Theorganicgrocer.com is an online supplier of organically produced fruit and vegetables. Clients within a 50 km radius of Bangor in Wales are promised next-day delivery at a time and place selected by the customer. Maria Heales, a joint owner says, “Our business has been based on market research. We’ve done a great deal of background work to ensure our business model works.

All the early signs suggested that people would order online if the quality was good, payment was secure, the price was right and delivery could be trusted…. ‘Dependability, reliability, timeliness, quality and price’ were the words that sung out,” she says. The service offering includes delivery, 9 A.M. to 9 P.M., six days a week; organic produce; and customer-specified date and time of delivery. All produce is direct from the market on the day of delivery from a chilled vehicle. The Web site is updated daily to reflect current price and in-season produce. “The key to our success,” Maria says, “is the simplicity of use of our Web site.”

Vehicle route planning ensures deliveries are optimized and aggregated stock ordering means only produce previously ordered by customers is purchased. Customers’ payments are made online using a secure, encrypted facility administered by a national bank. “But our business has grown, so we need to expand capacity and capability. We are no longer a fruit and ‘veg’ stall online!” Maria’s husband and business partner, Marcus, says. Their goal now is to expand their business to include regional franchising, product range expansion and, for example, birthday gifts, filled baskets, and ready-to-eat gourmet selections. Operating from a small “lock-up” unit on the fringe of town, expansion of the business would require considerable capital investment. Moreover, the operations of the future business will be more complex.

Currently, 95 percent of the customers are households, with the remainder being local restaurants. Approximately 20 percent of their customer base generates 80 percent of the profit. Theorganicgrocer.com has a financial system—a computer application that Marcus modified to meet its needs. A separate computer package generates advertising material and mail-outs. This tends to be done by Maria when time permits. However, there is little market information to support strategic operations planning. Much of Maria and Marcus’s aspiration is based on the success of their current operations and the hope that the trend continues. Whilst there are several competitors supplying online vegetables, they do not offer organic products and they have limited products. They are, however, some 20 percent cheaper than Theorganicgrocer.com.

As business has grown, there have been complaints of damaged products, and growth in customers has caused the average on-time deliveries (plus or minus 20 minutes) to fall from 95 percent to 75 percent. All this, Maria and Marcus argue, is more reason for expanding the business.

Marcus enjoys the technical aspects of the online business, and spends much of his time modifying and improving the Web site. When necessary, he helps to consolidate customers’ orders. “I think my time is better spent on Web site development,” Marcus says; “It’s critical for the business if it goes down or it isn’t showing current product information, then sales are jeopardized.” Presently, Maria takes responsibility for placing orders to their thirty suppliers. Maria and the delivery drivers pack customer orders into salvaged cardboard boxes that are of various sizes and often damaged. “But at least they are free!” she laughs.

Questions:

1. What are the comparative operational differences of a conventional “bricks and mortar” grocery to an online operation? What are the comparative value chains for each system? Illustrate the flow structure between conventional and online operation as well. 

2. What are the key three processes in the online operation? 

3. Where are the possible operational problem areas of their online business, now and in the future?

4. What operational improvements need to be taken now to improve competitiveness?

Answer rating: 100% (QA)

1 The biggest advantage for a brick and mortar operation is customer security To a customer if a company has physical presence it is seen as more reliable as the company is far less likely to fold ove... View the full answer