Harvard Case - Migros Turkey: Scaling Online Operations (A)
"Migros Turkey: Scaling Online Operations (A)" Harvard business case study is written by Antonio Moreno, Gamze Yucaoglu. It deals with the challenges in the field of Operations Management. The case study is 28 page(s) long and it was first published on : Aug 21, 2020
At Fern Fort University, we recommend that Migros Turkey implement a comprehensive digital transformation strategy focused on optimizing its online operations, enhancing customer experience, and leveraging technology for sustainable growth. This strategy should encompass improvements in supply chain management, logistics, and technology infrastructure, while also incorporating customer-centric initiatives and data-driven decision making.
2. Background
Migros Turkey, a subsidiary of the Swiss retail giant Migros, faced the challenge of scaling its online operations to meet the increasing demand for e-commerce in the Turkish market. The company had a robust physical presence but struggled to replicate its success online, facing issues with delivery times, inventory management, and customer satisfaction. This case study explores the challenges and opportunities faced by Migros Turkey as it sought to expand its online presence.
The main protagonists in this case are:
- Mehmet T't'nc': General Manager of Migros Turkey, tasked with leading the company's digital transformation.
- The Migros Turkey Management Team: Responsible for developing and implementing the company's online strategy.
- The Turkish E-commerce Market: A rapidly growing market with increasing competition and consumer expectations.
3. Analysis of the Case Study
This case study can be analyzed using the framework of Operations Strategy, focusing on the following key areas:
- Supply Chain Management: Migros Turkey's supply chain was not optimized for e-commerce, leading to delays in delivery and stock-outs. The company needed to address issues with inventory management, order fulfillment, and last-mile delivery.
- Technology and Analytics: Migros Turkey's IT infrastructure and data analytics capabilities were not sufficient to support its online growth. The company needed to invest in robust systems for order management, customer relationship management (CRM), and data-driven insights.
- Customer Experience: Migros Turkey faced challenges in providing a seamless and convenient online shopping experience. The company needed to improve its website functionality, delivery options, and customer service.
- Competitive Advantage: Migros Turkey needed to differentiate itself in the competitive Turkish e-commerce market by offering unique value propositions, such as personalized recommendations, loyalty programs, and innovative delivery solutions.
4. Recommendations
To address the challenges and capitalize on the opportunities, Migros Turkey should implement the following recommendations:
1. Optimize Supply Chain for E-commerce:
- Implement a robust inventory management system: Utilize MRP and ERP systems to optimize inventory levels, reduce stock-outs, and improve order fulfillment accuracy.
- Adopt a Just-in-Time (JIT) production approach for fast-moving items to minimize inventory holding costs and improve responsiveness.
- Enhance logistics infrastructure: Invest in additional warehouses and distribution centers strategically located to ensure efficient delivery across Turkey.
- Explore outsourcing options for last-mile delivery to leverage specialized logistics providers and improve delivery speed and reliability.
- Implement Lean Manufacturing principles to streamline processes, reduce waste, and improve efficiency throughout the supply chain.
2. Leverage Technology and Analytics:
- Upgrade IT infrastructure: Invest in a scalable and secure cloud-based platform to support the growing volume of online transactions.
- Implement a comprehensive data analytics platform to track customer behavior, identify trends, and optimize marketing campaigns.
- Develop a robust order management system to streamline the order fulfillment process and provide real-time order tracking.
- Utilize AI-powered chatbots for customer service to provide 24/7 support and address common queries efficiently.
3. Enhance Customer Experience:
- Improve website functionality: Optimize the website for user-friendliness, navigation, and mobile responsiveness.
- Offer multiple delivery options: Provide customers with flexible delivery options, including same-day delivery, scheduled delivery, and pick-up from stores.
- Implement a personalized recommendation engine: Utilize customer data to provide personalized product suggestions and promotions.
- Develop a loyalty program: Reward frequent online shoppers with exclusive discounts, promotions, and personalized benefits.
4. Foster a Data-Driven Culture:
- Establish a dedicated team for data analysis: This team should be responsible for collecting, analyzing, and interpreting data to inform strategic decisions.
- Develop a framework for data-driven decision making: Use data insights to optimize pricing, promotions, product assortment, and marketing campaigns.
- Promote a culture of experimentation and continuous improvement: Encourage employees to test new ideas, measure results, and iterate based on data.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Migros Turkey's core competency lies in providing high-quality products and services to its customers. The recommendations align with this mission by enhancing the online shopping experience and providing customers with a wider selection of products and services.
- External customers and internal clients: The recommendations are designed to meet the needs of both external customers and internal clients. Customers will benefit from a more convenient and efficient online shopping experience, while internal clients will benefit from improved processes, increased efficiency, and better data-driven decision making.
- Competitors: The recommendations aim to position Migros Turkey as a leader in the Turkish e-commerce market by offering a superior customer experience, a wider selection of products, and innovative delivery options.
- Attractiveness ' quantitative measures if applicable (e.g., NPV, ROI, break-even, payback): The recommendations are expected to generate significant ROI through increased sales, improved efficiency, and reduced costs. The implementation of these recommendations will require an initial investment, but the long-term benefits will outweigh the costs.
- Assumptions: The recommendations assume that Migros Turkey has the resources and commitment to invest in the necessary technology, infrastructure, and personnel to implement the proposed changes.
6. Conclusion
By implementing these recommendations, Migros Turkey can effectively scale its online operations, enhance customer experience, and achieve sustainable growth in the competitive Turkish e-commerce market. The company can leverage technology and data analytics to optimize its supply chain, improve efficiency, and provide a personalized and convenient online shopping experience. This will enable Migros Turkey to compete effectively with other online retailers and solidify its position as a leading player in the Turkish market.
7. Discussion
Alternatives:
- Partnering with a third-party e-commerce platform: This could provide a quicker and less capital-intensive solution, but it would also limit Migros Turkey's control over its online operations and customer data.
- Focusing solely on improving customer service: While important, this alone would not be sufficient to address the underlying challenges in supply chain management and technology infrastructure.
Risks and Key Assumptions:
- Implementation challenges: Implementing these recommendations will require significant effort and coordination across different departments.
- Technology adoption: Migros Turkey needs to ensure that its technology infrastructure is robust and scalable enough to support the growing volume of online transactions.
- Customer adoption: The success of these recommendations hinges on customer adoption of the new online platform and services.
- Competition: The Turkish e-commerce market is highly competitive, and Migros Turkey needs to continuously innovate and adapt to stay ahead of the competition.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline the specific steps, timelines, and resources required to implement each recommendation.
- Establish a dedicated project team: This team should be responsible for overseeing the implementation of the recommendations and ensuring that they are delivered on time and within budget.
- Pilot test new technologies and processes: Pilot testing will help to identify and address potential challenges before full-scale implementation.
- Monitor progress and adjust as needed: Regular monitoring and evaluation are essential to ensure that the recommendations are achieving the desired results.
Timeline:
- Phase 1 (Months 1-6): Focus on optimizing supply chain management, improving website functionality, and implementing a data analytics platform.
- Phase 2 (Months 7-12): Expand logistics infrastructure, develop a loyalty program, and launch new delivery options.
- Phase 3 (Months 13-18): Continue to refine and improve online operations based on customer feedback and data analysis.
By following these recommendations and taking a strategic approach to its digital transformation, Migros Turkey can position itself for continued success in the dynamic Turkish e-commerce market.
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Case Description
The case opens in November 2019 as Ozgur Tort and Mustafa Bartin, CEO and chief large-format and online retail officer of Migros Ticaret A.S. (Migros), Turkey's oldest and one of its largest supermarket chains, are contemplating what the best fulfillment format and delivery model for the company's growing online arm, Sanal Market, and its under-30-minutes gorcery service arm, Hemen, are. Migros's online operations had grown over 50% year-on-year in the previous three years, and the target for 2020 was to grow 100%. With all of these considerations in mind, Bartin and Tort needed to decide which levers to pull for the last mile and fulfillment to best serve the future of Migros. The case chronicles the founding and growth of Migros as well as Sanal Market and lays the ground for food and grocery retail in Turkey complete with the competitive outlook. The case then provides a detailed overview of how Migros built online channels, Sanal Market and its recently introduced Hemen, and how Tort and Bartin have thought about fulfillment and delivery as well as omnichannel mentality. The case goes into detail about the three different fulfillment models, store pick micro-fulfillment center, and dark store, that Migros is piloting in 2019 as well as providing an understanding of what the company is thinking about logistics and last mile delivery as its online sales grow. While globally, online shopping and consumer preferences were changing fast, particularly in terms of how and with what frequency customers shopped online and how fast they wanted their groceries delivered, Migros was trying to find the optimum model for fulfillment and last mile delivery.
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