Case Prima 1000 supermarkets and their e-commerce solution The Norwegian supermarket chain Prima 1000 operates in all Norwegian counties and has currently around 400 outlets. The chain has a relatively wide assortment of food (including fresh meat and fish) and non-food products, and the overall profitability is good. Prima 1000 ASA Prima 1000 Prima 1000 ASA: Top management, marketing and customer relations, procurement, logistics and now also Prima Digistore Services AS Prima 1000 Services AS: Accounting, IT-services, and HR management Prima 1000 Prima 1000 Prima 1000 West AS Prima 1000 North AS East AS South AS 152 shops 96 shops 88 shops 66 shops Prima 1000 Online (2002-2020) The chain launched their e-commerce platform already in 2002, as a second sales channel for around 60 of their supermarkets. It is a local Prima 1000 store that delivers the goods to the e-commerce customers in their own geographic market. Hence, there is no centralized warehouse, and the orders are packed and shipped from the local supermarket. Customers can go to the e-commerce platform (prima1000online.no), enter their postal code and check if Prima 1000 can deliver to their address This platform is only used for ordering and paying, and it is not integrated with other modules in the company's Enterprise Resource Management (ERP) systems CS Scanned with CamScanner The company policy until the spring of 2020 was that any supermarket that wanted the possibility to deliver to online customers was free to do this, but no specific actions were taken from the top management to convince the remaining 340 stores to join the e-commerce platform. When most of the local store managers expressed the view that "it is better that the customers come to us and do their shopping themselves, instead of asking us to it on their behalf", it goes without saying that the e-commerce business suffered from lack of internal support for many years. Hence, the net-based sales did not contribute much to the chain's overall sales figures the first 18 years, and around 80% of the customers in this segment were small and medium sized companies and local public entities, such as schools. Few private customers chose to order their groceries online, although they now could get what they needed delivered at home, often the same day, for an extra transportation fee of only kr 89.00. This fee was even reduced to kr 39.00 for a while to attract more online customers, but was in April 2020 increased to kr 79.00, which also seems to be rate for 2021 and 2022. The Corona Pandemic that hit Norway in the spring of 2020 changed the management's strategy on e-commerce! Many customers were now in quarantine or in isolation due to the COVID-19 virus, and others feared to go out to do their shopping. In April 2020 it was decided that all Prima 1000 stores should offer their customers the possibility to order online by the end of 2020. For most of the stores, this change was very resource-demanding and many failed in establishing well-functioning internal processes. The consequences were delayed deliveries as well as incomplete deliveries when customers ordered goods that were out of stock. Many of the customers complained and a few of the stories from unsatisfied customers were picked up by media, challenging Prima 1000's solid reputation. Prima Digistore (2021-) In October 2020, the e-commerce business was renamed and placed in a new organizational unit in Prima 1000 ASA. Prima Digistore is led by Mario Broccoli, who previously worked as an area manager for the company and knows the organization and industry very well. When Prima 1000 revised its corporate strategy for 2021-2024, the company's e-commerce solution was now an integrated part of the company's long-term planning process. This strategy concludes how an integrated with four overall targets that relate to the e-commerce segment: 1. 15% of the total sales shall by the end of 2024 come from the e-commerce customers. No store zamon shall have less than 8% net-based sales. 2. The net total profit contribution from the net-based sales shall be at least 26.0%, when all direct costs are included 3. 4. More than 90% of all orders placed before 10 AM shall be delivered by 6 PM the same day More than 90% of the deliveries shall be identical to the customers' orders (meaning that the customers get exactly what they order and there are no needs for substitute goods if the store is out of stock).. There are currently no plans to revise the Internet platform, but it is now accessible through the frontpage of company's main web site (prima1000.no). CS Scanned with CamScanner In another document, Mario Broccoli described a standardized procedure for the handling of an order that is placed on the Internet platform. This business process can be grouped in three main groups, with altogether 15 activities, describing the process cycle from start to stop: 1 Placement of customer orders: 1.1 Customer logs in through a two-factor identification authentication process (Bank-ID). Customer picks articles from the product database to a virtual shopping cart. 1.2 1.3 Customer pays (VISA or Mastercard) and checks out, where the preferred time for delivery of the goods is stated, within the limitations of the logistics (1) 1.4 Two order confirmations are sent by e-mail from the e-commerce application; one to the customer and one to the local Prima 1000 store that this customer "belongs too". Order handling: 2.1 The local Prima 1000 store prints out the order confirmations and sort them in a box at the shop's office, grouped after preferred delivery of the goods. 2.2 An employee picks up the order confirmation and start picking the goods ordered, around 30 minutes before planned pick-up by the external courier service that handles the transportation to the customers. 2.3 The employee orders a pick-up of goods from the courier service. 2.4 If a product cannot be delivered as ordered because the store is temporarily out of stock, the employee writes down this article on a "missing goods list", so the store manager can order these goods. If a substitute product is delivered that costs more than the article originally ordered, there will be no extra charge. If the store must replace the ordered product with a cheaper one, the customer is compensated in cash that is put in an envelope and placed in the bag. 2.5 The employee registers the sales in the cash register and enter "prepaid" in the check-out phase, enabling the system to identify that this is a net client and not a regular customer. 2.6 The goods are packed in environmental-friendly paper bags and are ready for pick-up. The order confirmation with customer name, address and phone is attached to one of the bags. Transportation: 3.1 The courier service picks up the goods and writes down the name of the customer, the address, and the transportation distance on a dispatch list. 3.2 The courier service transports the goods to the customer's address. This average distance is eight kilometers back and forth, but in around 10% of the cases the distance exceeds 30 kilometers. The goods are delivered and the customer sign on the dispatch list. 3.3 3.4 The delivery van drives back and once a week the dispatch list is sent to the store. 3.5 The store pays for the transportation weekly, based on the number of deliveries and the mileage covered. () The delivery algorithm is as follows: . Monday through Friday: Goods ordered before 10 AM can be delivered between 2 PM and 6 PM same day, according to the customer's wishes. Monday through Thursday: Goods ordered after 10 AM can be delivered between 10 AM and 6 PM next day, according to the customer's wishes. Friday through Sunday: Goods ordered after 10 AM on Friday until 12 PM on Sunday can be delivered the following Monday, between 10 AM and 6 PM, according to the customer's wishes. In the same document, Mario Broccoli sketched some cause and effect-relationships between critical success factors that in his opinion may lead to an increased financial value creation for Prima Digistore. This strategy map looks as follows: CS Scanned with CamScanner 2. 3. High sales volume Financial value creation. Customer loyalty Customer satisfaction High customer profitability On-time Deliveries as ordered deliveries Sufficient Good training routines Well-functioning technology capacity Question 1 (30%) Suggest KPIs that can be used for the financial reporting of Prima 1000 Digistore's activities, both for each of the 400 supermarkets that belong to the Prima 1000 chain, as well as reports for the consolidated monthly reports to the top management team. Question 2 (30%) Comment on the strategy map for Prima 1000 Digistore - are there in your opinion other success factors that are so critical for the company that they should be included in the strategy map? Suggest at least five non-financing KPIs that the company can use in its regular management reporting, in addition to the financial KPIs. Question 3 (20%) Comment on Prima 1000 Digistore's described routine description for the standardized sales process. In your opinion, are there activities that are currently performed that conflict with the classical Lean- philosophy and the nine corresponding sources of organizational waste? Suggest actions that can improve the effectiveness of this process. Question 4 (20%) In his 1996 article "What is Strategy", Michael Porter writes that operational effectiveness is "necessary, but not sufficient". Discuss Porter's views considering The Lean Philosophy as well as The Resource Based View - in your opinion, are those views in conflict with each other? CS Scanned with CamScanner Effective order handling Case Prima 1000 supermarkets and their e-commerce solution The Norwegian supermarket chain Prima 1000 operates in all Norwegian counties and has currently around 400 outlets. The chain has a relatively wide assortment of food (including fresh meat and fish) and non-food products, and the overall profitability is good. Prima 1000 ASA Prima 1000 Prima 1000 ASA: Top management, marketing and customer relations, procurement, logistics and now also Prima Digistore Services AS Prima 1000 Services AS: Accounting, IT-services, and HR management Prima 1000 Prima 1000 Prima 1000 West AS Prima 1000 North AS East AS South AS 152 shops 96 shops 88 shops 66 shops Prima 1000 Online (2002-2020) The chain launched their e-commerce platform already in 2002, as a second sales channel for around 60 of their supermarkets. It is a local Prima 1000 store that delivers the goods to the e-commerce customers in their own geographic market. Hence, there is no centralized warehouse, and the orders are packed and shipped from the local supermarket. Customers can go to the e-commerce platform (prima1000online.no), enter their postal code and check if Prima 1000 can deliver to their address This platform is only used for ordering and paying, and it is not integrated with other modules in the company's Enterprise Resource Management (ERP) systems CS Scanned with CamScanner The company policy until the spring of 2020 was that any supermarket that wanted the possibility to deliver to online customers was free to do this, but no specific actions were taken from the top management to convince the remaining 340 stores to join the e-commerce platform. When most of the local store managers expressed the view that "it is better that the customers come to us and do their shopping themselves, instead of asking us to it on their behalf", it goes without saying that the e-commerce business suffered from lack of internal support for many years. Hence, the net-based sales did not contribute much to the chain's overall sales figures the first 18 years, and around 80% of the customers in this segment were small and medium sized companies and local public entities, such as schools. Few private customers chose to order their groceries online, although they now could get what they needed delivered at home, often the same day, for an extra transportation fee of only kr 89.00. This fee was even reduced to kr 39.00 for a while to attract more online customers, but was in April 2020 increased to kr 79.00, which also seems to be rate for 2021 and 2022. The Corona Pandemic that hit Norway in the spring of 2020 changed the management's strategy on e-commerce! Many customers were now in quarantine or in isolation due to the COVID-19 virus, and others feared to go out to do their shopping. In April 2020 it was decided that all Prima 1000 stores should offer their customers the possibility to order online by the end of 2020. For most of the stores, this change was very resource-demanding and many failed in establishing well-functioning internal processes. The consequences were delayed deliveries as well as incomplete deliveries when customers ordered goods that were out of stock. Many of the customers complained and a few of the stories from unsatisfied customers were picked up by media, challenging Prima 1000's solid reputation. Prima Digistore (2021-) In October 2020, the e-commerce business was renamed and placed in a new organizational unit in Prima 1000 ASA. Prima Digistore is led by Mario Broccoli, who previously worked as an area manager for the company and knows the organization and industry very well. When Prima 1000 revised its corporate strategy for 2021-2024, the company's e-commerce solution was now an integrated part of the company's long-term planning process. This strategy concludes how an integrated with four overall targets that relate to the e-commerce segment: 1. 15% of the total sales shall by the end of 2024 come from the e-commerce customers. No store zamon shall have less than 8% net-based sales. 2. The net total profit contribution from the net-based sales shall be at least 26.0%, when all direct costs are included 3. 4. More than 90% of all orders placed before 10 AM shall be delivered by 6 PM the same day More than 90% of the deliveries shall be identical to the customers' orders (meaning that the customers get exactly what they order and there are no needs for substitute goods if the store is out of stock).. There are currently no plans to revise the Internet platform, but it is now accessible through the frontpage of company's main web site (prima1000.no). CS Scanned with CamScanner In another document, Mario Broccoli described a standardized procedure for the handling of an order that is placed on the Internet platform. This business process can be grouped in three main groups, with altogether 15 activities, describing the process cycle from start to stop: 1 Placement of customer orders: 1.1 Customer logs in through a two-factor identification authentication process (Bank-ID). Customer picks articles from the product database to a virtual shopping cart. 1.2 1.3 Customer pays (VISA or Mastercard) and checks out, where the preferred time for delivery of the goods is stated, within the limitations of the logistics (1) 1.4 Two order confirmations are sent by e-mail from the e-commerce application; one to the customer and one to the local Prima 1000 store that this customer "belongs too". Order handling: 2.1 The local Prima 1000 store prints out the order confirmations and sort them in a box at the shop's office, grouped after preferred delivery of the goods. 2.2 An employee picks up the order confirmation and start picking the goods ordered, around 30 minutes before planned pick-up by the external courier service that handles the transportation to the customers. 2.3 The employee orders a pick-up of goods from the courier service. 2.4 If a product cannot be delivered as ordered because the store is temporarily out of stock, the employee writes down this article on a "missing goods list", so the store manager can order these goods. If a substitute product is delivered that costs more than the article originally ordered, there will be no extra charge. If the store must replace the ordered product with a cheaper one, the customer is compensated in cash that is put in an envelope and placed in the bag. 2.5 The employee registers the sales in the cash register and enter "prepaid" in the check-out phase, enabling the system to identify that this is a net client and not a regular customer. 2.6 The goods are packed in environmental-friendly paper bags and are ready for pick-up. The order confirmation with customer name, address and phone is attached to one of the bags. Transportation: 3.1 The courier service picks up the goods and writes down the name of the customer, the address, and the transportation distance on a dispatch list. 3.2 The courier service transports the goods to the customer's address. This average distance is eight kilometers back and forth, but in around 10% of the cases the distance exceeds 30 kilometers. The goods are delivered and the customer sign on the dispatch list. 3.3 3.4 The delivery van drives back and once a week the dispatch list is sent to the store. 3.5 The store pays for the transportation weekly, based on the number of deliveries and the mileage covered. () The delivery algorithm is as follows: . Monday through Friday: Goods ordered before 10 AM can be delivered between 2 PM and 6 PM same day, according to the customer's wishes. Monday through Thursday: Goods ordered after 10 AM can be delivered between 10 AM and 6 PM next day, according to the customer's wishes. Friday through Sunday: Goods ordered after 10 AM on Friday until 12 PM on Sunday can be delivered the following Monday, between 10 AM and 6 PM, according to the customer's wishes. In the same document, Mario Broccoli sketched some cause and effect-relationships between critical success factors that in his opinion may lead to an increased financial value creation for Prima Digistore. This strategy map looks as follows: CS Scanned with CamScanner 2. 3. High sales volume Financial value creation. Customer loyalty Customer satisfaction High customer profitability On-time Deliveries as ordered deliveries Sufficient Good training routines Well-functioning technology capacity Question 1 (30%) Suggest KPIs that can be used for the financial reporting of Prima 1000 Digistore's activities, both for each of the 400 supermarkets that belong to the Prima 1000 chain, as well as reports for the consolidated monthly reports to the top management team. Question 2 (30%) Comment on the strategy map for Prima 1000 Digistore - are there in your opinion other success factors that are so critical for the company that they should be included in the strategy map? Suggest at least five non-financing KPIs that the company can use in its regular management reporting, in addition to the financial KPIs. Question 3 (20%) Comment on Prima 1000 Digistore's described routine description for the standardized sales process. In your opinion, are there activities that are currently performed that conflict with the classical Lean- philosophy and the nine corresponding sources of organizational waste? Suggest actions that can improve the effectiveness of this process. Question 4 (20%) In his 1996 article "What is Strategy", Michael Porter writes that operational effectiveness is "necessary, but not sufficient". Discuss Porter's views considering The Lean Philosophy as well as The Resource Based View - in your opinion, are those views in conflict with each other? CS Scanned with CamScanner Effective order handling