Food Logistics

OCT 2014

Food Logistics serves the entire food supply chain industry with targeted content for manufacturers, retailers, and distributors.

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18 OCTOBER 2014 • FOOD LOGISTICS provide financial metrics, such as net sales, cases sold, gross margin, operating margin and head count, then provides a report that allows mem- bers to compare against their individual perfor- mance. Wood says small and regional distribu- tors have been growing slowly since 2008. The Hale Group identifies five areas where distributors will be looking for ways to reduce costs and improve efficiencies: Sales force reduction to have broader coverage and apply technology-based solutions to sales tasks. Web-based automated order and informa- tion retrieval. Rationalized product offerings based on category management and greater use of redis- tribution. Improved warehouse and delivery effi- ciencies through improved order selection, automation, larger drops, better route efficiency and night drops. Improved people skills through the use of technology. Major focus: driver recruitment One advantage larger companies have in the near term is more resources to invest in driver recruitment, training and retention. Foodservice, like all industries that utilize vehicle fleets, sees the nation's driver shortage as its most immediate challenge. Foodservice companies are investing in recruitment, train- ing and retention more aggressively than at any time in the industry's history, both on an individual company basis and through industry trade groups. "In the foodservice industry, so much of the product moves via truck, that the driver short- age and the associated increased costs has almost an exponential effect," says Mike Seekins, vice president of transportation at Performance Food Group (PFG), the Richmond, Va.-based food distributor. "Obviously we monitor our compensation levels to ensure we are competi- tive, but more and more of our focus is on the quality of life aspects. How the work is done, how the trucks are loaded, how to keep sched- ules consistent, and recognition." PFG supports industry efforts to address the problem because it not only affects the compa- ny's fleets, Seekins notes, but those of its suppli- ers and customers. "My supplier may not have the driver to bring me my product," he says. The need to improve the driver's experience is one reason Conklin, N.Y.-based Maines Paper & Food Service now replaces its trucks every three to four years, says Pat DeOrdio, vice president of operations. This is also one of the reasons the company has introduced XRS mobile software for driver performance compli- ance. The company, which serves 35 states, also has its own driver training institute. Once hired, drivers have six weeks of further training. Concern about driver quality is a reason Sherwood Food Distributors recently intro- duced the Geotab fleet management solution, says Jim Gell, executive vice president of opera- tions for the Detroit-based food distributor. In addition to helping management monitor driver behavior, the telematics-based solution makes it easier for drivers to immediately improve their driving behavior. The in-vehicle audible alerts notify drivers of unsafe or potentially risky driv- ing events. "All of this supports the quality of the driver, which is diminishing," Gell says. In years past, Vietnam-era soldiers returning from military service filled many of the driver, logistic and warehouse positions. That genera- tion is retiring. The soldiers returning from the Middle East have strong skills but very few seem to be filling the driver jobs, Gell says. The IDFA has published a series of articles on its website on ways to meet the challenges of driver recruitment and retention. Electronic proof of delivery grows One technology that several foodser- vice distributors are embracing is elec- tronic proof of deliv- ery, which improves accuracy, requires less time for the driver and contributes to sustainability. Some distribu- tors find electronic proof of delivery helpful in keep- ing track of customer credits. This is impor- tant when servicing foodservice accounts. Merchants Foodservice is in the process of introducing Airclic's proof of delivery system to one of its four DCs, says Matthew Granlund, vice president of operations and logistics for the Hat- tiesburg, Miss.-based distributor. The company's drivers will use Intermec's CN 70 handheld device to capture proof of delivery information. Customers want this, he says, but it takes time to teach drivers how to use it. Airclic's electronic proof of delivery (ePOD) offers real-time order tracking. M any restaurant chains and purchasing coop- eratives have already implemented redistri- bution for savings on items their restaurants will use all year. But redistribution has even more benefits to offer for items related to limited-time offerings (LTOs) and regional menu offerings (RMOs) as well. First, a quick primer on redistribution: with redis- tribution, manufacturers ship truckload quantities of slower moving or seasonal items to a redistributor, who then ships full and mixed truckloads of products to foodservice distribution centers (DCs). By purchas- ing truckload quantities and then creating full truck- load shipments of consolidated SKUs, chains and co-ops can reduce freight costs while experiencing greater reliability. Most chains or co-ops find that redistribution's initial cost savings run 10 to 40 percent as com- pared to the cost of LTL shipments. And that's before other costs related to inefficiencies in the supply chain – like LTOs and RMOs – are even uncovered. LTOs and RMOs are inherently fraught with logistical inefficiencies. These select items will only be carried for a limited time. DCs easily can get overstocked or run out of inventory before the LTO or RMO is over. It's difficult to properly allocate product in a short period of time using traditional distribution. Often, as the LTO phases out, one DC will have a surplus of items they can't get rid of fast enough, while others will be out weeks before the LTO is over. The cost of overnight freight to get the items from one DC to another to fill demand is tremendous—it impacts profitability excessively, and just like any other cost, shouldn't be overlooked. With the right supply chain redistribution partner handling LTOs, they are able to micro-control the supply chain from the time the LTO rolls out to its conclusion. Or, redistribution may only come into play toward the end of the LTO when less product is needed. Since a redistributor can combine SKUs into full truckloads, there's no minimum order. Another detail that gets overlooked is product managers' time managing LTO and RMO items. It's a labor-intensive process for supply chain professionals who get called in on a Saturday when a DC runs out of product. While this isn't a cost that gets factored into overall landed costs, it affects efficiency. The correct redistribution partner can do the heavy lifting to make sure these items are properly allocated and get where they need to be, when they need to be there. One client used to have four people dedicated to managing LTO items, but after bringing on a redistribution partner, they've reported that hav- ing this off their plate has not only freed up the time of four staff people, they're also not experiencing the same phase-in/phase-out inventory management issues they used to have. While redistribution doesn't eliminate work for co-ops and chains, it certainly reduces their responsibilities in micro managing the supply chain. Supply chain costs will inevitably go up due to any number of uncontrollable factors, from the price of gas to driver shortages. Supply chain managers and product managers have to do everything they can to mitigate those cost increases. Utilizing redistribution to bring costs down is something they can control. ◆ Tom Varga is vice president, business develop- ment for Consolidated Distribution Corp., LLC (CDC), a Lemont, Ill.-based foodservice supply chain company serving the fast-casual, quick-serve and casual-dining restaurant industry. REDISTRIBUTION: Remove Hidden Costs In Limited Time Offerings BY TOM VARGA

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