locations operate with too many PCs for the amount of business, and having no real strategic operating plan in place for new franchise’s that are opening. Four alternatives are taken into consideration to help reduce overall costs and to help the business become successful. Through research on all four options it is determined that the best option for easyInternetcafe would be to hire Ingram Micro to help with new franchise’s opening and with the current locations that are already up and operating.

Issue(s) Identification

There are many different issues within easyInternetcafe and the way in which it operates. One of the main issues is the size of some of the café’s. Many of the café’s at single locations have 250-600 PC terminals to fill. With the decline in customers, and decline in hype around internet café’s the stores are not making a profit and are incurring cumulative losses of £80- £100 million over the period of 1999-2002.

Another issue easyInternetcafe is facing is there is no real strategic operating plan on how easyInternetcafe plans to supply and open each new franchise’s. This is an integral part of cost cutting to help 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 being incurred for the setup of new stores, increased logistics and transportation 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 strain on scalability, efficiency and bottlenecks for successful growth.

Environmental and Root Cause Analysis

EasyInternetcafe was launched in the late 1990’s by entrepreneur Stelios Haji-loannou as part of the Internet boom, under the umbrella of the easyGroup companies. Orginially called easyEverything, Stelios in October 2001 changed the name to easyInternetcafe.

The first store opened on June 21st, 1999 in Victoria, London with 330 PCs at a single café. Many stores later followed throughout Europe and eventually stores in New York, USA. Currently there are 47 stores with a total of 7267 PCs.

EasyInternetcafe currently is trying to re-vamp the internet café’s in hopes to increase profits and investments. In 2003 it was determined in order to eliminate the need for future investments in new stores the strategy would change, and stores would now be appointed as franchisees, and if possible for existing legacy stores (ie. company-owned) as well. With this new strategy Stelios decided stores should be smaller and would operate with only 20-30 PCs going forward.

The current plan in place is to have 10 stores open per week over the next 2-3 years, these new franchised café’s would be unmanned and no staff would be required at any store aside from the regular maintenance.

Logistic costs have been calculated at approximately £1300 for opening new stores; however this did not include outbound transport to the franchise. £602 per store was included for easyInternetcafe labor costs. After looking at calculations and the forecasting of opening 4 new stores per week over the next 3 years the annual logistics costs (excluding outbound transport costs) would total approximately £270,000; which included labour of £125,250 based of 208 store openings per year.

Alternatives and/or Options

In order to help reduce costs four alternatives have been found. Two of the options are considered to be pure logistics service provides and two are categorized as integrated supply chain solution provides.

Alternative