Meijer Considers Establishing Centralized Warehouse
Case Type: operations strategy.
Consulting Firm: Censeo Consulting Group 2nd round job interview.
Industry Coverage: Retail; General Merchandisers.
Case Interview Questions #00030: Your client Meijer is a regional chain of grocery stores based in Grand Rapids, Michigan. About half of the company’s 196 stores are located in the state of Michigan, with additional locations in Illinois, Indiana, Ohio, and Kentucky. Meijer currently receives its stock on a decentralized basis, i.e. each store 
deals directly with the various suppliers.
The CEO of the chain is wondering whether it would be better if they established a centralized warehouse through which all supplies would be delivered and then distributed to individual store by company trucks. The CEO of Meijer has hired you to determine whether he should make the move or not. What are the key issues to consider?
Possible Answer:
The following are some of the key issues that should be addressed at minimum:
1. First and foremost, would the savings from bulk purchasing more than compensate for the cost of:
- Building and maintaining the central warehouse;
- Employing additional personnel and trucks;
- Opportunity cost of capital tied up in inventory for additional periods?
2. Do all the Meijer stores buy similar products? i.e. do purchasing synergies actually exist?
3. Will delivery frequency to the stores by better or worse? Consider the costs of stockout and the need for fresh produce.
4. Will the stores prefer delivery direct from the supplier or from the central warehouse? Consider the time tied up in order processing, the flexibility of delivery times and quantities.
Possible Solution:
The proposed solution would depend upon your interpretation of the trade-offs both financially and organizationally for the two methods of delivery. For you to propose going with the new distribution method, you need to establish not only that it will cost less, but also that all the affected players can be persuaded to buy into it.