In July 2002, FreshDirect made its first delivery. The online grocer, which began in the New York metropolitan area and has expanded slowly and cautiously from Brooklyn to Queens to Manhattan, now has annual revenues of $150 million. The company decided to revamp its IT infrastructure focusing on availability and scalability to support a new, more aggressive growth strategy. In early 2004, FreshDirect hired a new CTO, Myles Trachtenberg, to help expand its business. Trachtenberg led the company through its IT infrastructure revamp, which was completed in September 2004.
The company's growth strategy focuses on using a variety of industry best practices to succeed. "I like to think of us as three types of businesses pulled together," Trachtenberg said. FreshDirect has sought to emulate the e-business success of Amazon.com, the just-in-time manufacturing capabilities of Dell, and the distribution expertise of FedEx. FreshDirect generates 99 percent of its business through its Web site.
To differentiate itself in the marketplace, the company concentrates on preparation and delivery of fresh foods, which account for about 70 percent of sales When Trachtenberg joined FreshDirect, its infrastructure was running on Sun Microsystems servers. Trachtenberg wanted to update the systems to create an infrastructure that would ensure high availability to meet customer demands for a quick and easy online experience, as well as the scalability to allow FreshDirect to continue to expand. Trachtenberg also wanted to move to an Intel-based system. Keeping FreshDirect's Web site operational is essential to the company's growth strategy.
The Web site must handle over 4,000 orders a day, each with an average of 30 items, which requires the movement of about 1 million items in the warehouse each week. Before the new IT infrastructure revamp, the average response time on the FreshDirect Web site was about eight seconds. Today, the response time is two seconds during peak demand and one second during low demand periods. Within its data center, FreshDirect runs SAP enterprise resource planning software and database. Inside the warehouse, each order is disassembled for sorting and packing.
The order is first run through a logistics application by RouteSmart Technologies Inc., which uses algorithms to divide orders based on destination, delivery schedules, and capacity. How rapidly FreshDirect will expand its territory has yet to be determined. "There's still a lot of growth left in the areas we serve now," Trachtenberg said. "In New York City alone, I'd say there's definitely potential for between $300 million and $500 million a year
Questions
1. What type of technology is FreshDirect using-disruptive or sustaining?
2. How could FreshDirect use a kiosk to improve its business?
3. How could FreshDirect use m-commerce to improve its business?
4. What are the three different types of service providers and which one would FreshDirect use to run its business?
5. What types of information would be contained in FreshDirect's intranet?
6. What types of information would be contained in FreshDirect's extranet?
7. Which metrics would you use if you were hired to assess the efficiency and effectiveness of FreshDirect's Web site?