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ID NEWS: Sysco cost structure 'comparable' to that of Wal-Mart, thanks to IT

Sysco Corp.'s focus on cost structure is comparable to that of Wal-Mart Stores, Inc., according to Andrew Wolf, an equities analyst at BB&T Capital Markets.

Wolf cites the Houston-based, $24.7-billion broadliner's IT system as key to controlling inventory and lowering operating costs. In fact, the distributor credits efficiencies achieved via its Sysco Order Selector (SOS) and delivery routing technology as significant factors in a one-tenth of a percentage point reduction in operating expense as a percentage of sales during the third quarter (ID web news 4/28/03).

Moreover, Sysco's gross profit margin decline of two-tenths of a percentage point for the quarter-impacted by bad weather and the war in Iraq--was offset by cost reduction. The number of order errors in cases of food shipped, for example, dropped by 15 percent from the previous quarter, according to John Palizza, assistant treasurer.

This improvement was facilitated by continuing rollout of SOS, Palizza says. Approximately half of Sysco's 87 operating companies are now aboard. Thus, marketing associates can transmit orders from the field, via radio frequency, directly to portable computers installed on forklifts. Screens on the forklifts tell order selectors where to locate the products. A bar-code scanner on the selector's finger confirms that the right product has been selected. A small printer attached to the selector's belt generates the case label.

All told, for the quarter ended March 29, Sysco recorded an 11.2% year-to-year gain in profit, amounting to $168.4 million. Sales increased 13.8% to $6.4 billion for the quarter.

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