Harvard Case - KeHE Distributors LLC: The Shore Power Project
"KeHE Distributors LLC: The Shore Power Project" Harvard business case study is written by Ram Subramanian, Michelle DeMoss. It deals with the challenges in the field of Strategy. The case study is 17 page(s) long and it was first published on : Sep 30, 2022
At Fern Fort University, we recommend that KeHE Distributors LLC proceed with the Shore Power Project, prioritizing a phased approach to implementation. This strategy will allow KeHE to reap the benefits of reduced emissions and operational efficiency while mitigating potential risks and ensuring a smooth transition.
2. Background
KeHE Distributors LLC is a leading distributor of natural and organic food products in the United States. Faced with increasing pressure from customers and stakeholders to reduce its environmental impact, KeHE is exploring the adoption of shore power technology at its distribution centers. Shore power allows ships to connect to the electrical grid while docked, eliminating the need for them to run their engines and reducing emissions.
The case study focuses on the decision-making process surrounding the Shore Power Project, highlighting the potential benefits and challenges associated with this innovative technology. The main protagonists are:
- John, the CEO: Concerned about the environmental impact of KeHE's operations and the potential for competitive advantage through sustainability initiatives.
- Mark, the VP of Operations: Responsible for evaluating the feasibility and cost-effectiveness of the Shore Power Project.
- Sarah, the Sustainability Manager: Championing the project and advocating for its environmental benefits.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several strategic frameworks:
a. Porter's Five Forces:
- Threat of New Entrants: The natural and organic food distribution industry is relatively fragmented, with limited barriers to entry. However, the Shore Power Project could create a barrier for new entrants, as it requires significant capital investment and technical expertise.
- Bargaining Power of Buyers: KeHE's customers, primarily retailers, have significant bargaining power due to the competitive nature of the industry. The Shore Power Project could enhance KeHE's value proposition, potentially giving it a competitive advantage in attracting and retaining customers.
- Bargaining Power of Suppliers: KeHE's suppliers are primarily food producers, with varying degrees of bargaining power. The Shore Power Project is unlikely to significantly impact supplier relationships.
- Threat of Substitutes: The threat of substitutes is moderate, as consumers can choose to buy from other retailers or opt for alternative food sources. The Shore Power Project could differentiate KeHE from competitors, reducing the threat of substitutes.
- Rivalry Among Existing Competitors: The natural and organic food distribution industry is highly competitive, with several large players. The Shore Power Project could create a differentiation strategy for KeHE, potentially reducing rivalry among competitors.
b. SWOT Analysis:
Strengths:
- Strong brand reputation: KeHE is known for its commitment to quality and sustainability.
- Established customer base: KeHE has a strong network of retail customers.
- Strong financial position: KeHE has the resources to invest in the Shore Power Project.
Weaknesses:
- High operating costs: The Shore Power Project will require significant capital investment.
- Limited technical expertise: KeHE may need to partner with external experts to implement the project.
- Potential for disruption: The project could disrupt existing operations.
Opportunities:
- Increased customer loyalty: The Shore Power Project could enhance KeHE's reputation and attract new customers.
- Competitive advantage: The project could differentiate KeHE from competitors.
- Government incentives: KeHE may be eligible for government incentives for adopting sustainable technologies.
Threats:
- High upfront costs: The Shore Power Project will require significant capital investment.
- Technological challenges: The project may encounter technical difficulties.
- Regulatory uncertainty: The regulatory landscape for shore power technology is evolving.
c. Value Chain Analysis:
The Shore Power Project impacts multiple stages of KeHE's value chain:
- Inbound Logistics: Reduced emissions from shipping and improved efficiency.
- Operations: Potential for increased operational efficiency and reduced energy consumption.
- Outbound Logistics: Reduced emissions and improved sustainability.
- Marketing and Sales: Enhanced brand image and competitive advantage.
d. Business Model Innovation:
The Shore Power Project represents a potential business model innovation for KeHE. By adopting this technology, KeHE can differentiate itself from competitors, attract new customers, and enhance its sustainability credentials. This could lead to increased revenue, improved profitability, and a stronger competitive position in the market.
e. Corporate Social Responsibility:
The Shore Power Project aligns with KeHE's commitment to corporate social responsibility. By reducing its environmental impact, KeHE can demonstrate its commitment to sustainability and build trust with stakeholders.
4. Recommendations
KeHE should proceed with the Shore Power Project, adopting a phased approach:
Phase 1: Pilot Project:
- Implement shore power at one or two distribution centers with high ship traffic.
- Partner with external experts to ensure successful installation and integration.
- Monitor the project closely to assess its impact on operations, costs, and emissions.
- Gather data and feedback from stakeholders to inform future decisions.
Phase 2: Scalable Implementation:
- Based on the success of the pilot project, expand shore power to additional distribution centers.
- Develop a comprehensive plan for integrating shore power into KeHE's operations.
- Explore opportunities for collaboration with other stakeholders, such as port authorities and shipping companies.
- Continuously monitor and evaluate the project's performance.
Phase 3: Continuous Improvement:
- Continuously invest in research and development to improve shore power technology and reduce costs.
- Explore innovative solutions for using renewable energy sources to power shore power systems.
- Advocate for supportive government policies and regulations.
- Promote the Shore Power Project as a key element of KeHE's sustainability strategy.
5. Basis of Recommendations
These recommendations are based on:
- Core Competencies and Consistency with Mission: The Shore Power Project aligns with KeHE's core competencies in logistics and distribution, while also supporting its commitment to sustainability.
- External Customers and Internal Clients: The project addresses the growing demand from customers and stakeholders for sustainable practices.
- Competitors: By adopting shore power, KeHE can gain a competitive advantage in the natural and organic food distribution industry.
- Attractiveness: The project offers potential for cost savings, reduced emissions, and improved brand reputation.
Assumptions:
- The Shore Power Project will be technically feasible and economically viable.
- Government incentives and regulations will support the adoption of shore power technology.
- KeHE can successfully integrate shore power into its existing operations.
6. Conclusion
The Shore Power Project presents a significant opportunity for KeHE to enhance its sustainability credentials, gain a competitive advantage, and build a stronger brand reputation. By adopting a phased approach, KeHE can mitigate potential risks and maximize the project's benefits.
7. Discussion
Alternatives:
- Delaying the Project: This would allow KeHE to wait for further development of shore power technology and potentially lower costs. However, it would also risk falling behind competitors and missing out on potential benefits.
- Focusing on other Sustainability Initiatives: KeHE could focus on other sustainability initiatives, such as reducing energy consumption in its facilities or sourcing products from sustainable suppliers. However, these initiatives may not have the same impact on KeHE's brand reputation and competitive advantage as the Shore Power Project.
Risks:
- High upfront costs: The Shore Power Project requires significant capital investment.
- Technological challenges: The project may encounter technical difficulties.
- Regulatory uncertainty: The regulatory landscape for shore power technology is evolving.
Key Assumptions:
- The Shore Power Project will be technically feasible and economically viable.
- Government incentives and regulations will support the adoption of shore power technology.
- KeHE can successfully integrate shore power into its existing operations.
8. Next Steps
- Develop a detailed project plan: Define project scope, timeline, budget, and resources.
- Secure funding: Identify sources of funding for the Shore Power Project.
- Partner with external experts: Engage with experts in shore power technology and sustainability.
- Communicate with stakeholders: Keep customers, employees, and investors informed about the project's progress.
- Monitor and evaluate performance: Track the project's impact on operations, costs, and emissions.
By taking these steps, KeHE can successfully implement the Shore Power Project and position itself as a leader in sustainable business practices.
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Case Description
KeHE Distributors LLC., a $5.5 billion in revenues Illinois-based B Corp certified supplier of natural and organic food products across North America conducted a pilot study in 2020-2021 involving switching to shore power (using electricity instead of a truck's engine power) in bringing the temperature to desired levels in the refrigerated containers in their trucking fleet. The switch would have a positive effect on the environment in terms of lower carbon emissions in addition to cost savings. Tom Harden, KeHE's Senior Manager of Fleet Assets along with Laura McCord, the organization's Executive Director of Sustainability and Corporate Responsibility, had to decide on whether to seek approval for the project using both financial and sustainability metrics or to conduct an additional pilot study to better understand the controllable and uncontrollable factors that led to cost savings. The company had done poorly on the environmental dimension in the 2020 certification. Two factors made the decision both urgent and important. One was the necessity of applying early to receive rebates from state agencies that would help lower the capital cost of the project. The second was the fact that the company was facing a B Corp certification process in two years' time that involved more stringent criteria on the environmental front.
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