The Operational Infrastructure of Webvan

Paper Summary:

This paper discusses the online e-tailer Webvan and the causes for its failure following the dot.com bust. Webvan was found to have completely disregarded traditional operation principles and practices by building such massive capacity into its operational infrastructure that its existing revenue model could not support it. Consequently Webvan was forced to spend exorbitant amounts of money in a misguided attempt to establish market share at all cost.

From the Paper:

"In a recent article, "Application of POM to e-Business: B2C e-Shopping," Martin Starr discusses the operational infrastructure of an e-retailing model utilizing Webvan as the central vehicle for his argument. Starr's primary argument is that by forsaking traditional operations practice and principle Webvan, and other purely e-tailing businesses, doomed themselves from the outset of their operations. Starr makes the observation that, "Webvan's rush to absorb all markets with the most expensive technology should have been scrutinized in terms of when break even could be achieved...Demand levels...could have been recognized as impractical...within...Webvan's spending rate" (p.122). Clearly Webvan believed, erroneously, that the e-tailing business model had separated itself not only from basic operations management principal and practice but also from basic business concepts of sustainable cash flows and margins. The conclusion of this..."

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