Grocery Gateway

Executive Summary

Founded in 1997, Grocery Gateway ("GG" or the "Company") was the largest direct online grocer in Canada. GG had been able to achieve only 2.7 stops per hour on area (SPHOA), which was 67.5% of its target of 4 stops per hour. The vice-president, Dominique Van Voorhis, has to make recommendations to improve the productivity of Grocery Gateway's delivery operations at the weekly management meeting seven days hence.

In order to achieve the target of 4 SPHOA by planning the routes effectively and increasing the drivers' productivity, GG is recommended to expand its licensing agreement with Descartes to include the route analyzer

Problem Statement

Dominique Van Voorhis has to make recommendations to improve the productivity of Grocery Gateway's delivery operations to reach the target of 4 SPHOA from the current 2.7 SPHOA at the weekly management meeting seven days hence.

Background Information

 GG was the largest direct online grocer in Canada providing home delivery to approximately 125,000 customers in the Greater Toronto area, which covered a territory of approximately 3,200 square kilometers.

 GG offered 6,500 items at its website (www.thegrocerygateway.com), including dry goods, health and beauty products, meat, fresh produce, frozen foods, wine and beer.

 GG 's products were priced competitively with grocery retailers, even the customers were expected to place minimum orders of $60 and pay an $8 delivery fee.

 GG's systems integrated a variety of technology solutions (RIMMS, WMS, OPS, and WCS), built around five main systems that were used to generate and execute the customer orders.

 GG had been able to achieve only 2.7 SPHOA, which is 67.5% of its target of 4 SPHOA.

Situation Analysis

Mission Statement

We're dedicated to exceeding expectations by offering the best food experience to every customer, every time - whether in our stores or at your door. (www.grocerygateway.com)

Objectives and goals

* Lowest cost capability with best service

* Continued aggressive growth with a target of 5,000 orders per day within three years

* Generate a net operating cash inflow in 2001 on a variable cost basis

* Achieve 4 SPHOA and reduce delivery windows to 30 minutes

S.W.O.T Analysis

Strengths

 Competitive prices with grocery retailers

 The largest direct online grocer in Canada

 125,000 registered customers

 Provide 6,500 items at the grocerygateway.com

 Greater Toronto area, the largest urban centre in Canada, is relatively dense with a population of seven million people

 Secured $33 million in 2nd phase venture capital funding in May 2000 for growth

 The fulfillment center is centrally located in Downsview, in contrast to the former location in Mississauga.

 Variety of technology solutions in place to generate and execute orders and optimize delivery route

 Appeal to people who don't like and/or who don't have time for grocery shopping

 Strong financial performance with annual revenue of approximately 58.7 million (see financial analysis)

Weaknesses

 Minimum order requirement ($60)

 Delivery charge ($8)

 Incurred loss of $3.11 delivery cost per order (see financial analysis section)

 Payment cannot be made over the Internet

 Long delivery window (90 minutes)

 Short notice to customers before arrival (10 minutes)

 Perishable items

 Customers need to have computer knowledge to place an order

 Customers cannot see or touch the actual products

 Under capacity problems

 Company is growing (positive percentage growth over the previous week)

 GG's customer base is limited to people who has internet access and who is comfortable with online shopping

Opportunities

 Grocery shopping is a huge market

 Online shopping becomes popular

 Increase sales through broader appeal and reach

 New products can be listed on their website, such as household products

 Operate below full capacity

Threats

 Price war from big grocery retailers such as Wal-Mart

 Sales volumes were subject to seasonality

 Unfavorable weather or driving conditions will affect the timeliness of the delivery

 Food may be spoiled or damaged

Market Analysis

 GG provided its service to the Greater Toronto Area only

 Toronto, New York, and Mississauga account for about 70% volume of orders per day

 Toronto and New York have the highest quantity growth compared to the previous week

 The majority of the customers place order on Monday, Tuesday, Thursday, and Friday

 GG targeted customers who don't like grocery shopping

 GG customers were attracted to the convenience

Segmentation and Competition Analysis

Market Segmentation Analysis

The

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