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Retiredfoodpro

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Reply with quote  #1 
11/23/18 07:14 AM EST
By Heather Haddon 

High freight, fuel and labor costs are forcing food distributors to streamline their businesses.

US Foods Holding Corp., Performance Foods Group Co., SpartanNash Co. and Sysco Co. all reported rising costs in their latest quarterly earnings. Operating expenses rose 6% at Sysco, the world's largest food distributor, and 2% at US Foods.

Industry executives expect the trend to continue as record-low unemployment forces them to boost wages for drivers, pay more in overtime, and offer six-figure signing bonuses. Higher oil and freight prices have also pushed up transportation costs this year.

Food distributors, the intermediaries between packaged-food makers and farmers on one side and restaurants and grocers on the other, are especially sensitive to cost pressures. Their operations are less automated than those of some other businesses, increasing their exposure to the worker shortages and rising wages that come with a tight labor market. Surging demand is also pushing up the cost of for-hire transportation.

To adapt to rising logistics and shipping expenses, distributors say they are shifting some deliveries to smaller trucks that don't need full rig loads. They are also trying to pack trucks more efficiently and break down delivery routes to make them shorter. Some distributors are also turning to online brokers, like the Freight unit of Uber Technologies Inc., that use technology to match cargo with available trucks, a process some say is faster and more efficient.

"Those that resisted technology are starting to get on board," said Avery Vise, vice president of trucking for the FTR Transportation Intelligence research firm.

Sysco, US Foods, Performance Foods and SpartanNash declined to elaborate further on how much the additional operational expenses would cost their companies.

Distributors are facing fierce competition from e-commerce companies for the truck drivers and warehouse workers who make up three-quarters of their workforce, according to the International Foodservice Distributors Association. The driver population is aging, and some are leaving for other work in fields that offer higher pay or more time at home, such as energy or construction.

The nationwide need for truck drivers to meet demand grew to 285,000 this year, the biggest deficit ever recorded, according to FTR. Freight rates have surged as a result, including on refrigerated trucks that distributors use to deliver perishable foods. FTR projects refrigerated rates will be up more than 11% this year.

Distributors are having to pay more to attract and retain employees. US Foods, for example, has started paying up to several dollars more per hour for hundreds of entry-level drivers and warehouse workers in its tightest labor markets, Chief Financial Officer Dirk Locascio said in a recent interview.

The industry is urging Congress to reduce the age requirements for an interstate commercial trucker's license to 18 from 21, arguing it would help them find more drivers. Some lawmakers have introduced legislation to that effect, but it hasn't advanced. Sysco and SpartanNash are shifting some deliveries to smaller trucks that don't have such strict licensing rules.

Some distributors are also trying to improve the experience for truckers, who typically have to wait in long lines to meet narrow delivery windows while working for grocers.

"They are notorious for wasting time," said Dick Pingel, a Wisconsin-based trucker for 35 years.

SpartanNash is cutting down on night shifts. US Foods is redrawing routes so trucks won't have to drive crosstown, and packing vehicles more efficiently to avoid drivers having to rummage around for orders.

Freight rates and oil prices have eased in recent months. Still, analysts expect costs to continue weighing on distributors, which are passing some of them along to customers in the meantime.

But "you can only go so far on price in a business that is so competitive," said Bob Goldin, co-founder of Pentallect Inc. consultancy.

As distributors improve their operational efficiency, restaurants and grocers that rely on them are taking steps to protect their supply. Texas Roadhouse Corp., a steakhouse chain, is making bigger, less frequent orders to Sysco after running short on supplies at several busy restaurants this year.

"If we don't have product, we can't open," said Travis Doster, a Texas Roadhouse spokesman.

Florida-based Firehouse Restaurant Group Inc. is looking to expand storage capacity at new restaurants by 15% so deliveries can be made less frequently. The 1,150-restaurant chain is also testing new distribution centers to shorten delivery routes.

Those changes will hurt profits -- the newly designed restaurants are expected to raise equipment costs by 20% -- but will help Firehouse guarantee a standard level of service at each restaurant, said Matthew Riddleberger, Firehouse's vice president of supply chain services.

"There is no short-term solution to this," he added.

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broadliner

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Reply with quote  #2 
USF, Sysco and other distributors are trimming costs by forcing more customers to order online, reducing the number of salespeople, and changing compensation plans. USF and Sysco are also reviewing regional and national chains to see if they are profitable. Also, they are dropping customers who don't place large orders, typically under $1,500 per order.

USF and Sysco are both publicly held. Shareholder dividends are more important than sales compensation.
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isellketchupforaliving

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Reply with quote  #3 
Quote:
Originally Posted by Retiredfoodpro

Distributors are having to pay more to attract and retain employees. US Foods, for example, has started paying up to several dollars more per hour for hundreds of entry-level drivers and warehouse workers in its tightest labor markets, Chief Financial Officer Dirk Locascio said in a recent interview.



Maybe.... just maybe.... these greedy companies wouldnt be having this problem if they took care of all the great people that helped to build the companies back in the 90's and early 00's in to the mega corporations that they are today. But as long as they keep wall street happy! Good luck with all the cost cutting measures, you can only cut so much before it comes back to bite you in the ass.

Sales takes care of almost all the other problems! If you didnt push out all your talented professional sales people and replace them with mostly clueless robots you wouldnt have to worry about penny pinching.

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FSVET

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Reply with quote  #4 
Sales takes care of almost all the other problems! If you didnt push out all your talented professional sales people and replace them with mostly clueless robots you wouldnt have to worry about penny pinching.


Local independent distributors are going to be the big winners as they pick up seasoned reps from Sysco and USF. Houston and Rosemont seem to have forgotten that this is a relationship business. I was always told "people by from people". Reps just want to take care of their customers and be compensated fairly. Too bad managers (from DSMs up) Sysco and USF care more about their bonuses and shareholder dividends.

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