Easyinternetcafe

Executive Summary

Roger Jones, Managing Director of easyInternetcafe (eIc) hired Raj Chopra to analyze eIc’s current operations and provide a report on options for the future. Mr. Chopra addresses challenges to implement a new logistic system to improve operations and increase eIc’s profits. The original business model is to build and operate on the principle of ‘economics of scale’ or yield management. In 2003, with losses continuing to increase, eIc management has decided to radically revamp their operations. In order to eliminate the need for future investments in new stores, the strategy was changed to appoint franchisees for the new stores. These stores will decrease in size and will hold the franchisee accountable to incur costs of property and hardware.

The company’s current logistic operation represents a bottleneck and is the main causes for the ongoing losses. As Raj Chopra, four different logistics scenarios and providers were researched in detail. Mr. Chopra recommends Ingram Micros logistic services which offer most benefits for eIc. Ingram Micro provides complete integrated solutions including procurement, warehousing, transportation, configuration, billing & payment collection facilities and returns management. By outsourcing logistic operations to a 3rd party provider such as Ingram Micro will reduce the cost of logistics and labour per new store, from almost to £2,000.00 to £1,357.00.

Issue Identification

The main issue for easyInternetcafe was their high expectations of growth in demand and revenues did not materialize. By the time the second and third stores were opened, eIc had built yield management into its store management system. Yield management is a process of making numerous price adjustments in response to demand. Internet access demand varies. For example, elc offers a highly perishable product of selling one hour of Internet access time, once that hour elapsed profits are lost. It was quickly recognized that eIc‘s yield...