Speaking in a panel discussion during the inaugural IFDA Foodservice Distribution Conference & Expo here Monday, Oct. 16, titled "A Strategic View of Operations," the four panelists said people, from the occupants of the corner offices, who envision the culture for the entire company, to managers and line employees, are needed to determine priorities and then harmoniously implement policies, practices and procedures that result in error-free deliveries. Technology, they quickly pointed out, only helps people fulfill the mission and attain goals.
As for error-free deliveries, the group was unanimous in its assessment that going forward flawlessness will be merely the table stakes for distributors to stay in business.
"One of the things that we're preaching is that in five years, error-free deliveries will be the bar just to be in the industry," observed Mac Sullivan, president and coo of Pate Dawson Co., Goldsboro, NC, and general chairman of the conference and expo.
"If we can't figure out a way to significantly help independent operators maneuver around the 20% cost-of-goods advantage that the chains have then we will not have done our job." Ã¢â‚¬â€œ Steve Spinner
"My own belief is that being error free is a culture. It represents a significant cultural change from where most operating companies exist today," he said.
When confronted with errors in deliveries, Spinner elaborated, most distributors become "reactive" and frenetically endeavor to immediately deliver the missing product to the customer, oftentimes, as ID has learned on numerous occasions, in the trunk of someone's car.
"We tend to deal with the symptoms of the problem and not the chronic nature of the issue," he said.
The challenge for distributors, Spinner said, is to change their own view of how distribution executives and managers solve problems within their companies.
"Being error free is an entirely different viewpoint than what exists in most companies today. We need to have the ability and people who have enough foresight to actually go out and determine what the source or root cause of the problem is. Then use technology to support that change," he said.
Spinner, who in his comments also eloquently championed the cause of independent operators, said the trickledown process begins with the company's leadership that establishes the tone for defining the term "error free" and then making sure that all of the employees carry out that vision.
Sullivan promptly offered his support for Spinner's ideas, saying, "We heard it in a number of the educational sessions here that the technological tools are excellent and they continue to get better. But if you don't start with your people, if you don't start with your culture, the tools are not going to help you at all. We can put in voice or scanning equipment and not make any progress at all if we're not changing the minds, hearts and attitudes of the people within our organizations."
"If you don't start with your people, if you don't start with your culture, the tools are not going to help you at all." Ã¢â‚¬â€œ Mac Sullivan
Asked by moderator Dan Raftery, president of Raftery Resource Network, to offer his view, Greg Hickman, executive vice president, U.S. Foodservice, Columbia, MD, expanded the concept of people to include customers Ã¢â‚¬â€œ the end users.
"You start with the customer," Hickman said.
Urging his colleagues to evolve away from dwelling on what he called traditional error rates toward perfect invoices and deliveries, Hickman said before distributors can act, their operator-customers first have to define those concepts as they pertain to their businesses.
"Distributors have to go out and understand in an unbiased fashion what the customer is looking for and then develop those processes around those important values," he said.
Momentarily turning his attention upstream, Hickman said circumstances will pressure suppliers to participate in creating a "perfect" supply chain.
"If you look at the kind of performance that suppliers have coming into our organizations, in order for us to deliver what customers require, suppliers are going to have to perform better for us," he opined.
Sullivan illustrated this critical point by recalling a recent vendor review, during which his staff discovered that at any given time 20 or more vendors would deliver only 85-95% of the ordered items or deliver complete orders but with delays half the time.
"It is absolutely atrocious. If we would service our customers that way, we'd be out of business. We certainly have to begin working on the suppliers and let them know that their service-level requirements to us are the same as our service-level requirements to our customers," he said.
On a purely technological side, the speakers indicated that voice-recognition and scanning equipment would be helpful in reducing all sorts of inbound and outbound errors. Speaking with distributors on the expo floor, ID learned that they are investigating the potential benefits of those types of hardware in their operations.
"In order for us to deliver what customers require, suppliers are going to have to perform better for us." Ã¢â‚¬â€œ Greg Hickman
"A new requirement that we've agreed to with customers is that we put up a barcode inside their stores that the driver locates, scans and then scans the product. The report gives a chronology of the delivery," Walsh said.
Ultimately, he suggested, technology will make the distributor transparent to the end user.
"We're hearing more and more that the distributor will be invisible to the customer. Our product just appears Ã¢â‚¬â€œ it's there, it's correct, it's on time," Walsh said.
Furthermore, Walsh also placed the burden of an error-free supply chain on the end users, many of which have solicited Maines' participation in designing an error-free process.
"We have customers who are committing us to be part of the team to develop their receiving practices to ensure that they are accurately receiving products and not reporting errors when there aren't any. Our customers are critical to making that happen," he said.
As the speakers spoke about involving their upstream and downstream partners in creating an error-free supply chain with the help of scanning technology and still infrequently-used barcodes, Spinner returned to his initial premise, insisting that no amount of technology will help the cause without a well-trained, people-based culture. He estimated that most distributors' errors come from their broadline street accounts that return the same product every week of the year.
"Until you figure out a way to stop that you're never going to make any headway in reducing errors. Scanning is not going to prevent the sales person from padding the order or the customer sending it back because he's over ordered. Eliminating that is unbelievably important," he said.
For Sullivan, who underscored that foodservice distribution is a customer-relationship business, this means determining how best to service the customer and deal with the errors that distributors and operators commit. Once that is done, everyone wins and everyone's bottom line becomes stronger.
Specifically, on the chain side, Walsh spoke about the need for a higher level of communicating skills. He suggested that operations managers or general managers become ombudsmen or primary contact points for customers because contemporary circumstances have forced them to interface with end users more than in the past.
"They talk to restaurant managers about delivery issues and problems, where to store dry products and cool ones. All of our customers have processes and formulas but there is a qualitative part to the relationship as well. It's getting the restaurant manager to call the customer ombudsman to solve problems before he calls the franchisee operator and it becomes a problem at the headquarters," Walsh said.
On the street side, Hickman said a team consisting of the inside sales rep, the territory manager (DSR) and operations manager must cooperate in servicing and penetrating accounts.
"This requires more than the ability to move quickly, it requires the ability to communicate with customers, managers and executives, which may be a new skill for some," he said.
Spinner anointed the distributorship president or ceo with the title of customer ombudsman because that's where the culture and process begins. By declaring that the company will be perfect and an advocate for the customer, as well as "vehemently" search for problems, using the latest technology to solve them, the president establishes the rules of the game, he said.
"We're hearing more and more that the distributor will be invisible to the customer." Ã¢â‚¬â€œ Terry Walsh
Comparing chain and street businesses, the panelists concurred that success in the former category is predicated on discipline, knowing the profitability boundaries of territories, and not allowing customers to stretch distributors' supply lines by taking then farther away from their headquarters.
Sullivan, who believes that in a customer-centric industry such as distribution bringing value to end users brings value to the provider, noted that there is one chain concept that would be beneficial to independent operators Ã¢â‚¬â€œ the single-supplier policy.
"Most broadline customers have the tendency to buy from four or five distributors. That's really not to their advantage. If they can find one distributor who can manage their food costs, then we can bring advantages to them that the chain accounts have," he said.
Spinner's formula for driving performance and street business is to focus on measuring the cost of goods, rather than impatiently anticipating vendors' sheltered income contriubtions, which actually raise the cost of foodservice products.
"If you don't focus on cost of goods, your sales people will not be competitive," he said.
Spinner, in his summary, boldly enunciated a proactive mission statement for his fellow distributors by declaring that it is incumbent upon them to rally to the side of independent operators, who are under ever-increasing pressure from chain restaurants that enjoy three times the volume of street accounts.
Pointing out that independent operators are important to the future of Performance Food Group, Spinner urged distributors to take responsibility for the survival of that market segment. He illustrated chains' aggressive growth by stating that today multi-unit operators are moving into communities with 40,000 inhabitants while five years ago they only targeted areas with 10 times that amount. While there are three times as many independents today as there are chains, Spinner warned, the gap is closing quickly.
"Historically, we have helped the restaurant operator with what is in the back of the house. A lot of us offered value-added tools. Those are benefits that helped us because we had to provide them since everyone else did so. The challenge for independent restaurants is in the front of the house. How can we help the restaurant operator get more people into the restaurant, come back more frequently, train their wait staff, have them understand the differences between why people go to a chain versus why they should go to an independent. If we can't figure out a way to significantly help independent operators maneuver around the 20% cost-of-goods advantage that the chains have then we will not have done our job," Spinner said.
The conference and expo were endorsed by UniPro Foodservice, Inc., Atlanta; F.A.B., Inc., Alpharetta, GA; Golbon, Boise, ID; Federated Foodservice, Arlington Heights, IL; Independent Marketing Alliance, Houston; the AWMA, and Progressive Group Alliance, Richmond, VA.
The next Foodservice Distribution Conference & Expo will be held Oct. 7-9, 2007, at the Kentucky International Convention Center, Louisville, KY.
(See ID webnews of Oct. 15 and Oct. 16 for coverage of conference opening and initial attendee reactions. ID will report on other conference events in upcoming issues of ID Report.)