Sun Valley reorganizes wholesale produce delivery

March 1, 2005
Operating from a location that some could characterize as isolated, Sun Valley Fruit Company quickly knocks aside any such suggestion, saying emphatically

Operating from a location that some could characterize as isolated, Sun Valley Fruit Company quickly knocks aside any such suggestion, saying emphatically that Albuquerque, New Mexico, places the 95-year old produce distributor in the heart of its trade area.

If the mountains of central New Mexico form the state's spine, the Rio Grande acts as its central nervous system, still today as much as it has done from earliest times. The river rises near the continental divide in south central Colorado. By the time it flows the relatively short distance from its source to a region south and west of Taos, New Mexico, it has cut the deepest gorge in the state. South from the gorge, the Rio Grande splits the state as it runs past Santa Fe and then a fairly straight course south through Albuquerque and on to Las Cruces before forming the international boundary in Texas between the US and Mexico.

As has always been the case, the state's population centers along the riverbank. Albuquerque, in the center of New Mexico, forms the commercial hub with its population exceeding 850,000. Fifty miles northeast, Santa Fe, only a fraction the size of Albuquerque, fills the government and cultural niches in the state. South of Albuquerque, the river feeds the state's agricultural heartland as it always has.

Draw a circle with a radius of 300 miles around Albuquerque and only El Paso, Texas exceeds it in population or commercial activity. That is exactly what Joe Kemetz, CEO of Sun Valley, means when he says Albuquerque is the ideal place to do business.

Core trade area

Although Sun Valley trucks regularly venture beyond the core trade area, Kemetz says that a loose oval about 50 by 75 miles in shape forms the home territory. The most noticeable bulge in the oval is to the south. In fact, Sun Valley has a small satellite operation with five trucks in El Paso to serve Las Cruces along with military installations such as Fort Bliss in El Paso and the White Sands Missile Range and Holloman Air Force Base near Alamogordo, New Mexico.

Albuquerque serves the business core that includes Santa Fe. Leaving Albuquerque to the east or west in a sense is leaving the populated part of the state — the river. Heading east, a short driver over the Sandia Mountains that overlook the city, Sun Valley drivers find themselves on a vast rolling plain, not unlike the High Plains of West Texas.

Sun Valley trucks cross those 217 miles of plain three times a week to serve Cannon Air Force Base at Clovis, New Mexico, just inside the border from Texas. Trucks go west and northwest as well into the high mountain desert — the real terrain of Tony Hillerman novels — to serve Gallup and Farmington up in the Four Corners region at least twice a week. Outside those small communities, western New Mexico is mostly the property of the Navajo nation.

Sun Valley Fruit Company was formed in 1910 as Hutchinson Fruit and has been in business constantly ever since. In 1992, new ownership changed the name to Sun Valley. “We cover the entire spectrum of produce distribution,” Kemetz says. “We are a produce wholesaler to the foodservice industry including schools and healthcare facilities in addition to restaurants. We serve commissaries on military installations throughout New Mexico; and we provide fill-in service for retail supermarkets. Retail sales account for about 30% of the business. Foodservice covers the broadest spectrum with customers ranging from the smallest lunch counter to some of the finest restaurants and resorts in the trade area.”

In addition to the produce inventory, Sun Valley sells some dry groceries and a little frozen food. Perhaps most intriguing for a produce distributor, the company sells fluid milk, especially to schools. The milk is produced by Farmer's Dairy in El Paso and trucked back to Albuquerque for distribution.

Late in 2004, Sun Valley redesigned its fleet operations slightly and made a significant change in its fleet to match delivery requirements more closely. Prior to September 2004, Sun Valley had a fleet of 26 refrigerated straight trucks and 10 tractors and trailers. As it does today, the straight truck fleet provided distribution to wholesale customers. The tractor-trailer fleet was used to haul outbound freight from Albuquerque to the West Coast to reach the produce that supplied a portion of Sun Valley's inventory.

Fleet changes completely replaced the delivery fleet to make it more efficient as well as better able to protect product from the hot, dry climate. The highway fleet was completely eliminated as an economy move. “It was an aging fleet subject to increased maintenance costs,” Kemetz says. “In addition, fuel prices were rising rapidly, and insurance rates for operation beyond a 500-mile radius were increasing as well. The whole situation was compounded by a shortage of outbound freight to pay the way west. We looked at the situation and determined that we could purchase inbound transportation for less than it cost to haul inbound produce ourselves. With our current operating practices, we receive five to 10 full loads from California every day.

“A significant amount of that inbound produce is sold before it ever hits our dock. We simply pull it off the inbound trailer and load it directly on our delivery trucks; it never goes into inventory.”

Kemetz is careful to attribute the end of highway operations to rising operating costs. “Running that road fleet probably cost $250,000 a year,” he says. “Finding drivers for the longhaul operation was never a problem.”

New straight trucks

The straight truck fleet changed shape, but not purpose, Kemetz says. The straight trucks were always for delivery. The only difference now is that trucks are larger and better insulated and refrigerated. The biggest change is that now Sun Valley can do more work with fewer trucks.

In the past, the company ran a fleet of 20 straight trucks with 14-ft insulated bodies. Refrigeration was provided by truck-engine driven units. Trucks in the previous fleet had only two inches of insulation, and with the small, low capacity refrigeration units were doing well to hold temperature to 40°F on a hot day, Kemetz says. Some of those trucks had seen better days; vehicle age was as high as 18 years with trucks from 1986 to 2004 in the fleet. Replacement was based more on necessity than a schedule, he says.

Sun Valley owned the fleet and provided on-site maintenance in a two-bay shop with a staff of four mechanics and one supervisor. Including labor as well as the parts and tire inventory, Kemetz estimates maintenance expenses at $250,000 to $300,000 annually.

Seeking to improve that cost structure, Sun Valley embarked on wholesale change, replacing the 20 small trucks with 15 vehicles with 18-ft bodies and putting eight 26-ft trucks into service in place of seven large 22-ft trucks with the result that a smaller fleet became capable of larger deliveries. At the time the change was made, the company was operating with 25% of its driver payroll as overtime. Following the reorganization, fleet count fell, but not the driver count. By assigning drivers to four 10-hour days weekly, all drivers were retained and overtime requirements were reduced.

Knowing what the company wanted was the easy part, Kemetz says. The highway fleet was to be eliminated, as was the maintenance operation. A redesigned straight truck fleet was to be placed in service. Accomplishing it was a somewhat more involved task. To that end, Sun Valley developed a wish list for what that truck fleet should look like.

More thermally efficient

First and foremost, the new fleet would have to be thermally efficient. That requirement was defined as trucks with much heavier insulation and with self-powered refrigeration. In practice, Sun Valley settled on truck specifications that called for Kidron refrigerated bodies with four inches of sidewall insulation. Refrigeration units would need to be capable of holding frozen foods during normal route duration. To help maintain box temperature during delivery stops, bodies would be equipped with strip curtains at the rear door. A curbside door was included in the specifications to allow frozen foods to be segregated in the nose of the bodies. In addition, trucks would need to be equipped with delivery ramps — a new feature for Sun Valley, which had never used ramps before. Kemetz specified R•O•M RoadwarrioR ramps, a product he calls the “best on the market.”

Almost by definition, acquiring and putting a new fleet in service in a short time frame while moving away from an internal maintenance program would require a full-service lease. “It became a simple question about whether we were in the trucking business with a shop and maintenance program or whether our core business was produce distribution,” Kemetz says. “Obviously, we are a produce wholesaler, so we made the moves necessary to support our primary business.”

With its truck body specifications in hand, Sun Valley solicited bids from the major fleet leasing companies with New Mexico operations — PacLease, Penske, and Ryder. Lessors were required to meet the body specifications but were allowed to propose truck chassis and refrigeration units that best fit their own operations. Each of the three leasing companies shows a definite preference for a particular chassis. “All three bids came in within the limits we set, so we took the offer that provided the trucks we liked best,” Kemetz says. “That was the PacLease bid offering Kenworth T300 chassis. We did ask our drivers for input on this, and the KWs were an easy sale, because our fleet had been operating imported low COE chassis. The PacLease proposal equipped bodies with refrigeration from Carrier Transicold. The local dealer, CT Power, part of a chain throughout Colorado, New Mexico, and Arizona, made a strong bid for the business.”

Replace at lease termination

The lease is serviced by Inland Kenworth, the local PacLease franchise. Trucks and bodies are held on a seven-year, full-service lease that calls for replacement at the end of the term. “Replacing trucks as complete units including bodies and refrigeration provides a higher residual value to PacLease at the end of the lease term,” Kemetz says. “The positive result is a lower lease rate for Sun Valley.”

The larger trucks — the 26-ft bodies — are powered by Cummins ISC 8.3-liter engines rated at 240 horsepower. Designed for the longer rural runs, the big trucks have Eaton Fuller FSO-6406A, six-speed manual transmissions. The long truck bodies are cooled by Carrier Transicold Supra 744 refrigeration units. The shorter 18-ft trucks are powered by Cummins ISB 5.9-liter engines with 200 hp. Intended more for city delivery, the smaller trucks use Allison 2400-series, five-speed automatic transmissions. Carrier Transicold Supra 644 units provide refrigeration.

Most service work happens at the Sun Valley facility. Inland Kenworth checks the fleet nightly, usually after all the trucks return around 5 pm. Trucks that need more than routine service are taken to the KW facility and returned the same night or replaced with a spare while out of service.

All these fleet changes allow Sun Valley to excel now at the same job its been doing throughout its history — serving produce customers as many as three times every day. Many produce wholesalers will deliver twice a day, but Sun Valley takes service a step further. Orders in the house by 5 pm are delivered by noon the following day. That first wave of deliveries typically uses the entire fleet. Customers who forgot part of an order or who need something extra can order by 6 am for same-day delivery by 1 pm.

Many restaurants, especially upscale establishments in Albuquerque and Santa Fe open only for dinner, Kemetz says. The customers start kitchen preparation later in the day, so afternoon deliveries are ideal. If these customers order by noon, their delivery is available no later than 6 pm on the same day. Obviously, the number of trucks required for the second and third routes is lower than for the first route, he says. Running three delivery waves keeps the warehouse working almost around the clock.

About the Author

Gary Macklin

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