Jan 1, 2008 12:00 PM

Earlier this year, the International Foodservice Distributors Association (IFDA) published a report that represents the foodservice industry's first gathering and analysis of operational data and processes that is not commingled with other industries, such as retail and wholesale groceries. The IFDA Operational Benchmark Report examined operational factors critical to the success of foodservice distributors across the industry and identified the traits of best-in-class performers.

An overview of the report, which collected information on business practices from 164 distribution facilities — 48 broadline and 16 systems — was presented at the recent annual Foodservice Distribution Conference & Expo by Steve Potter, IFDA's senior vice president, industry relations.

The report provides metrics, graphs, and information to help executives identify areas of opportunity within the organization, Potter said. It is designed to provide foodservice distributors with a tool to evaluate existing performance and to identify new ways to create improvement.

The study addressed five key areas: general warehouse operations, inbound operations, outbound operations, transportation, and fleet maintenance. In addition, participants provided operational data for August 2005.

This month was chosen, said Potter, because it contained no holidays, and therefore would reflect an “average” four weeks, without anomalies. Included in this data were such metrics as the number of cases received, cases shipped, loads delivered, miles traveled, and hours worked to determine averages that could be used to analyze and quantify results.

Measure and manage

“The most significant conclusion of the study was that levels of performance parallel the levels of details being measured and managed,” said Potter.

The study found that best-in-class distributors:

• Effectively gather and use data.
• Establish performance measurements.
• Maximize technology to link data and measurements.
• Understand and control costs.
• Strive for continuous improvement.

Potter said “continuous improvement is a must because technology investments without changing internal processes will reduce the benefits of those investments.” What's more, “effective process change can only come about after the consistent gathering and review of performance metrics.”

Technology investment

The Operational Benchmark Report determined that the foodservice distributors with the best financial performance invest heavily in technology to improve warehouse and transportation efficiencies, track and reduce non-productive time, and identify and eliminate the cause of errors, returns, and re-ships. Furthermore, they:

• Focus on accountability and expected results.

• Improve inbound freight scheduling.

• Reduce inbound product re-handling.

• Track vendor and shipper performance and accuracy levels.

• Address vendor and shipper performance and accuracy issues.

Warehouse operations

Looking at warehouse operations, the study found that the top performing distributors have clear and fair performance standards as well as incentives for superior performance, said Potter. They take a cross-functional team approach, have well-trained supervisors, pay employees competitive wages, and provide workers with “tools to be able to work smarter, not harder.”

Moreover, these distributors focus on warehouse layout and concentrate on reducing product handling.

With regard to inbound freight operations, best-in-class distributors set realistic receiving schedules, reduce unloading time, replenish slots for the night crew, and delegate accountability for accuracy and results.

As for outbound freight operations, the study revealed that these distributors identify and reduce bottlenecks, focus on accuracy, track individual performance, and improve training effectiveness. They use double pallet jacks, select and palletize product by zone, pallet load product on trailers, use load diagrams for product location, and develop standards for performance.

Transportation matters

When it comes to the transportation side of their business, the most successful distributors track and follow up on driver performance, develop incentive-based pay programs, and use state-of-the-art technologies. Potter said 65% of the study respondents use onboard computers; 75% use computerized routing.

Additionally, these distributors establish realistic delivery time windows to recognize the value of safe equipment.

Power equipment typically is traded every five to seven years; trailers every 10 years, said Potter. Refrigeration units usually are traded every seven to 10 years.

The four most important factors when purchasing equipment are fuel consumption, safety and design, warrantees, and training costs.

The decision to handle equipment maintenance in-house or contract it out is dependent upon several primary factors: the size of the fleet, cash flow, available shop and fueling capabilities, and in-house management expertise.

Potter said best-in-class distributors assign their power equipment, track costs on a per vehicle basis, and track the repair effectiveness of each mechanic. They wash their trailer interiors a minimum of once a week, and they check tire pressures at least weekly.

As would be expected, the IFDA Operational Benchmark Report suggests that there is a direct link between superior operational practices and financial performance.

In analyzing the key data on productivity, operating methods, expenses, human resources issues, and other fundamental aspects of the day-to-day operations of a foodservice distribution center gathered during the study, the report concluded that “a distributor's future performance success will depend upon accuracy, efficiency, through knowledge of costs and dedication to process improvement.”

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