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THE CASE
Case Published By ICMR Centre For Management Research in 2006 Focus on the Food Service Distribution Industry of the USA Exemplifies the SCM Practices Adopted by SYSCO Systems and Services Company Selection of Company for Discussion based on industry leading operational efficiencies and record revenue growth
SCOPE
Characteristics of Foodservice Industry Complexities of Foodservice Industry Introduction to SYSCO SCM Practices SCM Impact SCM Enablers Performance Evaluation of SYSCO Summary Of Learnings
FOODSERVICE CHARACTERISTICS
Peak Demand Determined by Local Customs, e.g In USA Mothers Day is most popular day to dine out. Foodservice Products include both food items and non-food items North American Market comprised of Three Type of Operating Companies(OCs) Broadline, Customised and Speciality/Niche OCs involved in manufacturing AND/OR procurement and Distribution/Re-Distribution.
FOODSERVICE COMPLEXITIES
Distribution involved handling of complementary products, e.g. Frozen, Dry, Fresh, non-perishable, etc. Demand growth due to rise in number of Double Income Families High demand fluctuations due to shifting preferences of demographics Excellence in Delivery on schedule and as required identified as key value proposition for success in foodservice distribution industry
INTRODUCTION TO SYSCO
Founded in 1969 by merger of various small food distribution companies. Subsequent growth fuelled through acquisitions 43 during 1970 to 1990 By 1993-94, SYSCO had 24000 employees, 4100 Trucks, 3000 Suppliers. As of Mar 2003, SYSCO had largest market share of 13% of the market worth US$ 200 Billion.
INTRODUCTION TO SYSCO
By 2006, Sales and Service relationship spanned 3,90,000 Customers covering both retail and institutional clients. Network of 100 Operating Companies with Portfolio of 3,00,000 products comprising both national brands and SYSCOs Private Brands. Had reached 47,500 employees operating from 170 locations across USA, Alaska, Hawaii and Canada Identified 07 Strategic Areas for long term Growth Development & Global Reach
INTRODUCTION TO SYSCO
Suppliers/Processors
Operating Company Operating Company
Inbound Transportation
Operating Company
Customers
Operating Company
Forward Warehouse
INTRODUCTION TO SYSCO
Supplier Manufacturing Supplier DCs and 3rd Party Forward Warehouses SYSCO OpCos Manufacturer Supplier DC Manufacturer Forward Warehouse Manufacturer Supplier DC OpCo OpCo OpCo
Manufacturer
resulting in complex and costly product and information flows
OpCo
Multiple orders flowing from multiple OpCos Multiple invoices and payments Replication of safety stocks Significant number of less-than-truckload (LTL) shipments
SCM PRACTICES
National Supply Chain Project
Autonomous ordering by OCs Division of inventory into 04 categories : A, B, C, D A directly to subsidiaries B & C to Regional Distribution Centres(RDC) D handled by 3P Provides termed as Forward Warehouse Network RDC aimed as Supplier Consolidation as well as Aggregation of Safety Stock for OCs High order fill rate and quick delivery supported by supplier assistance programs to cut lead times
SCM PRACTICES
Vendor Management
Collaboration based on intense understanding of value and profitability contribution to each other Performance based recognition and rewards
ChefEx Program
Distribution of gourmet speciality products having low volumes and low shelf life Program connected pre-certified suppliers and customers through direct deliveries Regional and customer limitations overcome with added benefits of cost savings and single source
SCM IMPACT
Suppliers/Processors
Operating Companies
Customers
Outbound Transportation
Forward Warehouse
Collaboration
SCM ENABLERS
1970-1994 - Basic Distribution
Setting up of series of warehouses and creating fleet of refrigerated trucks. 89 Distribution Facilities, Serving 150 cities and approximately 2,25,000 Customers.
SCM ENABLERS
Early 2000s Strategic IT Initiatives
Engaging Infosys to improve cost and service efficiencies. Concept of mid-point distribution facilities (RDCs) to serve OCs by consolidating LTL shipments and using Intermodal Transport. Business Processes defined for demand planning, order management, inventory management, transpcrtation and warehouse management CriticalArc Technologies Inc provided integration of existing online order entry system with web based SCM application
SCM ENABLERS
Early 2000s Strategic IT Initiatives
Automated Order Selection System to reduce errors in order picking concept of ASRS Vehicle Routing Software to enable vehicles to take most efficient routes Technologies for seamless exchange of order information to facilitate vendor development, contract management and supply chain visibility Implementation of SYSCO Uniform System(SUS) to efficiency in administrative document handling, e.g. invoices, reports, etc.
SCM ENABLERS
2005-06 Heralding Asset Visibility
Implementation of Bar Coding for Tracing Assets within the Supply Chain Introduction of RFID to enable Tracking Assets across the Supply Chain Combination of both technologies improved shipment verification, integrity and reduced probability of spoilage losses especially in cold chains Knowledge portal to share innovative practices across OCs in areas of customer care, operations, finance and HR. For example, Drivers Pay System
PERFORMANCE EVALUATION
Return on Capital was 2nd Best at 22.3 %. Best Performer had 26.5% and worst had -7%. Profitability focus irrespective of market situation aimed by adopting objectives of : Lowest net landed costs in the Industry. Food Security and Safety Operational Flexibility Capacity and Predictability RDCs provided shipping accuracy of 99.94 % & uninterrupted supplies despite Katrina
PERFORMANCE EVALUATION
IT enabled RDC concept significantly reduced unloading time, dock congestion and material handling US$ 27 Million savings Redistribution Centres provided benefits to Even Supplier and Customer.
SUPPLIERS Increase in the number of orders. Increase in the customer base. Reduced credit risk. Simplified logistics. Additional sales support. Accelerated sampling response. CUSTOMERS Faster turnaround. Shorter lead times. Timely deliveries. No MOQ constraint. Efficiency of one order, one delivery and one invoice for multiple manufacturers.
SUMMARY OF LEARNING
Organised Management Structure
Autonomous decision making management structure Commitment to Employees, customers, suppliers and shareholders. Improve profitability through leverage of assets and people by improving productivity and efficiency Cross Functional Experts across key areas essential to ensure organisational structure-strategy fit
SUMMARY OF LEARNING
Control Over Distribution Costs
Quality assurance policy to guarantee availability of high quality products to customers Leverage IT Tools in functions of physical distribution as well as support functions(e.g SUS) for maximum efficiency Redistribution Enabled Supply Chain
SUMMARY OF LEARNING
007 Virginia
027 Syracuse
051 Central PA
Mfg Plant
056 Hallsmith
Mfg Plant
Mfg Plant
SUMMARY OF LEARNING
007 Virginia
027 Syracuse
051 Central PA
Mfg Plant
053 Jamestown
RDC
Mfg Plant
054 Connecticut
056 Hallsmith
073 Hampton Rds 075 Philadelphia 076 Metro NY
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