Case Study Undergraduate 1,577 words

EasyInternetcafe Logistics Outsourcing Strategy

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Abstract

This case study examines EasyInternetcafe's strategic pivot from large company-owned cafes to a franchise model with outsourced logistics operations. Following cumulative losses of £80–100 million after the dotcom collapse, EIC restructured its business to focus on core competencies in yield management while delegating logistics to external providers. The paper evaluates four logistics outsourcing alternatives—Ingram Micro, Globalserve, UPS Global Logistics, and Exel—against decision criteria including cost-effectiveness, growth opportunity, operational efficiency, and economies of scale. Through SWOT analysis and quantitative assessment, the study concludes that Ingram Micro represents the optimal solution, enabling EIC to reduce per-store logistics costs and labor expenses while maintaining strategic control through collaborative governance.

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What makes this paper effective

Clear problem framing: Establishes the financial crisis (£80–100 million in losses) and operational bottleneck (logistics) upfront, making the urgency of restructuring self-evident.
Structured decision analysis: Uses a formal alternatives framework (four named providers) evaluated against explicit criteria (cost, growth, efficiency, profitability, core competence, economies of scale), making the comparison transparent and replicable.
Quantitative rigor: Provides concrete cost breakdowns per store (£560 vs. £1,875 vs. £1,110 vs. £1,434) and annual projections (208 stores/year), anchoring recommendations in data rather than opinion.
SWOT integration: The SWOT analysis directly supports the decision to outsource, linking strategic weaknesses (high fixed costs, no operating plan) to concrete outsourcing benefits (eliminating capital drain, focusing on yield management).

Key academic technique demonstrated

This paper exemplifies the case-based decision analysis methodology common in business strategy and operations management. It combines qualitative strategic context (SWOT, root cause analysis) with quantitative comparative evaluation (cost per store, annual labor savings) to justify a complex operational decision. The technique is particularly strong in its use of decision criteria as an explicit filter: each alternative is judged against the same six benchmarks, eliminating subjective bias and enabling stakeholders to trace how Ingram Micro emerged as the preferred choice.

Structure breakdown

The paper follows a diagnostic-to-prescriptive arc. It opens with the executive summary and issue identification (problem and urgency), then pivots to root cause analysis (why the current model failed—high fixed costs, logistics bottleneck, misalignment with core competencies). The heart of the paper is the alternatives section, which lists four real logistics providers and evaluates their pros and cons against six decision criteria. The recommendation flows naturally from this evaluation, and the implementation and monitoring sections address execution risk and governance. This structure mirrors a management consulting report: define problem → analyze root causes → generate and screen alternatives → recommend → implement.

Issue Identification

Strategic Issues – Long Term

EasyInternetcafe (EIC) has been experiencing severe financial difficulty after the dotcom bubble burst. Despite strong public support and brand recognition, the company's cumulative losses have reached £80–100 million. The original concept of operating large stand-alone cafes with 250–600 PC terminals proved unsustainable, requiring fundamental business restructuring. The company's new strategy calls for smaller franchised locations with approximately 20–30 PC terminals, operated with minimal staff to reduce fixed costs and capital requirements.

Tactical Issues – Short Term

Three immediate operational challenges have been identified:

Strategic Perspective

Management has recognized fundamental flaws in the existing business model and initiated a comprehensive change strategy. The company will transition from company ownership to a franchisee-based model, where franchisees assume the capital costs of property and hardware. This approach is designed to eliminate ongoing capital drain on the parent company.

Root Cause Analysis

The new operational model features smaller stores (20–30 PC terminals) with minimal staffing, supported by an aggressive growth plan targeting 10 new store openings per week over the next two to three years. The company has committed to returning to its core competency in yield management—the science of optimizing revenue per unit of capacity—while outsourcing all non-core activities, particularly logistics.

SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Quantitative Analysis – Current Situation

Financial analysis reveals the urgency of operational change:

Qualitative Assessment

EIC must achieve profitability within nine months or face forced closure. Growth and cost-effective logistics operations are essential to company survival. The business must immediately outsource non-core activities, including logistics, to redirect management focus and capital toward revenue-generating core competencies.

Decision Criteria

Four key decision criteria were established to evaluate logistics outsourcing alternatives:

Alternative 1: Ingram Micro

Alternative Options and Evaluation

Advantages:

Disadvantages:

Alternative 2: Globalserve

Advantages:

Disadvantages:

Alternative 3: UPS Global Logistics

Advantages:

Disadvantages:

Alternative 4: Exel

Advantages:

Disadvantages:

Comparative Cost Analysis

When evaluated against the four alternatives, cost differences are substantial. Ingram Micro's total per-store cost of £560 is substantially lower than all alternatives: Globalserve at £2,256 (4x higher), UPS at £1,110 (2x higher), and Exel at £1,434 (2.5x higher). Over the planned expansion of 208 new stores annually, this cost differential translates to annual savings of over £350,000 with Ingram Micro compared to Globalserve, the next-lowest-cost option in most scenarios.

Recommended Strategy: Ingram Micro Partnership

Based on comprehensive evaluation against the six decision criteria, Ingram Micro emerges as the optimal logistics outsourcing partner for EasyInternetcafe. The recommendation is grounded in four primary factors:

Cost Leadership: At £560 per store, Ingram Micro's total cost is the lowest among all four alternatives by a significant margin, directly supporting EIC's critical objective of returning to profitability within nine months.

Integrated Service Delivery: Ingram Micro's end-to-end supply chain solution—encompassing procurement, warehousing, transportation, returns management, and configuration—eliminates the operational complexity and administrative burden that competitors impose on EIC. The no-charge warehousing and inventory management services provide additional cost relief unavailable from other providers.

Direct Franchisee Billing: Ingram Micro's ability to bill franchisees directly and collect payments reduces EIC's working capital requirements and administrative overhead, enabling the company to maintain focus on yield management rather than logistics administration.

Recommendations and Implementation

Growth Enablement: The cost-effective model directly supports the aggressive growth target of 10 new stores per week. Lower per-store logistics costs mean each new opening contributes to profitability rather than accumulating losses, a critical requirement for the franchise model's success.

Implementation Approach

Implementation of the Ingram Micro partnership should proceed through three coordinated workstreams:

Phase 1 – Transition Planning (Weeks 1–4): Establish detailed service level agreements with Ingram Micro, define data integration requirements, and establish governance protocols. EIC management and Ingram Micro leadership should jointly design the operational handoff from in-house logistics to the provider.

Phase 2 – Pilot Deployment (Weeks 5–12): Begin Ingram Micro logistics support for new franchisees in a limited geographic market, enabling refinement of processes before full-scale rollout. Monitor cost performance and service quality metrics closely during this phase.

Phase 3 – Full-Scale Expansion (Weeks 13+): Roll out Ingram Micro support across all new store openings, targeting the 10-stores-per-week growth objective. Simultaneously migrate logistics for existing company-operated stores to Ingram Micro where operationally feasible.

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Monitoring and Strategic Control · 180 words

"Governance framework for outsourced logistics oversight"

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Key Concepts in This Paper

Logistics Outsourcing Franchise Model Yield Management Supply Chain Strategy Cost Reduction Third-Party Logistics Dotcom Bubble Core Competencies