Chilling Your Chain
How to expand your distribution network for MTO foodservice.
“If I need to make a special order because something happened, or something didn’t come in and I need it today, these are the companies that have the flexibility to make that a reality.”
Such is the mantra of Brian Matlock, director of foodservice for 189-store Tedeschi Food Shops, Rockland, Mass., who runs his department like a true foodservice operation. He works with two foodservice distributors to supply the 21 Tedeschi stores that have full-service delis, and a regional commissary for the other stores. “We need the flexibility,” says Matlock. “We need vendors that are not only educated on how to handle food, but obviously the big point is that they are highly customer-focused.”
According to Chicago-based research firm Technomic Inc., nearly 70% of c-stores source their foodservice items from traditional c-store distributors. And many of those distributors have created cold-chain solutions for their c-store customers, such as Fresh on the Go from McLane and the Up for Grabs line from Frosty Acres Brands.
But other retailers, such as Matlock, have turned to foodservice distributors for their raw goods. Why a different distributor? Because these products require a quick turnaround and a fanatical focus on shelf life—something traditional c-store distributors are just beginning to focus on. BUILDING A PARTNERSHIP
At Tedeschi, orders for the two foodservice distributors are handled by deli managers at the store level. They put the order in by 10 a.m., and it’s filled within 24 hours. To ensure he’s getting the best price Matlock uses two distributors, a method often employed by independent restaurants and smaller operations.
It does require a certain level of volume to create such a flexible, reactionary supply chain, Matlock says, “but we have 21 sites, and we leverage that when we do business with them. It’s the overall business that they’re concerned about. They know that there will be emergency delivery that will be the exception as long as it’s not the rule.”
Those volume requirements vary by distributor, and one of the first questions to ask a potential partner is its minimum drop size. That number should be identified before creating a menu. “Some of the stores we have order every other week, instead of every week, because their order is not that big,” says Chuck Hummer, district sales manager for Shamrock Foods, a broad-line foodservice distributor based in Phoenix. Such stores need to plan their menus carefully to combat spoilage and out-of-stocks.
But a bigger mistake could be made if the retailer doesn’t first align the company’s computer inventory system with that of the distributor, says Hummer, who worked with Western Refining’s Retail Division on its new Southwest Kitchen proprietary foodservice program (see p. 93). Whereas traditional retail distributors often place a retail price alongside every item on the invoice, the same is not done for wholesale items.
“You can’t just flip a switch like you can with your grocery provider,” Hummer says. “You can get in a lot of trouble very quickly if the store manager cannot communicate to the corporate office, ‘What do I do with this?’ or ‘I sold out of this.’ There is a big potential for mismanagement and loss.”
Shamrock distributes to the entire spectrum of foodservice, from schools and hospitals to restaurants and c-stores. It even has a few grocery clients who use it as a secondary distributor for certain products they can’t get from their primary partner. It’s the freshness factor, Hummer says, that separates foodservice distributors from the others.
Hummer recommends c-store chains first approach local or regional foodservice distributors who understand local business needs. That’s how Shamrock began working with Western. “They were familiar with our demographic and what had sold well before in our area,” says Keith Kuells, category manager for Western. Kuells was also able to use Shamrock’s test kitchen for R&D and the audio-visual department to shoot photography for merchandising purposes.
“As we tried to design new items, we worked with their chef [and] we came up with menu items like the Frito pie wrap and Navajo burger,” Kuells says. “It was a great experience to be able to create some things for our menu that were tested by their chef.” These value-added services are benefits to retailers who don’t have a chef or foodservice professional on staff.
THE COLD CHAIN EXPANDS
Meanwhile, traditional c-store distributors are not blind to the growing needs of their customers. Grant Demers, product director, perishables and foodservice, for Temple, Texasbased- McLane Co. Inc., says McLane does offer raw goods to c-stores to a limited extent. He is tracking this side of the supply chain to determine if it is a sustainable move for the company. And while McLane has already invested “north of $1 billion” on its cold-chain infrastructure (including multi- temperature trucks and warehouses), Demers is focused on keeping the number of products and suppliers in check. “It’s case-by-case, retailer-by-retailer and division-bydivision,” Demers says of McLane’s current raw-goods distribution to c-stores. “And ultimately what that can cause is this aggregation of SKUs within each division that ultimately compete with each other to not really build any sustainable momentum.” As McLane reaches the one-year mark with its Fresh on the Go program, it plans to roll out two similar programs for bakery goods and hot foods. It has also created a new cost model for Fresh on the Go. From there, the company will “shift some of the focus over to what’s more out there on the horizon in terms of the more foodservice products and how we formally take those to market,” says Demers.
Along with its two foodservice distributors, Tedeschi also has a partnership with a regional commissary, which makes fresh-made sandwiches, salads and yogurt cups and delivers them through a DSD arrangement to 90 of the stores that don’t have the full-service deli.
“I like that because the same people who are making the food are the same people who are delivering the food, and they are foodservice-oriented people,” says Matlock. “They understand the dangers involved with making sure the product gets there with the right temperatures maintained. They have a vested interest.” Like Matlock, Deborah Holand, consulting partner with b2b Solutions and president of North Dallas, Texas-based Food Sense Inc., recommends to her c-store clients that they look into a commissary partnership. “There are some really interesting things you can do with [it],” she says. A large commissary can work with a retailer on sliced meats, cheeses and produce, as well as fruit cups, vegetables and dip, and other case-ready products. Some commissaries, in Holand’s experience, will even make specific chits. For example, a pizza chit could contain a prebaked focaccia; a portioned, 6-ounce bag of cheese; and a portioned bag of sauce—all shrink-wrapped and ready to be made to order. This method is more expensive, but it saves labor costs if staffing is tight. Be it wholesale or commissary, for Matlock, foodservice distribution comes down to agility. “It’s a different mindset, a different level of commitment to service levels,” says Matlock. “Out-of-stocks can’t happen, really, in a food business.”
Tips to Grow On
- Focus on “efficient foodservice response”: the shelf life of the product as it moves through the supply chain.
- Just-in-time delivery will keep inventory costs down and reduce food waste by ordering only what you need when you need it.
- Look for a foodservice distributor who can respond to emergency orders, and help you with product and menu development.
- When looking for a foodservice distributor, ask about drop-size minimums and determine how to sync your computer/inventory systems.
- Consider a partnership with a regional commissary, which can help you with both case-ready products and made-to-order ingredients.
There are two critical times to reset a foodservice program, says Deborah Holand, consulting partner for b2b Solutions and president of Food Sense Inc.: spring break and fall. In the spring, everyone is coming back outside, kids are running around, and parents are getting busier. If you wait until May or June to rollout or tweak a program, “then you’ve missed the boat.” Similarly, fall is about readjusted schedules, back to school and hot food items. “If you do it fast, you can create a program in 90 days flat,” she says.
If you don’t have that much time, Holand recommends slowly phasing in a program to get familiar with your distributors and their vendor partnerships. Back-door your distributor to see what caseready products you can get in as a start, and start building those relationships through your supply chain.
Back It Up
If your existing distributor has safe and sound cold-chain capabilities, there’s a more involved yet efficient method of “back-dooring” and cross-docking all your raw goods, thereby building a web of partnerships between your current distributor and all of its suppliers, according to Deborah Holand, consulting partner of b2b Solutions and president of Food Sense Inc.
After you’re equipped with a list of all the items you’ll need to execute your program, ask your current distributor for its order guide—every item and vendor that goes through its distribution center, “because then you’re going to be able to get it into your store extremely fast,” Holand recommends.
Check those lists for the products you need, and if they don’t have everything you need, then “I back-door the distributors,” Holand continues. She goes to all the vendors and distributors who are landing on her primary distributor’s back dock and asks for their order guide. “And then I back-door their warehouse, and then theirwarehouse, and I keep backing up until I find what I can get in the chain efficiently.”
The idea of cross-docking—taking product from an incoming delivery and putting it directly on an outgoing shipment—saves in storage and slotting costs. It also helps keep your delivery schedule condensed.
“However, the retailer must plan and be sure they [don’t run out of product] because the distributor will have no excess inventory,” says Holand, referring to just-in-time delivery, in which retailers order only what they need when they need it. “This gives the retailer maximum shelf life and minimal waste on all sides.”
Grant Demers, product director, perishables and foodservice for Temple, Texas-based McLane Co. Inc., supports Holand’s tactics: “I think where we can all win is by opening those lines of communication.” Nevertheless, he points to the role of distributors to keep SKUs—and therefore costs—down to a manageable level.