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Case Study

Northlake Bookstore:Benchmarking for Performance Evaluation

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Content

• 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

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Ⅰ.Case overview

Textbook sales for this fall had decreased from the prior fall sales

Wendy-ManagerChuck-Boss

In September 2004

Problem

Who

When

Where

In NorthlakeBookstore

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

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Ⅱ.Strategic Objectivesof Northlake Bookstore

Excellent ServiceTo provide service excellence for the students, faculty, staff, alumni and guests of the University

Strategic Objectives

A profit center To contribute to the overall profitability of the University as well as being efficient andcontrolling costs.

To achieve highcustomer satisfaction

To attain high

profitability

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Level 0 Objectives

Level 1 Perspectives

Level 2 Indicators

Strategy Objective

Financial

Gross margin ratioTotal operation expenses ratioSales per sq.ft.of spaceRatio: selling to storage spaceSales per FTE employee / student

Customer Customer satisfaction Percentage of textbooks available First Day Customer Queuing time at Registers

Internal process

Inventory turnoverTextbook sell-throughDays textbooks in Receiving areaNumber of hrs store is open per Week

Learning and growth

Cartons processed per employee hourEmployee satisfactionEmployee Turnover

From strategy to action --on the basis of BSC

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　Internal process

Financial CustomerLearning

and growthTotal

Normalized average*

Internal process 1 1/3 　 3 5 　 9.33 　 0.34 　

Financial 3 1 3 5 　 12 　 0.43 　

Customer 1/3 　 1/3 　 1 3 　 4.67 　 0.17 　

Learning and growth 1/5 1/5 　 1/3 　 1 1.73 　 0.06 　

Aggregate27.73

　 1.00 　

1=equal importance to both elements in the matrix3=moderate importance of one element compared with another5=strong importance of one element compared with another

The Analytical Hierarchical Process (AHP)

*Normalized averages are calculated by dividing the row totals by the aggregate.

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Quantitative analysis: The result of hierarchical analysis shows Financial is the most important measure to realize the strategy.

Qualitative analysis:• Northlake Bookstore faces threat from online textbook vendors• Donations and gifts to the University were down

Thus, in a short term, we decide to pay more attention on improving the profitability of Northlake, i.e. to emphasize its role as a profit center.

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III. Benchmarking Analysis

Financial perspective

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III. Benchmarking AnalysisFinancial perspective

Advantages

　 BMK(Average)

Northlake GAP

Cost of Goods sold（ as a % of sales)

74.2% 72.5% -1.7%

Gross Margin Ratio 25.80% 27.50% 1.7%

Total Oper. Expenses（ as a % of sales)

20.1% 16.9% -3.2%

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

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Financial perspectiveMeasures About Space Utilization

BMK(Average)

Northlake GAP

Sales per sq.ft.of total space $1,229 $741 -$488

Sales per sq.ft.of selling space $1,587 $1,112 -$475

Ratio: Selling to Storage Space 3.4:1 3.3:1-0.1:1

　

Rent Expenses (as a % of sales) 1.90% 1.20% -0.70%

Sales per sq. ft. of space should be increased

Make best use of its

space

Measures About EmployeesBMK

(Average)Northlake GAP

Sales per FTE Employee $444,665 $383,124 -$61,541

Labor Expenses (as a % of sales) 12.9% 12.6% -0.3%

# of FTE Employees 30.1 26.4 -3.7

Labor Expenses per FTE Employee

0.429% 0.477% 0.049%

Increase Sales per employee

Reduce labor expenses

per employee

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Product Line Profitability

Product LineBMK

Gross Margin(average)

NorthlakeGross Margin

BMK% of sales(average)

Northlake% of sales

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%<

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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

>

<

<

>

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

Pay attention to used text sales

BMK(Average)

Northlake GAP

Used Text Sales:as a % of New Text Sales

41.49% 28.70% -12.79%

Used Text Sales:as a % of Course Book Sales

28.23% 20.70% -7.53%

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Price gap between Northlake and Online Vendors

2003 Fall 2004 Winter 2004 Spring

2004 Fall

Northlake 78.02 79.03 63.99 60.83

BMK(Average)

78.43 78.83 63.04 58.76

Gap -0.41 0.2 0.95 2.07

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　 Online Sales as a % of Total Sales

Campus Contrib. as a % of Sales

Northlake 1.90% 12.10%

Average 3.10% 6.70%

Where do the sales come from?

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Online Sales as a % ofTotal Sales

Campus Contib. As a % ofSales

Northlake Average

As a solid shop

inside the university,

Northlake Bookstore

doesn’t need to perform

as well as Amazon

on web sales.

Northlake can increase

its online sale to the

average level.

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Internal process perspectiveInventory 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.

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Internal Comparison

Internal process perspective

Days textbooks in receiving area is

increasing

Northlake’s open hours are less than

average level

Textbook Sell-Through is increasing

year by year

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Customer Perspective

Faculty satisfaction is increasing

Customer Queing time is decreasing

Products available ratio is high and increa

sing year by year

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Customer Perspective

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

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

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

Key Advantages

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Learning & Growth Perspective

Improvement of the working efficiency is required

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Learning & Growth Perspective

Employee Satisfaction Survey

Employee Turnover

Frequency of Employee Being Rewarded

Regular Meeting Frequency

Employee Training Hours per year

Set Up New Measures

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Ⅳ.SWOT

Strength Steady source of customers Real experience for customersClose relationship with customersGood performance in profitability in the past 3 years

WeaknessOnline salesStaff marketing abilitiesSpace utilizationLate or inaccurate orders

Opportunity

New business linesPotential online customers

Threat

Online textbook vendors and publishersIncreasing costs of textbook

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Three-year Objectives

One-year Objectives

Three-month Objectives

Provide Service ExcellenceSustain Good Profitability

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

Attain the same level of Net Incomeas prior winter

Ⅴ. Three Steps for Improvement

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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%

62.8%

Custom materials (% of Sales) 4.7%

General Books (% of Sales) 3.0%

Software & Accessories (% of Sales)

6.5%

Clothing(% of Sales) 11.7%

Total Sales 100% 100%

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Three-month Plans

To Optimize Product Mix

Current Target* Actions

Used Course Books

(% of Sales)

13.4% 20.7%

•Advocate the use of used books for the environment protection (through advertising, cooperating with the students’ association for the environment)

•Give bookmarks or postcards as gifts to those who buy six or more used books at a time

Supplies & Sundries

(% of Sales)

6.3% 12.5%

•Identify what customers need through surveys

•Identify best-sales product through analyzing historical statistics

Computer Hardware

(% of Sales)

7.8% 4%

•Reduce the % of hardware sales

•Zero Inventory

•Hardware only for new orders * We decide the target according to benchmark

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Three-month Plans

To Improve Inventory Management

Current Target* Actions

Inventory Turnovers-Software & accessories 3.9 5.5

•Analyze historical data and predict demand at the beginning of every semester

•Introduce JIT concept into daily operation

Inventory Turnovers- Supplies & sundries 1.9 2.7

Days Textbook in Receiving Area 10 7

•Training courses in receiving and categorizing books

* We decide the target according to the BMK or Northlake’s good performance in past years

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To Improve the Employee Working Efficiency

Current Target* Actions

Cartons Processed per Employee Hour 3.3 3.8

•Arrange regular training courses for employeesShopping Guides

- Sales Skills, Smiling from 3 metersWarehouse Workers

- More familiar with unloading processCashiers

- Recognize & receive money faster and more accurately

•Improve staff incentive system,

e.g. combine salary with sales

Sales per FTE Employee $383,124 $444,665

Three-month Plans

* We decide the target according to BMK

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To Improve Orders Management

Current Target Actions

Orders Accuracy TBD TBD•More communications with faculty in book orders accuracy

To Lower the Labor Expenses

Part-time/full-time employees

0.3 0.77

•Hire more part-time employees

•Hire students as part-time employees

-Low labor expenses

-Know what the customers need

-Build upon customer relationship

Three-month Plans

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One-year Plans

Continue the three-month actions

New Ways to Realize Profits

Make better use of its space - Create a “Reading Bar” inside the bookstore Develop New Business Lines - Provide services like coffee and internet

Make better use of its space - Rent some space to proper tenant for business use(e.g. photocopying & printing)

OR

Realize a net-income-increase

of 15% than prior fiscal year

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Three-year plans

Gather information on Feedback & Demand of customers by web surveyEfficiently solve problems identified in surveys Focus on details,e.g. cut down customer queuing time at registers

Satisfaction

Serve as an official textbooks supplier for Northlake University

Supplier

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

Sponsor

Update the latest academic lecture information on poster board for faculty and students

Service

4S

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