Company Context

FreshCart is a regional online grocery delivery company operating in 12 U.S. metro areas. It generated $420M in revenue last year and has grown quickly, but profitability has deteriorated as delivery density has plateaued and labor, fuel, and fulfillment costs have risen. FreshCart holds an estimated 8% share of the online grocery market in its operating regions, competing with Instacart, Walmart+, and local supermarket chains with in-house delivery.

Strategic Situation

You are a strategy manager asked by the COO to recommend how FreshCart should reduce operational costs over the next 12 months without materially harming customer experience or revenue growth. The company’s board wants a credible plan because EBITDA margin fell from +2% to -4% over the last 18 months. Management believes there is meaningful inefficiency across fulfillment, delivery, customer support, and promotions, but there is disagreement on where to act first.

FreshCart is considering several levers: consolidating underutilized micro-fulfillment centers, changing picker staffing models, redesigning delivery zones, increasing basket minimums for free delivery, automating support, and renegotiating third-party logistics contracts. The COO wants a prioritized recommendation, not a long list.

Data Points

Additional operating facts:

• Average delivery time is 42 minutes, with an on-time rate of 91%.
• Net Promoter Score is 58, and management does not want it to fall below 55.
• Free delivery is offered for orders above $35; 62% of orders qualify.
• Third-party drivers complete 70% of deliveries; in-house drivers complete 30%.

Deliverables

1. Identify the major cost buckets and estimate where the largest savings opportunities likely sit.
2. Prioritize 2-3 initiatives FreshCart should pursue first, with rough savings estimates and trade-offs.
3. Assess likely customer and competitive impact of those initiatives.
4. Recommend a 12-month cost-reduction plan with sequencing and key decision points.
5. Define the metrics management should track to ensure savings do not come at the expense of service quality.

Constraints

• Must deliver at least $15M in annualized cost savings within 12 months.
• Capex budget is limited to $5M.
• Headcount reductions above 8% would trigger major organizational resistance.
• FreshCart cannot exit any of its 12 metro markets this year.
• Customer experience guardrails: NPS must remain >=55 and on-time delivery >=89%.