Business Dilemma

Netflix reinvented the video rental business using supply chain technology. Netflix, established in 1998, is the largest online DVD rental service, offering flat rate rental-by-mail to customers in the United States. Headquartered in Los Gatos, California, it has amassed a collection of 80,000 titles and over 6.8 million subscribers. Netflix has over 42 million DVDs and ships 1.6 million a day, on average. Netflix previously claimed to spend about $300 million a year on postage. On February, 25 2007, Netflix announced the delivery of its billionth DVD.

The company provides a monthly flat-fee service for the rental of DVD movies. A subscriber creates an ordered list, called a rental queue, of DVDs to rent. The DVDs are delivered individually via the United States Postal Service from an array of regional warehouses (44 in 29 states). A subscriber keeps a rented DVD as long as desired but has a limit on the number of DVDs (determined by subscription level) that can be checked out at any one time. To rent a new DVD, the subscriber mails the previous one back to Netflix in a prepaid mailing envelope. Upon receipt of the disc, Netflix ships another disc in the subscriber's rental queue. Netflix’s business is video rental, but it used technology to revamp its supply chain to completely disrupt the entire video rental industry.

PROJECT FOCUS:

• Define a way that you can revamp or reinvent your cafe using supply chain technologies.