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Learning from Foodservice
Foodservice distributors have improved their profit and return on assets in recent years as they have become "much more diligent in how they manage their businesses and control their costs," said Mark Allen, President of the International Foodservice Distributors Association, during Tuesday’s session. Typical gross margin for a foodservice distributor was 17% last year, with net profit before taxes of 1.8%, up from 1.66% in 2005.
He said foodservice distributors face many challenges, including the growth of restaurant chain operators, new competition, and soft sales in some restaurant segments, as well as increasing costs for health care, labor and fuel.
But he said distributors have worked to control expenses and compensate for higher costs, including imposing fuel surcharges and utilizing technology to improve warehouse and transportation efficiency.
Even so, Allen said, significant opportunities still exist in warehousing, transportation, fuel, sales and procurement. "Often, operations, sales and procurement are working at cross-purposes," he said. "Breaking down silos and creating a common-good type theme has proven to be very successful for some companies."
A big key has been a focus on reducing errors throughout the system, which can greatly add to costs and create unhappy customers. In addition, many companies in the $50 million range have begun to invest in technology for warehouse and distribution operations, increasing their efficiency and reducing their overall costs.
"The best distributors have invested in technologies or systems to help them measure and manage costs," he said. "You can’t manage what you can’t measure, and in a pennies-based system, that’s absolutely critical."
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