Grocery Gateway (Ivey 902D03): Questions to consider for analysis.

1. What is the supply chain strategy of the firm? What capabilities must the firm develop?
2. How much money, on average, can Grocery Gateway save by increasing the number of stops per
hour from 2.7 to 4 at the current demand volumes?
3. What are the pros and cons of the 3 options suggested by Dominique?
4. Is the business model sustainable?
a. How should Grocery Gateway think about its fleet-size? Make any suitable assumptions
about demand distributions.
b. How should Grocery Gateway decide on which geographic areas to serve? How much
demand to serve in each area?
c. What happens as demand scales up? Does Grocery Gateway have enough number of
trucks? How should it decide on an appropriate fleet size?
d. What happens if profit margins fall/increase?
e. What are potential issues of meeting delivery time windows?
To answer parts of question 4 consider the following additional data.
Suppose the new plant depreciates over 20 years with a salvage value of $1 Million. Further suppose a
truck costs $50,000 and has a useful life of 5 years with no salvage at the end of 5 years. Let us consider
the case when the trucks operate for 2 shifts (7 hrs delivering orders + 1.5 hours of stem time and set-up
time) in the day, and the average daily demand in each geography is equally split across these 2 shifts.
Let the variable cost/order (COGS as percentage of the average revenue not including distribution
costs) be 85% and the variable cost/hour/truck be $30. Assume there are 360 working days in the year.