Chewy.com (A)

In late 2013, Ryan Cohen, cofounder and CEO of online pet products retailer Chewy.com, faces a “bet the company decision”—whether to stay with a third-party logistics provider (3PL) for all of its e-commerce fulfillment or to take the function in house. Cohen worries that the existing 3PL may not be able to scale with Chewy’s projected growth or maintain the company’s performance standards for service quality and fulfillment. While Cohen is convinced that achieving scale is essential to making the business work, he is also keenly aware that neither he nor his cofounders have any experience in managing logistics. In addition, any move they might make to in-source fulfillment would likely destabilize the existing 3PL relationship, on which the viability of the fast-growing business depends. Cohen’s board members are concerned enough about the situation to pressure him to throttle back growth and maintain the 3PL. Cohen sees four possible options: stay with the current 3PL, add another 3PL to handle additional volume, stay with the 3PL and add a company-owned fulfillment center in a new region, or fully insource fulfilment as quickly as possible. In light of Cohen’s goal of reaching $500 million in sales by 2018, the board is divided about what to do, and the CEO is left with what appears to be a choice between two risky options as he attempts to move Chewy forward.