For any case, there can be many ways of approaching it; just sharing one line of thinking below:
Here, we have have been given a somewhat specific problem - that one specific variable cost has been increasing. For questions like this it is even more important not to try and regurgitate a canned higher level framework that would miss the point of the question we are asked.
The starting point I would use is to try and understand what are the key points we need to diagnose the issue. In my mind, the core question is to find out what is driving the costs, and from there you can brainstorm solutions. Specifically 3 main questions are:
1. Is this a market problem? Are other competitors experiencing similar increases and/or are there macro factors in play?
2. Is this a third party issue? E.g. can we isolate this to specific distributors, or specific regions?
3. Is this our issue? Can we isolate it a specific product line or specific distribution cost lever (shipping, storing, packing, etc.)? Has this come up in the past?
From here you can clearly see we have 3 main buckets to explore in our framework, with some sub-buckets to dive into. Your framework does not have to be similar to this, but by making sure you cover all the bases you can make it clear to the interviewer you have thought through all possible options.
Very thorough approach. Keen to understand the rationale for asking the first two clarification questions and how it relates to the prompt, I can understand the last three. Also, from a process point of view I believe it should cover the steps in order to cash post completion of finished article given focus on finished goods aspect of distribution. Is this your understanding? Confirming since you have mentioned dist. from manufacturing plants, which would be raw material cost? Thank you for the advice!
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