as a _ of sales by pengxuebo


									           Case Study
         Northlake Bookstore:
Benchmarking for Performance Evaluation


• Ⅰ.Case overview
• Ⅱ.Strategic objectives of Northlake Bookstore
• Ⅲ.Benchmarking analysis from four perspectives
  of BSC
• Ⅳ.Summary of strengths & weaknesses
• Ⅴ.Three steps for improvement

                     Ⅰ.Case overview

       Where                                                   Problem

                                           Who             Textbook sales for this
In Northlake
Bookstore                                                  fall had decreased from
                                                           the prior fall sales

                 In September 2004
What to do
•Employ benchmarking analysis to figure out the reasons behind the poor performance
•Then identify how to sustain the excellence and improve the inferior performance
•Further more, determine a long-term action plan for improvement                    3
                 Ⅱ.Strategic Objectives
                 of Northlake Bookstore
                            Strategic Objectives

Excellent Service                                    A profit center
To provide service                                   To contribute to the
excellence for the                                   overall profitability of
students, faculty, staff,                            the University as well
alumni and guests of                                 as being efficient and
the University                                       controlling costs.

             To achieve high                   To attain high
           customer satisfaction                   profitability
                From strategy to action
                     --on the basis of BSC
    Level 0             Level 1                           Level 2
   Objectives         Perspectives                       Indicators
                                        Gross margin ratio
                                        Total operation expenses ratio
                        Financial       Sales per sq.ft.of space
                                        Ratio: selling to storage space
                                        Sales per FTE employee / student
                                        Customer satisfaction
                        Customer        Percentage of textbooks available First Day
Strategy Objective                      Customer Queuing time at Registers
                                        Inventory turnover
                                        Textbook sell-through
                     Internal process
                                        Days textbooks in Receiving area
                                        Number of hrs store is open per Week
                                        Cartons processed per employee hour
                      Learning and
                                        Employee satisfaction
                        growth                                                        5
                                        Employee Turnover
The Analytical Hierarchical Process (AHP)

1=equal importance to both elements in the matrix
3=moderate importance of one element compared with another
5=strong importance of one element compared with another

                 Internal                               Learning            Normalized
                                Financial   Customer                Total
                 process                               and growth            average*
 process            1              1/3          3          5        9.33       0.34

                    3              1            3          5         12        0.43

                   1/3             1/3          1          3        4.67       0.17
and growth         1/5             1/5         1/3         1        1.73       0.06
                                                       Aggregate    27.73      1.00

 *Normalized averages are calculated by dividing the                                     6
 row totals by the aggregate.
Qualitative analysis:
• Northlake Bookstore faces
threat from online textbook
vendors                           Thus, in a short term,
• Donations and gifts to the      we decide to pay
University were down              more attention on
                                  improving the
                                  profitability of
Quantitative analysis:
                                  Northlake, i.e. to
   The result of hierarchical
                                  emphasize its role as
analysis shows Financial is the
                                  a profit center.
most important measure to
realize the strategy.

III. Benchmarking Analysis
Financial perspective

III. Benchmarking Analysis
Financial perspective

                                           Northlake   GAP

     Cost of Goods sold
                                74.2%       72.5%      -1.7%   Advantages
     (as a % of sales)

    Gross Margin Ratio          25.80%      27.50%     1.7%

    Total Oper. Expenses
                                20.1%       16.9%      -3.2%
     (as a % of sales)

        Net Income               6.5%       12.1%      5.6%

Sales Change From Prior Year    6.40%       20.80%     14.4%

   Sales Per FTE Student        $1,025      $1,338     $313

         Financial perspective
         Measures About                BMK
                                                  Northlake     GAP
         Space Utilization           (Average)
                                                                          Sales per sq. ft.
   Sales per sq.ft.of total space     $1,229        $741        -$488
                                                                           of space should
  Sales per sq.ft.of selling space    $1,587       $1,112       -$475       be increased
                                                                          Make best use o
 Ratio: Selling to Storage Space       3.4:1        3.3:1       -0.1:1
                                                                              f its space
 Rent Expenses (as a % of sales)      1.90%        1.20%       -0.70%

                        Measures About Employees                         Northlake    GAP
Increase Sales
 per employee             Sales per FTE Employee            $444,665     $383,124    -$61,541
Reduce labor
                      Labor Expenses (as a % of sales)        12.9%       12.6%       -0.3%
 expenses per
   employee                  # of FTE Employees               30.1         26.4        -3.7
                          Labor Expenses per FTE
                                                            0.429%        0.477%     0.049%
                         Product Line Profitability
                            BMK                              BMK
                                             Northlake                      Northlake
     Product Line        Gross Margin                      % of sales
                                            Gross Margin                    % of sales
                          (average)                        (average)

New Course Books            21.4%       <     23.40%        47.5%            46.7%
Custom materials           23.70%       >     22.50%         2.0%             4.7%
Used Course Books           33.7%       <     36.30%        20.7%       >    13.4%
General Books               28.5%       <     30.90%         2.5%             3.0%
Computer hardware           7.3%        >      4.60%         3.3%             7.8%
Software & accessories      21.3%       <     23.70%         3.3%             6.5%
Supplies & sundries         33.2%       <     37.60%        12.5%       >     6.3%
Clothing                    36.7%       <     47.00%         8.2%            11.7%

High-margin Product:
Try to increase % of sales for used course books and Supplies & sundries
Sustain the advantage in the margin of such products

Low-margin Product
             Pay attention to used text sales

                                          Northlake     GAP

Used Text Sales:
                               41.49%      28.70%      -12.79%
as a % of New Text Sales

Used Text Sales:
                               28.23%      20.70%      -7.53%
as a % of Course Book Sales

    As a high-margin product line, used textbooks should be sold more.

        Price gap between Northlake and Online Vendors
            2003 Fall 2004 Winter 2004 Spring 2004 Fall

Northlake    78.02       79.03       63.99      60.83
             78.43       78.83       63.04      58.76
  Gap        -0.41        0.2        0.95        2.07

 Where do the sales come from?
                                                      Online Sales        Campus Contrib.
                                                  as a % of Total Sales    as a % of Sales

                                      Northlake          1.90%                12.10%

                                       Average           3.10%                 6.70%
          Northlake       Average
                                                                      As a solid shop
                                                                   inside the university,
                                                                   Northlake Bookstore

                                                                 doesn’t need to perform
                                                                    as well as Amazon
 4.00%                                                                  on web sales.
 2.00%                                                            Northlake can increase
 0.00%                                                             its online sale to the
         Online Sales as a % of   Campus Contib. As a % of
               Total Sales                Sales                        average level. 14
    Internal process perspective
Inventory Turnovers Analysis——External Comparison

                             BMK (Average)     Northlake        Gap
      New Course Book             5.4              9.1           3.7
     Used Course Books            5.8              9.5           3.7
     Total Course Books           5.7              9.4           3.7
       General Books              1.6              1.8           0.2
         Total Books              5.2              9.1           3.9
          Hardware                9.2             13.7           4.5
    Software & accessories        5.5              3.9          -1.6
     Supplies & sundries          2.7              1.9          -0.8
          Clothing                2.6              3.1           0.5
•    Notice:
    Inventory Turnovers of Software & accessories and Supplies & sundries
     are lower than average levels.
 Internal process perspective
Internal Comparison

                       Days textbooks in
                        receiving area is
                        Northlake’s open
                        hours are less than
                          average level
                         Textbook Sell-
                       Through is increasing
                           year by year

Customer Perspective

Faculty satisfaction
   is increasing
Customer Queing
time is decreasing
Products available
   ratio is high and
 increasing year by

Customer Perspective

                  One-stop back-to-school shopping:
                  Provide various products,
                  Get freshmen ready for the first day

                  Real experience:
 Key Advantages   As a solid shop in the campus, it
                  provides real experience for

                  Close relationship with customers:
                  Hire students as part-time
                  employees, who are familiar with the
                  customers (i.e. students)

Learning & Growth Perspective

               Improvement of the
           working efficiency is required
Learning & Growth Perspective

                      Employee Satisfaction Survey
                      Employee Turnover
                      Frequency of Employee Being Rewarded
Set Up New Measures
                      Regular Meeting Frequency

                      Employee Training Hours per year


              Strength                          Weakness
Steady source of customers          Online sales
Real experience for customers       Staff marketing abilities
Close relationship with             Space utilization
customers                            Late or inaccurate orders
Good performance in profitability
in the past 3 years

          Opportunity                             Threat

New business lines                  Online textbook vendors and
Potential online customers          publishers
                                     Increasing costs of textbook

          Ⅴ. Three Steps for Improvement

               Provide Service Excellence
               Sustain Good Profitability
                                                   Three-year Objectives

       Realize a net-income-increase
       of 15% than prior fiscal year
                                              One-year Objectives

Attain the same level of Net Income
as prior winter
                                       Three-month Objectives

Three-month Plans
 To Optimize Product Mix
                                       Current   Target
 Used Course Books (% of Sales)        13.4%     20.7%

 Computer Hardware (% of Sales)         7.8%      4%

 Supplies & Sundries (% of Sales)       6.3%     12.5%

 New Course Books (% of Sales)         46.7%

 Custom materials (% of Sales)          4.7%

 General Books (% of Sales)             3.0%     62.8%

 Software & Accessories (% of Sales)    6.5%

 Clothing(% of Sales)                   11.7%

 Total Sales                            100%     100%
  Three-month Plans
To Optimize Product Mix

               Current Target*                         Actions

                                 •Advocate the use of used books for the
   Used                          environment protection (through advertising,
  Course                         cooperating with the students’ association for the
  Books        13.4%   20.7%     environment)
(% of Sales)
                                 •Give bookmarks or postcards as gifts to those who
                                 buy six or more used books at a time
 Supplies &                      •Identify what customers need through surveys
  Sundries      6.3%   12.5%     •Identify best-sales product through analyzing
(% of Sales)                     historical statistics
 Computer                        •Reduce the % of hardware sales
 Hardware       7.8%     4%      •Zero Inventory
(% of Sales)
                                 •Hardware only for new orders
  * We decide the target according to benchmark
   Three-month Plans

To Improve Inventory Management

                         Current   Target*                 Actions

 Inventory Turnovers-                        •Analyze historical data and predict
                           3.9       5.5
Software & accessories                       demand at the beginning of every
Inventory Turnovers-
                           1.9               •Introduce JIT concept into daily
 Supplies & sundries

  Days Textbook in                           •Training courses in receiving and
   Receiving Area
                           10         7
                                             categorizing books

  * We decide the target according to the BMK or Northlake’s good performance
     in past years                                                                25
   Three-month Plans
To Improve the Employee Working Efficiency

                    Current     Target*                   Actions

Cartons Processed                         •Arrange regular training courses for
per Employee Hour
                      3.3         3.8     employees
                                          Shopping Guides
                                            - Sales Skills, Smiling from 3 meters
                                          Warehouse Workers
                                            - More familiar with unloading
  Sales per FTE
                    $383,124   $444,665   Cashiers
                                            - Recognize & receive money faster
                                          and more accurately
                                          •Improve staff incentive system,
                                          e.g. combine salary with sales
* We decide the target according to BMK
 Three-month Plans

To Improve Orders Management

                       Current   Target               Actions

                                          •More communications with
  Orders Accuracy       TBD      TBD
                                          faculty in book orders accuracy
To Lower the Labor Expenses
                                          •Hire more part-time employees
                                          •Hire students as part-time
 Part-time/full-time                      employees
                         0.3     0.77
     employees                             -Low labor expenses
                                           -Know what the customers need
                                           -Build upon customer relationship
One-year Plans

                                                          Realize a net-
           Continue the three-month actions             income-increase
                                                           of 15% than
           New Ways to Realize Profits                   prior fiscal year

 Make better use of its space
 - Create a “Reading Bar” inside  Make better use of its space
   the bookstore                   - Rent some space to proper
 Develop New Business Lines         tenant for business use
 - Provide services like coffee  (e.g. photocopying & printing)
   and internet
Three-year plans
          Gather information on Feedback & Demand of
           customers by web survey
          Efficiently solve problems identified in surveys
          Focus on details,
          e.g. cut down customer queuing time at registers

          Update the latest academic lecture information
           on poster board for faculty and students
          Serve as an official textbooks supplier for Northlake

          Assist to organize activities
           e.g. sports meeting, academic case competition

To top