SCM PRACTICES AT SYSCO

Case Study Presentation By Group 5

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

Less than pallet order quantities

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

Regional Distribution Centers

Inbound Transportation

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.

1995 Fold Out Strategy

New Distribution Centers closer to the Market

Late 1990s Capitalising on IT

System enabling customers to choose products and place orders online. Value Added Services through iCare

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

Supplier Distribution Center

Mfg Plant

008 Northern NE 009 Pittsburgh 010Lankford 012 Baltimore 025 Albany

027 Syracuse
051 Central PA

Mfg Plant

3rd Party Distribution Center

053 Jamestown 054 Connecticut

056 Hallsmith

Mfg Plant

073 Hampton Rds 075 Philadelphia 076 Metro NY

Mfg Plant

SUMMARY OF LEARNING
007 Virginia

Supplier Distribution Center

Mfg Plant

008 Northern NE 009 Pittsburgh 010Lankford 012 Baltimore 025 Albany

027 Syracuse
051 Central PA

Mfg Plant
053 Jamestown

RDC
Mfg Plant

054 Connecticut

056 Hallsmith
073 Hampton Rds 075 Philadelphia 076 Metro NY

THANK YOU