Appendix 1: Scenario – e-Commerce strategy Background to scenario The BBQfun Board of Directors and the CEO have decided to implement an e-commerce strategy to maintain or increase market share and revenue and satisfy customer needs in line with company strategic directions. You have been hired as an external consultant to manage operational planning activities for BBQfun's e-commerce strategy. Under the strategy, BBQfun would offer all products in an online store. Stock could be stored at no extra cost at existing stores. Customers would cover delivery costs. Currently, BBQfun has a website, but this website lacks e-commerce functionality. The website would need to be redeveloped to incorporate this functionality in line with relevant technical specifications. Existing infrastructure, such as office and store configurations, would need to be adapted to the new strategy. Additionally, assets, such as delivery vehicles would need to be acquired. New staff would need to be recruited and existing staff retrained or informed of the e-commerce strategy and associated operational and performance targets. All resourcing must be acquired and operations undertaken in accordance with relevant internal and external standards – legislation and codes of practice; intellectual property (IP) rights and responsibilities; and organisational policies and procedures. Preliminary approval has been given to amend existing budget and operational planning to incorporate this strategy. It is now 30 June 2013 and e-commerce operations are expected to be underway in one year and three months, by 1 October 2014. Scenario task As the external consultant, you will need to determine physical and human resourcing requirements. Review organisational documentation and undertake preliminary research on e-commerce. Consult with the following personnel to determine resourcing needs: ● Sales and Marketing Manager ● technology consultant. You will then need to plan physical and human resourcing and establish associated performance measures and targets. You may consider the Management Team of BBQfun, including team leaders in warehouses, to be resources for the implementation. Use description of their roles in operational planning when assigning responsibilities. Finally, you will need to propose resourcing and associated operational changes to the Operations General Manager, who will, in consultation with the CEO and Board of Directors, provide approval. Resourcing and budget: e-Commerce strategy After consulting with the management team at BBQfun, you determine: • eight online sales and customer service people will be needed to manage increased online customers • since stores are overstaffed, four of the required customer service staff could be sourced from existing employees at the two stores • no current staff have any online customer service skills • management would like to develop people through re-training rather than hire new staff to handle online sales • six delivery trucks needed to enable distribution • e-commerce website will take 50 days to develop • three forklifts are needed • four additional warehouse workers are needed • six additional drivers are needed • office space will need to be reconfigured. The following operational costs are associated with e-commerce business strategy. Costs: e-Commerce strategy (initial investment) Resources Costs Plant and equipment ● Delivery trucks $50,000 x 6 = $300,000 ● Forklifts $10,000 x 3 = $30,000 Promotional costs $300,000 Website developers $100,000 Staff training Online customer service training $3,000 per staff member = $24,000 Recruitment costs $30,000 Management change leadership training for store managers and team leaders $3,000 each = 1 Brisbane store manager, 4 Brisbane team leaders, 1 Gold Coast store manager and 3 Gold Coast team leaders x $3,000 = $27,000 Warehouse and office reconfiguration $50,000 Total $861,000 In addition, ongoing staff costs will be incurred. The expected life of the initial investment is expected to be three years. Costs: e-Commerce strategy (ongoing) Resources Costs Additional staff: (At $40,000 year average annual salary) • 4 online staff 4 x $40,000 ($160,000) per year for 3 years = $480,000 4 warehouse staff 4 x $40,000 ($160,000) per year for 3 years = $480,000 6 delivery drivers 6 x $40,000 = $240,000 per year for 3 years = $720,000 Total $1,680,000 The following expenses should be incurred in the 2014 financial year and be included in associated financial targets for spending: Additional staff $400,000 Additional marketing $300,000 Additional training $51,000 Recruitment $30,000 Benefits to business According to financial projection prepared by the CFO, the business expects the proposed strategy to be profitable over three years. Profitability index over three years Profitability index (PI) = Present value (PV) of future cash flows Present value (PV) of initial investment PI>1 indicates project should be undertaken FY 2014 FY 2015 FY 2016 Cash flow from operations (minus ongoing operational costs associated with e-commerce such as additional staffing) $200,000 $500,000 $800,000 Present value of future cash flows (discounted future cash flows with respect to opportunity cost, inflation) $180,000 +$420,000+$600,000 = $1,200,000 Present value of initial investment $861,000 Profitability index 1.39 The expected additional profit for 2014 would be $200,000. This figure should be added to targets. Risks to implementation After consulting with stakeholders at BBQfun, you determine: • medium risk of poor online sales • high risk of customer service quality problems for online customers leading to a breach of consumer law • high risk of staff misunderstanding changes and considering online sales as threat to jobs • medium risk of not being able to recruit fully trained online staff • low risk of loss of IP relating to confidential information contained within the e-commerce strategy when employees leave the organisation • medium risk of loss of IP ownership if a relationship with the website developer contract ceases • low level risk of not complying with WHS legislation through lack of risk assessment conducted on potential musculoskeletal disorders resulting from poor customer service workstation design • medium risk of wastage due to overstocking product in anticipation of increased online sales. All additional costs associated with contingency planning will be approved in accordance with BBQfun policies and procedures. Budget summary BBQfun 2013–2014 Approved budget by activities to be undertaken Income: Sales $11,000,000 Barbecues and related equipment. Investment income $1,567,000 Real estate investment income and rental of office space. Cost of goods sold (COGS) ($5,890,000) Cost of provision of goods, purchase of stock, distribution. Gross profit $6,677,000 Gross profit. Expenses: Wages, salaries and on costs $2,567,890 Wages, salaries, superannuation, work cover insurance, payroll tax. Consultancy fees $50,000 Project management: WHS management system; change management. Communication expenses $42,000 Telephone, ISP costs, IT support. Marketing $920,000 Cost of staff travel and associated costs for sales, etc. Premises expenses $1,000,000 Rent, electricity, maintenance, cleaning. Insurance $120,000 Liability insurance Depreciation and amortisation $177,569 Computers and capital equipment that is depreciated. Office supplies $65,068 Printing and stationery, postage, amenities. Training $62,187 Sales training: leadership, WHS, ethical/legal training. Total expenses $5,004,714 Net profit $1,672,286 Net income before tax. Operations General operating hours BBQfun operates Monday to Friday from 9 am to 5 pm. BBQfun will be operational year round except legislated holidays. Human resources Pat Mifsud, CEO Pat is responsible for working with the Board of Directors to oversee the business, set overall strategic directions, manage risk, and authorise large financial transactions. Riz Mehra, Chief Financial Officer Riz is responsible for preparing quarterly financial statements and overall budgeting. Riz is also responsible for overseeing budgets for cost centres and individual projects. At completion of financial quarters and at the end of projects, Riz is responsible for viewing budget variation reports and incorporating information into financial statements and financial projections. Kim Chen, Operations General Manager Kim is responsible for the day-to-day running of the company. Kim oversees the coordination of all operations. Kim is responsible for sponsoring projects that affect operations of the organisation as a whole. Kim works with the HR Manager to coordinate systems and projects to achieve company-wide synergy. Les Goodale, Human Resources (HR) Manager Les is responsible for the productive capacity and welfare of people at BBQfun. With the Operations General Manager, Les works to coordinate projects and management systems, such as performance management, recruitment and induction. Sam Lee, Marketing Manager Sam is responsible for the management of all aspects of marketing. Sam manages the activities of the marketing team. Pat Sweeney, Manager: Brisbane (Kenmore) Pat is responsible for the management of all aspects of the Brisbane store. Alex Mitchell, Manager: Gold Coast Alex is responsible for the management of all aspects of the Gold Coast store. A summary of human resources at each of the two locations appears below: Brisbane: Head office ● Employees: ○ 30 full-time and casual sales and customer service people, check-out staff trained in use of POS – integrated with ERP (enterprise resource planning) and CRM (customer relationship management) software system ○ senior management team (five) + one store manager ○ four sales team leaders ○ one delivery truck driver ○ one warehouse worker. Gold Coast operation ● Employees: ○ 30 full-time and casual sales and customer service people, check-out staff trained in use of POS – integrated with ERP (enterprise resource planning) and CRM (customer relationship management) software system ○ one store manager ○ three sales team leaders ○ one delivery truck driver ○ one warehouse worker. Office requirements The office space is leased and will accommodate the necessary office equipment, such as computers, fax machine, photocopier and other engineering equipment. Brisbane: Head office ● Location: Kenmore. ● Size: 15,000 square metres (50% warehouse, 50% display area). Warehouse area used at 45% of capacity, but poorly configured to accommodate heavy increase in distribution traffic. ● Large mezzanine office space (used to be occupied by online retailer, currently subdivided and occupied by the management team). ● Loading bay with large capacity (most of area incorporated into customer display area, could be easily and cheaply reconfigured to accommodate extra distribution). Gold Coast operation ● Location: Robina. ● Size: 12,000 square metres (50% warehouse, 50% display area). Warehouse area used at 50% of capacity, but poorly configured to accommodate heavy increase in distribution traffic. ● Large mezzanine open-plan office space with separate access (was previously rented out to a telemarketing company). ● Lots of spare office space. ● Loading bay with large capacity. Operating capital requirements BBQfun requires approximately five million dollars in working capital to sustain and ensure the business meets all opening and ongoing financial obligations. The company may experience financial pressures during slow sales periods. A long-term strategy to maintain a positive cash flow during these periods will be to diversify the company's product range and develop business opportunities such as e commerce to boost sales and sales capability overall. Operational expenses Wages, salaries and on-costs $2,567,890 Consultancy fees $50,000 Communication expenses $42,000 Marketing $920,000 Premises expenses $1,000,000 Insurance $120,000 Depreciation and amortisation $177,569 Office supplies $65,068 Training $62,187 Total Expenses $5,004,714 Insurance requirements BBQfun will have to incur costs for business liability insurance. The estimated cost for this requirement is $100,000 per year. Operational workflow 1. Conduct market research to determine needs. 2. Negotiate with suppliers. 3. Receive and warehouse products. 4. Provide service and information to warehouse customers. 5. Receive payment. 6. Arrange delivery of items (if required). BBQfun accepts cash, EFTPOS and major credit cards. Credit terms are available for trades. Operational plan (with strategic objectives, measures and tasks) FY 2013–2014 BBQfun Operational Plan (with strategic objectives, measures and tasks) FY 2013–2014 Objectives: Performance measures Tasks: 1 Engaging with customers through marketing, research and personalised service. ● Completion of market/marketing research. ● Completion of customer surveys. ● Completion of reports to identify marketing opportunities. ● Conduct quarterly surveys on customer satisfaction. ● Evaluation of market and marketing data to determine marketing opportunities. 2 Building reputation for quality products and quality customer service: ● Raise organisational profile by 20%. ● Improve client satisfaction performance by 25%. ● Percentage of brand recognition in sought-after categories in periodic customer surveys. ● Percentage of customers with positive view of organisational responsiveness, innovation, quality, ethics, safety. ● Number of customer complaints. ● Delivery times. ● Number of returned items. ● Audit of supplier quality. ● Regular contact with suppliers. ● Investigate resourcing needs: people, products. ● Fulfil resourcing and distribution needs in accordance with policies and procedures. ● Maintenance of enterprise resource management (ERP), point of sale (POS) and customer relationship management (CRM) systems. 3 Supporting people to perform via training and performance management. ● Numbers of injuries (Target = 0). ● Numbers of absentees (Target = <3% of total hours). ● Anti-discrimination complaints (Target=0). ● Lost Time Injury Frequency Rate (Target=2) ● Percentage completion of performance plans and performance management process. ● Numbers of coaching sessions completed. ● Numbers of operational-related training programs completed. ● Research effectiveness of possible incentives for: safe work achievement; healthy lifestyle. ● Engage workers with strategic goals of business and support professional development in line with strategic goals. (Targets to be set by individual managers). ● Management engagement with employees to achieve greater buy-in of organisational goals. ● Include explanation of how activities work with organisational strategic goals in all communications to internal personnel. ● Regular coaching. ● Training needs analysis and training (leadership, WHS, ethical/legal training). ● Strategic goals included in induction program. ● Employee incentives for performance in all areas relevant to operational and strategic goals. 4 Increasing sales revenue. General ledger accounts; financial statements: ● Revenue target = $11 million ● Profit target = $1,792,286 ● Marketing campaigns. ● Sales training for floor staff. 5 Reduce direct and indirect costs of operations. ● General ledger accounts; financial statements: ○ wages ○ cost of agent services ○ consultancy fees ○ wastage and associated expenses. ● Expense target = $5,004,714 ● COGS target = $5,890,000 ● Renegotiate with suppliers. ● Research potential new suppliers. ● Research new distribution possibilities, such as e commerce/delivery. ● Management engagement with employees to achieve greater employee support of organisational goals. ● Greater use by managers of budgets to encourage restraint. ● Greater focus on budget restraint in management of projects/activities. ● Inventory management through ERM to reduce overstocking and risk associated with storage. ● Incentives (as part of manager/employee performance management and bonus system). Appendix 2: Action plan template Milestone: Action and/or objective (to achieve strategic aims of physical or human resourcing) Date Person responsible Budget or resources (where applicable) Appendix 3: Balanced scorecard template KRA (key result area) Target KPI (key performance indicator) Result Appendix 4: Contingency plan template Contingency Plan Company name: BBQfun Name of person developing the plan: Who was consulted as part of this plan? Name Position Risk identified: Strategies/activities to minimise the risk By when By whom