Franchising | April 2010 | By Al Kelso

Smart Supply Chains

Al Kelso, chairman and CEO of Sysco’s quick-service delivery operation, Sygma, says the key to supply chain efficiency is leveraging a brand’s size and the supplier’s resources.

Supply chain management starts with a supplier who can offer more than food." ti
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Q: When I open my second store, how do I make my supply chains the most efficient?

Typically, what’s important to someone who’s going to go to a second unit is they’re going to have to document what they’re currently doing in the first unit and try to replicate that in another. That’s important, because in most cases they want to have the same product line, they want to keep the same specs. He’s looking for not only consistency in pricing for the second site on the supply chain side, but he’s also looking for services that are going to allow him to run his second unit more effectively, with a change in his time frame.

When you get into being more of an operator over multiple locations, you really turn into a manager of costs and efficiencies. So you want to partner up with somebody who is going to be able to bring things to the table that as a one- or two-site person you don’t really have the capabilities of.

You can’t afford to have a marketing person, you can’t afford to have a menu specialist, you can’t afford to have a supply chain specialist. We try to really make available the whole business review process, so that we sit down in a room with our operators and talk about their business, all of the cost efficiencies. The real key here is, and I’ll just give you my insight of what I see when customers succeed and when they fail, they’ve probably got a $1.5–2 million restaurant. They’re probably running cash flow or pre-tax of $200,000. The real key here is, when you open another site, to leverage your site so that $200,000 per site becomes $210,000. Cash flow is king.

You want a distributor who has the ability to go to the same manufacturer you’re buying from and leverage their sites to reduce your costs. Are they able to look at your inbound freight side? And because of their size, are they able to leverage your inbound freight costs? I know supply chain is the catchphrase right now, but that’s what you turn yourself into. It’s the whole thing from getting the product from the manufacturer to your door. And if you have a distributor who’s willing to participate in that, both sides can get something out of the deal.

In terms of trade area efficiencies, if it’s 300 cases on one side of Houston and 300 cases on the other side of Houston, costs are the same—whether it’s one owner or two owners. However, if you go to a distributor now and leverage your size and say, “Look, can you handle more product, can you handle our produce, can you handle our meat?” You should be able to leverage that from a cost side.

Some customers might want to have managers in each store order their own product. Some might want one person to order for both sites. The key in distribution is the mile to the site, and the cost of the service. We want to sit down with the operator … It’s important to know what delivery time you want. Is this a case where you can take a night delivery, where we bring the product in and you can stock it when you walk in the door? There are cost savings in that. Is this a situation where you don’t want that to happen, you want it at a certain time during the day? There are costs on both sides.

From a business perspective, if you’re going to have multiple locations, you need to document your processes and procedures so that you can replicate that concept, so that you know that everybody is all following the same processes. They’re all buying the same type of products. You need to demand from your supplier or broadliner, to sit down with you and do a business review at least once a year, where both parties are trying to find more efficient ways to work on the supply chain, more efficient ways for [them] to understand your business and add value and services.

When you get into being more of an operator over multiple locations, you really turn into a manager of costs and efficiencies.

As you grow more and more, it might turn out that a different distributor makes more sense for a multiunit than with somebody who only has one unit. You might want to go with more of a system distributor that goes to farther locations. Versus if you only have one or two units, you really can’t leverage your size on that. That’s why most of your really successful quick-serve customers will work with a Sygma versus a broadline company, because we have centralized buying.

If you’re going to have 15 locations, you’re going to have one customer-service rep, you’re going to have one buyer, you’re going to be talking to one person, whether it’s one location or locations spread out over a large geographical area, because we centralize all that. If you’re in a typical broadline company, if you’re in three different states, or three distribution areas, you’re going to have three different buyers, three different customer-service people, and you’re going to have three different people to talk to whenever you have an issue.