Industry leaders discuss operating in changing times

Dec. 1, 2008
In The General session, Assessing the Impact of the Economy and Environment on the Industry, a panel of leading foodservice distribution executives discussed

In The General session, Assessing the Impact of the Economy and Environment on the Industry, a panel of leading foodservice distribution executives discussed how fuel and energy costs, high operating expenses, and economic concerns are impacting foodservice distribution. They offered insights on the actions their companies are taking to achieve operational efficiencies and meet today's challenges.

Participating in the session were Jeff Braverman, president, Hawkeye Foodservice Distribution; Mike Roach, president, Ben E Keith Foods; Mac Sullivan, chief executive officer, Pate Dawson Company; and Tom Zatina, president, McLane Foodservice Distribution.

It was their consensus that companies should take advantage of a sluggish economy, when their business is slower, to embark on initiatives to retool to be more prepared for a rebound. Furthermore, they said companies need to manage their resources well, and do the fundamentals of business better every day as there isn't as much margin for error nowadays.

Success is doing a lot of little things right, they agreed.

Companies need to “work with customers to help them understand our business model and why a prime source is best for them, and we need to help them better manage their food costs,” advised Sullivan of Pate Dawson Company. “We also need to understand their needs, because we need to make sure that in that process, we're meeting those needs.”

Sales forces need to be well-trained and understand the basic financial economics of foodservice distribution, along with the business of customers, Ben E Keith Foods' Roach added. Rather than just selling product, price, and service, salespeople can then talk to customers in economic terms and “help them understand the things we as distributors must do, and why they are important for that customer.”

Reducing errors

Each panelist stressed the vital importance of eliminating reasons to return to a customer by delivering the order right the first time.

By working together, distributors and customers can figure out ways to solve errors, Sullivan said. “We know how to solve our errors, such as wrong selection and damage on trucks. But we also need to look at the orders that are coming in from our customers and do a better job of buying for them and anticipating their needs.”

As an example, he mentioned having systems in place to track when a customer didn't order something it needs every Friday.

“We can't assume that the customer is going to put systems in place,” said Sullivan. “We need to step up and do it because it's a win for the customer and win for us, plus it adds value to the customer.”

When a company is a principal supplier, there is a lot of pressure to do things right because there is no second or third supplier that a customer can rely on, observed Zatina of McLane Foodservice Distribution. “We have a lot of emphasis on superior execution and run our operation on the assumption that if we do our job well, then our customer can focus on being a great operator or restaurant.

“If we make an error, they don't have another place to go. And if we need to fix it, it's going to add cost to our system to make a re-delivery.

“In these times,” Zatina continued, “we think the best thing we can do is take all the worries off the back door and let our customers run their businesses.”

Roach said Ben E Keith Foods benchmarks all errors every week at each distribution center and compares how each does. If one center is doing better than another, the company determines how it is accomplishing this and passes the information along to the other centers so they can improve their performance.

“We also reward our operations people by incentivizing them to have continuous improvements,” he said, “and that helps quite a bit.”

“It is critical to have good error tracking, down to a very detailed level,” added Hawkeye Foodservice Distribution's Braverman. “This helps you determine how the error occurred so that you can then train or focus resources on fixing that problem.”

Managing fuel

The four executives concurred that the number and frequency of deliveries must change to help lower transportation costs. They suggested that distribution companies consider all their options and opportunities for finding more efficient ways of transporting goods to customers.

At the same time, they advised distributors to collaborate with their customers to make sure they aren't creating any problems for them by making changes.

Additionally, they said distributors must finds other ways to cut fuel consumption. Among their recommendations: route consolidation and proactively managing the driver force with such tools as onboard computers to monitor vehicle speed and other factors, minimizing idling time, and governing engines to reduce speed.

McLane Foodservice Distribution's Zatina said his company has seen “definite improvement” in miles per gallon since it reduced the governed speed of its trucks to 62 miles per hour.

“Just as important has been the dialogue that we've had with our drivers about the need to get better mileage. Hand in hand with cutting speed back is an increased awareness by drivers of how much their driving behavior can bring mpg to a higher level.”

Hawkeye Foodservice Distribution has taken steps to lessen fuel costs by implementing a two-tiered stop charge program, said Braverman. If a stop is not a certain size, there is an additional charge.

“This has helped us cut down on our small deliveries, and we've seen an increase in our average order size.”

The company also changed the sales commission system to have it based on the amount of gross profit dollars sales reps generate per stop.

The change has helped salespeople “understand that they control their profitability and the company's, and that they are an allocator of resources. This is helping them make wise decisions in developing their relationships with customers.”

Controlling energy

The panelists also talked about what their companies are doing to control and reduce energy consumption and costs in the warehouse. They stressed that whatever the measures, they never trade away temperature integrity or anything else that would even come close to impacting food safety.

Some actions that their companies have been taking include, re-lamping warehouses with more energy-efficient lighting and putting in sound and motion sensors, adding better insulation, and installing high-speed doors between compartments.

The executives said they are learning more about energy usage to make better decisions about energy and are looking at energy-saving devices and technology to see if some are feasible for their operations.

Considering backhauls

The matter of backhauls as a source of income was briefly touched upon. Zatina said McLane Foodservice Distribution is “very aggressive” about backhauls because it wants to reduce empty miles. When done successful, backhauling makes “a big difference in your P&L.”

Braverman added that it is necessary to get various departments to think as one about backhauling, understanding that it has an impact on the company's health and bottom line.

At Hawkeye Foodservice Distribution, “we do this through education and incentives so that everyone understands where backhauls makes sense, and everyone is working together to help the company maintain its profitability.”

Peering ahead

Looking ahead over the next five years, the executives see greater development and use of technology. “This will be driven by the increased need for more and faster information across the different business areas of companies and their trading partners,” said Roach.

Sullivan predicted that as RFID evolves, companies “will have the ability to know what happened to every single case, what temperature it was kept at throughout the supply chain, and those types of information from manufacturer all the way through to the end user.”

“We see customers getting more involved in order placement and tracking,” said Braverman. “We need to make sure we have systems in place that enable our customers to see where their product is every step of the way.”

Zatina added “the ability to quickly track and react is becoming more important.

“With technology, we're always looking at what we can do in our business to help us keep track of what is going on so we can react. We're also looking at what can we do to tract what's going on with our customers — or even better, help them track and react.

“Having the ability to react to customer needs through new technologies will make us even more indispensable as a business partner.”

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