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QUESTION 3B: Distribution Strategy Review (20 marks)
Format: Strategic Options PaperTime Allocation: 45 minutes (2.25 minutes per mark)
STRATEGIC OPTIONS PAPER
TO: Menu-Craft Board of Directors
FROM: Chief Strategy Officer
DATE: [Current Date]
SUBJECT: Distribution Strategy Review Following GoFlow Service Failures
1. STRATEGIC CONTEXT AND OBJECTIVES (3 marks)
Performance Gap Analysis GoFlow's repeated service failures (8 major incidents in 18 months) have resulted in customer satisfaction scores declining from 4.2 to 3.6 stars, directly impacting MC's premium positioning against competitors maintaining 4.4+ ratings. Current 91% dependency on single logistics provider creates unacceptable vulnerability because meal kit industry demands 99%+ reliability to support subscription retention models.
Strategic Imperatives Alignment Distribution strategy must support MC's 2027 carbon neutrality commitment while maintaining cost competitiveness against HelloFresh's £2.50 lower delivery costs. Central Ayeland location provides natural logistical advantage for UK coverage, therefore distribution strategy should leverage geographical positioning while building resilience against supply chain disruption.
2. OPTION 1: RENEGOTIATE WITH GOFLOW (5 marks)
SAF Model Analysis
SUITABILITY Renegotiation addresses immediate service level concerns through enhanced SLA requirements (99.5% on-time delivery, 4-hour incident response) with financial penalties for underperformance. This option maintains existing operational integration because current warehouse automation and order processing systems are optimized for GoFlow's API and tracking capabilities, avoiding £2.3 million system modification costs.
ACCEPTABILITY Financial impact includes increased logistics costs (estimated 15-20% premium for enhanced SLA) offset by improved customer retention. Stakeholder analysis reveals operations team preference for continuity because GoFlow relationship represents 5 years of process optimization and staff familiarity with systems and procedures.
FEASIBILITY GoFlow's financial stability (£180 million revenue, expanding fleet) supports enhanced service commitments, therefore technical capability exists for improved performance. However, MC lacks negotiation leverage because GoFlow serves multiple meal kit competitors, meaning enhanced terms may require volume commitments potentially limiting MC's strategic flexibility for future growth.
Carbon Impact Assessment GoFlow's electric vehicle transition plan (50% fleet by 2026) aligns with MC's sustainability targets, therefore maintaining partnership supports Scope 3 emissions reduction objectives. Current route optimization achieves 85% efficiency compared to industry average 70%, because consolidated delivery networks reduce per-order carbon footprint.
3. OPTION 2: MULTI-SOURCE LOGISTICS PROVIDERS (6 marks)
SAF Model Analysis
SUITABILITY Multi-sourcing strategy eliminates single-point-of-failure risk through 60/25/15% allocation across GoFlow, DPD, and regional carriers. This approach enables performance benchmarking and competitive pressure while maintaining service continuity because multiple providers cannot simultaneously fail without industry-wide crisis.
ACCEPTABILITY Cost structure increases approximately 12% due to volume discounts loss and coordination complexity, therefore impacting gross margins from 38% to 36.5%. However, risk mitigation benefits include reduced customer churn costs (currently £420 per lost customer) and enhanced negotiation position with all suppliers because competitive alternatives exist.
FEASIBILITY Technical integration requires £800,000 investment in logistics management platform supporting multiple carrier APIs and consolidated tracking systems. Implementation timeline spans 6 months because carrier onboarding, system testing, and staff training require sequential execution to avoid service disruption during transition.
Operational Complexity Considerations Multi-sourcing increases operational overhead through separate contract management, performance monitoring, and quality assurance processes for each provider. Regional specialization opportunities emerge because different carriers excel in specific geographic areas, therefore optimizing cost and service through strategic allocation becomes possible.
Carbon Impact Assessment Portfolio approach enables selection of environmentally superior carriers for specific routes, therefore accelerating progress toward carbon neutrality targets. Competition among providers incentivizes sustainability investments because environmental performance becomes differentiating factor in contract renewals and volume allocation decisions.
4. OPTION 3: DEVELOP IN-HOUSE CAPABILITY (6 marks)
SAF Model Analysis
SUITABILITY In-house logistics provides complete service control and quality assurance while capturing logistics margins currently paid to external providers (approximately £4.2 million annually). Vertical integration supports premium brand positioning because MC controls entire customer experience from order processing through doorstep delivery.
ACCEPTABILITY Capital investment requirement of £15-20 million for vehicles, technology, and distribution infrastructure represents significant financial commitment requiring board approval and potentially external financing. However, 5-year payback period becomes attractive because captured logistics margins and service premium justify investment through enhanced customer lifetime value.
FEASIBILITY Central Ayeland location provides strategic advantage for UK-wide coverage within 24-hour delivery windows to 85% of target demographic. However, operational expertise gap requires recruitment of logistics specialists and development of route optimization capabilities currently provided by established carriers.
Scale and Scope Considerations Current volume (35,000 weekly deliveries) approaches minimum efficient scale for dedicated fleet operations, therefore timing aligns with growth trajectory. Seasonal demand fluctuations (40% higher December volume) require flexible capacity management through temporary driver arrangements or partnership supplements.
Carbon Impact Assessment Electric vehicle fleet (100% by 2025) directly supports carbon neutrality objectives while providing marketing differentiation. Route optimization under MC control enables consolidation with supplier deliveries from central Ayeland location, therefore reducing overall supply chain carbon intensity through integrated logistics planning.
RECOMMENDATION AND IMPLEMENTATION
Phased Multi-Sourcing Approach Recommend implementing Option 2 (multi-sourcing) as immediate solution while developing Option 3 (in-house capability) for 2026 implementation. This strategy provides risk mitigation benefits immediately while building toward strategic logistics control over 18-month timeline.
Implementation Priorities Phase 1: Establish GoFlow/DPD/regional carrier portfolio within 90 days to address immediate reliability concerns. Phase 2: Develop in-house capability for 40% of volume by 2026, maintaining external partnerships for peak capacity and geographic coverage extensions.
PROFESSIONAL SKILLS DEMONSTRATION:
- Analysis: Comprehensive SAF model application across three strategic options with quantified impacts
- Commercial Acumen: Cost-benefit evaluation including capital requirements, payback periods, and margin implications
- Evaluation: Balanced assessment of feasibility constraints and strategic alignment with carbon neutrality objectives