Summary
While overall restaurant sales and related foodservice industry product case movement remain under considerable pressure, foodservice distributors that continue to leverage new technology to drive operational efficiencies to reduce warehouse costs, minimize fleet miles, and improve inventory management systems, are better positioned to survive the challenges to profitability in the current economic environment.
Analysis
At no time has the foodservice distributor’s focus on operational efficiency been more critical to survival than in the current business environment. Consumer spending pressures have reduced away-from-home meal expenditures and resulted in unprecedented pressures in an industry where supply exceeds demand, both in the restaurant sector, and with foodservice distributors, who deliver products and services to restaurant customers.
Key cost containment and efficiency improvement initiatives by distributors include efforts to reduce fleet delivery miles by negotiating with restaurant customers to reduce the frequency of deliveries per week, which increases the distributor’s pieces-per-route and leverages the distributor’s fixed costs to make a delivery. New technologies in warehouse management systems include bar code scanning and voice-activated order selection systems help improve accuracy in distributor inventory management. Computerized fleet routing programs and on-board computer systems serve to reduce total miles driven by monitoring delivery route productivity, truck speed, and fuel mileage. In addition, the implementation of engineered labor standards for warehouse workers and truck drivers, supported by activity-based compensation programs, help drive improved service levels in order fill accuracy and on-time delivery.
Distributors that aggressively implement both new technologies and improved operational disciplines in the current environment will be ideally positioned to protect operating margins and capitalize on higher levels of profitability when the challenging economic environment improves.
