How Meal Kit Delivery Services Manage Their Supply Chains

While having fresh, ready-to-cook meals delivered to your doorstep may seem like a simple way to get food on the table, the supply chain behind every meal kit delivery business is dually complex and time-pressured.

Businesses in this industry must invest extra effort into ensuring their logistics run seamlessly from sourcing the ingredients, portioning and packaging the meals, to timely deliveries.

At its core, these meal kit delivery services follow a subscription model. Instead of grocery shopping, customers choose their meals several days in advance from a set list of menu options, and then their shipment of fresh ingredients and corresponding recipes arrive to their homes once a week.

Forecasting plays an important role in these businesses. Some companies even plan their menus a full year in advance – instructing their network of farmers to grow crops specific to their recipes so that they can guarantee their supply and quality.

As well, many services try to set themselves apart by offering a unique hook. They need to take extra measures to ensure standards are met so they can deliver on their value propositions. For example, some meal-kit services will promise local, organic, gluten-free, or reduced-calorie meals.

The meal kit delivery industry hit $1.5 billion in sales in 2016. This is a number that is expected to grow over the next 5 years as consumers continue to embrace convenience, develop an improved perception towards subscription-based services, and become more comfortable with using technology to make purchases.

Some companies like Blue Apron ship out over 8 million meals a month. You can imagine the number of links that go into this long supply chain, and every part of it needs to move at an expedited rate since the foods are perishable.

The Challenges

1. Environmental Disruptions

This is something that poses a threat to any industry supply chain, but specific to the agriculture industry, crops can fail due to disease or poor seasonal weather.

Not only is crop yield and quality highly dependent on uncontrollable variables, but that extends to the rest of the supply chain, where any segment can fluctuate due to external factors beyond control.

2. Inefficient Distribution Channels

When fulfillment centers and warehouses are not centrally located or if there are not enough locations to efficiently service the growing consumer base, then there is an issue of supply chain mismanagement.

Meal-kit delivery companies typically prepare, package, and ship their inventory out within a week. With high inventory turnover, it is critical to research and adopt the most efficient distribution methods.

3. Customer Retention

As the meal-kitting market becomes saturated with competitors and consumers are moving on to the next novelty, retaining subscribers who will remain committed will be challenging.

Consumers are constantly changing their preferences, and in order to maintain a sustainable customer base, it’s important for businesses to be receptive and adaptive to market changes – otherwise the supply chain will hit a bottleneck.

The Solutions

1. Have Backup Suppliers

While environmental disasters may be unpredictable, businesses can minimize their risks by being prepared. Although meal-kit companies who promise to source only local ingredients may have a limit in their number of contingency suppliers, it is important to maintain a network of suppliers in case one fails.

Atlanta-based company PeachDish sources from over 75 farms and producers, and is able to keep up with their 20,000 meal deliveries a month. What if demand suddenly spikes? It is important to have the resources and infrastructure in place to support the dynamic supply chain.

2. Gain Full Visibility Into Your Supply Chain

Incorporate warehousing technology and inventory management systems to your business operations to maximize efficiency. Meal kit companies need to utilize software with tracking and tracing capabilities in case a food recall needs to be issued.

In this industry, responsible supply chain management ensures the health and safety of customers, as well as protects the company reputation and brand. Knowing what goes on at every step in the supply chain is crucial to logistics, forecasting, and customer retention.

3. Find Ways to be Sustainable

Many meal kit delivery services have began partnering with grocery stores to expand their market reach. In 2017 alone, in-store meal kits brought in $154.6 million in sales. Data science research also shows that 80% of grocery store customers want to see meal kits available in stores.

Meal kit delivery businesses have an edge over other food suppliers because they can analyze their customers’ order histories and find out their preferences.

Conclusion

So what can we learn from meal kit delivery companies?

The key is establishing and maintaining an efficient supply chain, and integrating the softwares and technologies available so that accurate forecasts about inventory and the production processes can be made.

Since these companies buy their supplies in bulk, they reduce their amount of waste and are cost-effective in their manufacturing and distribution processes. Additionally, these businesses analyze the purchasing patterns of their consumers, and adapt their product offerings according to the data.