Meal kits may make cooking easier, but getting a box of pre-portioned ingredients and instructions to a customer’s door is one of the most complicated OM riddles in the food business, writes The Wall Street Journal (July 27, 2018). Companies have poured millions into solving such questions as how to stack fish and fennel in boxes. They’re also investing in systems to reroute shipments during snowstorms and algorithms to predict what customers want to eat during the summer months. “It’s building a supply chain from scratch,” says the VP of Hello Fresh SE, the world’s largest meal-kit firm.
Meal-kit spending by consumers has grown three times as fast as spending in established food sectors such as restaurants and grocery stores since 2015. But companies have had to devise workarounds for everything from heavy weather to diverting trucks around highway accidents. At Home Chef, a sudden recipe change could set off a scramble to source ingredients at the last minute. “Building a perishable-food business is not something you do quickly or lightly,” said Sun Basket’s CEO. To help keep a lid on costs, Sun Basket has gone so far as to set up a Midwestern distribution center in a converted limestone cave—a cheaper way to keep its products cold than spending millions to convert a conventional warehouse in the region for refrigeration.
Adding to the complexity of the meal-kit business: Blue Apron, HelloFresh and others are now looking to supermarket sales to supplement subscription-only revenue. Chef’d was one of the first companies to push into supermarkets, but ran into trouble as it did so while also running a complex e-commerce operation that offered more than a 1,000 recipe choices. To survive, startups are scrutinizing each step of their operations. While some rely largely on manual labor, Blue Apron and Sun Basket are investing in automation, such as machines that dole out sauces or seal single-serving ingredients in tiny bags.
Classroom discussion questions:
- Why is this business complex from an OM perspective?
- What role can automation take?