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WEBVAN: THE NEW AND IMPROVED MILKMAN
He who does not mind his belly will hardly mind anything else. ...
Webvan, founded by Louis Borders (founder of bookstore chain Borders Group), set out to build
a nationwide infrastructure to solve the logistics problem. Webvan put together a sophisticated
distribution and information system, optimized from the ground up for e-commerce. After
launching its San Francisco Bay Area service in June 1999, Webvan went public on November
5, 1999 at an offering price of $15 a share. ...
Webvan: The New and Improved Milkman EC-31 p. ... Can Webvan deliver? ...
The Andersen study found that every group except traditional shoppers was willing to buy
groceries online, and most of the groups showed strong interest. ...
Webvan: The New and Improved Milkman EC-31 p. 3
According to the Andersen study, the online grocery opportunity was driven by the desire of
consumers, particularly dual-income families, to save time. ... 8 Webvan sought
to capitalize on this opportunity, hoping to become the milkman of the 21st century.
WEBVAN
Webvan launched operations in the San Francisco Bay Area in June 1999. ... In May 2000, Webvan launched its Atlanta operations and
expanded to Chicago in August 2000. ... com,
agreed to merge with Webvan. By the end of 2000, Webvan served ten markets.
Webvan designed state-of-the-art automated warehouses that could serve an entire metropolitan
market within a radius of 50 miles. ... Webvan expected each DC to bring in $300 million in revenue by 2003. (For a
review of Webvan’s financial and operating data, see Exhibits 3A-3B).
In the fourth quarter of 2000, Webvan was operating at a run rate of 2,250 orders per day in Los
Angeles and 2,160 in San Francisco. Besides groceries, Webvan delivered books, CDs, health
and beauty supplies, small electronics, flowers, office supplies and some clothes, and it offered
film development services. In the fourth quarter of 2000, 34% of Webvan customers in the San
Francisco Bay Area added general merchandise products to their grocery orders, up from 26% in
the third quarter of 2000. In January 2001, Webvan opened on its website a co-branded pet store
with Petsmart. ...
Webvan created an automated process that was designed to manage all aspects of the online
grocery business, from order taking to delivery. Webvan implemented an integrated IT
infrastructure, with different areas of operation sharing data through a central database. ...
Shopping at Webvan10
Webvan’s Webstore was a personalized, user-friendly website that let users navigate and
purchase from a wide selection of items. ...
10 The information in this and the subsequent four sections are based primarily on Webvan’s public filings.
Webvan: The New and Improved Milkman EC-31 p. ... Webvan’s systems ensured that the groceries a customer
ordered would be available and that they could be delivered within the window selected by the
customer (until December 2000, the time window was 30 minutes). ...
Webvan offered customer service by e-mail and an on-line “chat” system that connected
customers and customer service representatives, in addition to an FAQ page with answers to
commonly asked questions. Webvan planned a 12-hour average response time to e-mail. ... As it collected more customer data, Webvan
could further customize the shopping experience by periodically targeting discounts and
promotions to individual customers.
Distribution Centers
Webvan’s DCs were highly automated hubs for receiving, storing, and distributing products. ... The Webvan DC was a mammoth 336,000 square foot facility, featuring
4 1/2 miles of conveyor belts, with a $3 million dollar investment in electrical wiring and
temperature-sensitive rooms.
Webvan’s systems were fully integrated from order to fulfillment. Webvan invested over 50
person years in developing proprietary inventory management, warehouse management, route
management and materials handling systems. ... An Electronic Data
Interchange (EDI) network, which connected Webvan with its key vendors, was used to place
orders. As of June 2000, Webvan purchased through 50 distributors and directly from 300
vendors. ...
11 Before they merged, Webvan had a 30-minute time window, and HomeGrocer had a 90-minute time window. ...
Webvan: The New and Improved Milkman EC-31 p. ... Webvan had special temperature-controlled
rooms for meat, seafood, produce, and deli items, which were fulfilled manually. ...
The Webvan system rotated the carousel to bring the desired products in front of the picker. ...
Thanks to its automated systems, Webvan anticipated employing one-third the number of
employees required to operate the equivalent of 18 traditional supermarkets. Webvan could also
manage many SKUs: as of June 2000, Webvan sold about 35,000 SKUs, up from 15,000 when it
began operations. ...
Delivery Operations
Webvan used a hub-and-spoke delivery model, similar to those used by FedEx and UPS. Airconditioned
trucks transported multiple orders from the DC (the “hub”) to the Webvan station
(the “spoke”) closest to a customer’s residence. ...
Webvan typically leased 12-15 stations for each market it served. From the local station, smaller
air-conditioned vans with the “Webvan. ...
Webvan’s hub-and-spoke approach helped ensure timely delivery and efficiency. ... The system minimized manual handling: Webvan manually handled
produce and other grocery products an average of eight times compared to an average of 14
times for a traditional supermarket.
To ensure quality, delivery personnel were Webvan employees trained to be friendly, helpful and
professional and to refuse tips. They used a wireless mobile device, similar to a Palm Pilot, to
communicate with Webvan’s systems. Delivery personnel had the authority to credit customer
accounts and accept unwanted goods, updating Webvan’s systems through their wireless devices.
In 2000, Webvan expanded its service to deliver prepared foods, beverages, cleaning and office
supplies to businesses under its Webvan@work program.
Approximate Word count = 4667
Approximate Pages = 18.7
(250 words per page double spaced)
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