KeHE Distributors LLC: The Shore Power Project Custom Case Solution & Analysis

Evidence Brief

Financial Metrics

Diesel consumption for Transport Refrigeration Units: 0.8 to 1.1 gallons per hour during idling.
Diesel fuel cost: Average range between 3.50 and 4.80 dollars per gallon based on regional volatility.
Infrastructure investment: 15000 to 25000 dollars per electrified parking space pedestal.
Trailer modification cost: 800 to 1200 dollars per refrigerated unit for electric plug-in capability.
Electricity cost: 0.11 to 0.19 dollars per kilowatt hour depending on the utility provider and time of use.
Maintenance expense: Estimated at 3 to 5 percent of initial capital expenditure annually.

Operational Facts

Distribution network: 16 centers across North America serving natural, organic, and specialty food segments.
Fleet composition: Over 500 tractors and 1000 refrigerated trailers.
Idling duration: Trailers frequently idle for 4 to 10 hours during staging or overnight rest periods.
Primary locations for pilot: Portland, Oregon and Chino, California distribution centers.
Regulatory environment: Increasing restrictions on diesel emissions in California and the Pacific Northwest.

Stakeholder Positions

Laura McCord: Vice President of Sustainability and Corporate Responsibility. Advocates for the project to meet B Corp certification requirements and carbon reduction targets.
Chris Sieburg: Executive Vice President of Operations. Focuses on operational efficiency and requires a clear return on investment.
Fleet Managers: Concerned with driver productivity and the physical labor required to plug and unplug units.
Utility Companies: Essential partners for grid capacity but often slow to provide necessary infrastructure upgrades.

Information Gaps

The exact salvage value of electrified pedestals after a ten year period is not specified.
Detailed data regarding the impact of extreme cold weather on electric refrigeration efficiency is absent.
Specific driver retention impact resulting from increased manual labor requirements is not quantified.

Strategic Analysis

Core Strategic Question

How can KeHE Distributors align its environmental commitments as a B Corp with the financial necessity of a 24 month payback period for capital projects?
What is the optimal scale for the initial deployment of Shore Power to maximize learning while minimizing capital exposure?

Structural Analysis

The regulatory landscape in California and Oregon creates a high cost for inaction. Traditional diesel refrigeration faces rising carbon taxes and potential bans in urban zones. The competitive environment for specialty food distribution requires KeHE to maintain its reputation for sustainability to keep high value accounts like Whole Foods. However, the bargaining power of utilities is high, as they dictate the speed of infrastructure installation and the cost of energy inputs.

Strategic Options

Option	Rationale	Trade-offs	Requirements
Network Wide Rollout	Achieves maximum carbon reduction and economies of scale in procurement.	Extremely high upfront capital; risk of stranded assets if technology shifts.	Access to 25 million dollars in capital and national utility agreements.
Targeted Regional Deployment	Focuses on high diesel cost and high regulation zones like the West Coast.	Lower total impact; operational complexity in managing a mixed fleet.	Retrofitting 20 percent of the trailer fleet and 2 key distribution centers.
Wait and Monitor	Avoids current high costs of pedestals; waits for hydrogen or solar maturity.	Loss of B Corp points; exposure to rising diesel prices and fines.	Minimal capital; increased spend on carbon offsets.

Preliminary Recommendation

KeHE should pursue Targeted Regional Deployment. This path addresses the most pressing regulatory risks in Portland and Chino while limiting capital risk. This strategy allows the company to refine driver workflows and utility negotiations before committing to a national scale. The focus must be on locations where the spread between diesel and electricity prices is widest.

Implementation Roadmap

Critical Path

Month 1: Finalize utility capacity audits at Portland and Chino locations to ensure the grid can handle the load.
Month 2: Execute procurement contracts for 50 pedestals and 200 trailer retrofit kits.
Month 3: Begin physical installation of pedestals and driver training programs.
Month 4: Initiate a 90 day monitoring phase to track actual versus projected energy savings.

Key Constraints

Utility Lead Times: Local power companies often require 6 to 12 months for high voltage upgrades.
Driver Compliance: If drivers find the plugging process cumbersome, they will continue to run diesel engines, negating the investment.
Trailer Interoperability: Modified trailers must remain compatible with distribution centers that lack electrification.

Risk-Adjusted Implementation Strategy

The plan assumes a 15 percent buffer for construction delays. To mitigate driver resistance, the operations team will implement a small incentive for every successful electric session recorded. If electricity rates spike above 0.22 dollars per kilowatt hour, the project will pause further expansion until a power purchase agreement can be secured to stabilize costs.

Executive Review and BLUF

BLUF

Approve the 1.4 million dollar investment for Shore Power at the Portland and Chino distribution centers. This targeted deployment mitigates immediate regulatory risk in the West Coast corridor and provides a 19 percent reduction in localized emissions. The project will pay for itself in 32 months if diesel prices remain above 3.75 dollars per gallon. This is a necessary step to maintain B Corp status and meet 2030 carbon goals without overextending the balance sheet on unproven national infrastructure.

Dangerous Assumption

The analysis assumes that diesel prices will remain high and electricity prices will remain stable. A significant drop in diesel costs or a sharp increase in peak hour electricity rates would extend the payback period beyond the acceptable threshold for the operations team.

Unaddressed Risks

Grid Instability: Frequent brownouts in California could force a return to diesel usage, rendering the pedestals useless during peak demand.
Resale Value: Retrofitted trailers may have a lower resale value in secondary markets where shore power infrastructure does not exist.

Unconsidered Alternative

The team did not fully evaluate a third party leasing model for the pedestals. Instead of owning the hardware, KeHE could pay a monthly service fee to a provider like Enel X or ChargePoint. This would shift the capital expenditure to an operating expense and transfer the risk of technological obsolescence to the vendor.