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EXPERT TAKES

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Adobe Stock

The tech platform of the distributor of the future will be both customer facing
and internally facing.


WHAT DOES THE FOODSERVICE DISTRIBUTOR OF THE FUTURE LOOK LIKE?

These eight business success characteristics will define a best-in-class
distributor after (and during) COVID-19.

September 22, 2021 Tim Hand and Bruce Reinstein

Never in the history of the foodservice industry has the distribution community
been challenged the way it has been over the past 18 months. And never has there
been a more critical time to look forward.

Now is the moment to take stock and examine our organizations to ensure we are
preparing and investing for future success. As forward-thinking leaders, we must
guard against complacency and continuously evaluate our business models
considering today’s ever-changing market.

This article outlines eight business success factors that will define
best-in-class business practices to move organizations toward the “Distributor
of the Future.” This list is based on interviews and research conducted by
Kinetic12 with foodservice distribution executives.

Here are the eight business success factors that will define the Foodservice
Distributor of the Future and a deeper look into each.

1. Technologically Integrated

The pace of technology evolution is accelerating. In the future, every aspect of
the business model, from customer behavior analysis to supplier data sharing,
will be managed using technology. Those distributors with the scale and vision
to build a holistic and integrated business management system will have a
competitive advantage.

This was the No. 1 future business success criteria identified by distributors.

The best-in-class tech platform of the distributor of the future will be both
customer facing and internally facing. It will support the efficient execution
of critical business processes to drive efficiency, speed, transparency and
trust, while also enhancing the operator-customer experience.

The following systems were identified as being critical to business success in
the future.

Customer-facing systems

 * Customer-facing order & inventory visibility
 * Sales support tools—product data, marketing, merchandising, pricing, insight,
   inventory, order management
 * Pricing and contract management
 * CRM—customer support

Inward-facing systems

 * Supply chain management, order management, track and trace, crisis management
 * Warehouse management and automation
 * Supplier engagement and data management
 * Financial and asset management
 * Data and insight mining and analysis
 * Customer targeting—CRM: customer data analytics
 * Predictive analytics

2. Real-time Data Transparency

The ability to access data no matter what system it sits in is critical to
efficient business management and to building true competitive advantage. The
distributor of the future must develop capabilities for seamless sharing of data
with employees, customers, suppliers and other partners that inform decision
making.

Additionally, the distributor of the future will have built advanced analytical
capabilities, including predictive analytics, to provide insight to support
customer value platforms, operational efficiency efforts and supply chain
visibility, including forecasting, inventory management, order tracking, product
traceability, fulfillment rates, substitutions, and delivery times. 

A high degree of user trust will be established through systems that secure data
and transactions, such as GS1US and Blockchain implementation initiatives, and
through a track record of effective crisis management.

3. Multi-Channel Customer-Centric Engagement

Customer-centric is an approach to business that focuses on building the best
customer experience possible to build brand loyalty and grow lifetime value. A
best-in-class distributor of the future understands this and will have
implemented a comprehensive team member culture that puts the customer
first—fully enabled by the right structure, systems and processes.

As the Foodservice industry has evolved, the legacy partitions that have divided
it from grocery, mass, drug and c-store have become less important. Distributors
have now broadened their scope to a multi-channel approach that leverages their
capabilities to all potential segments and customers. This customer-centric
engagement strategy must also be customized by segment as a more diverse
customer base is built.

Three critical business components will help to define the multi-channel
customer-centric engagement strategy: sales, solutions and customer selection.

Sales: A highly skilled, technically savvy and empowered distributor sales force
trained in solution-selling and problem-solving. It is supported by culinary,
insight and marketing services with a high degree of connectivity to top
supplier partners and broker sales reps.

Solutions: A broad and customizable platform of value-added solutions executed
through a network of internal resources and 3rd-party providers. Example: An
internal team of delivery “unpackers” who unpack and store orders after delivery
to the operator.  They reduce the work of the drivers who can now be more
efficient and reduce the need for as many drivers.

Customer Selection: A sophisticated customer targeting system that allows for
identification of best-match operators (including picking customers based on a
cultural fit) and closer management of the chain-street mix to optimize
operations scale and profitability.

4. Last-Mile Flawless Execution Mindset

Flawless execution is “a business framework that equips individuals and teams
with the tools they need to successfully drive progress and achievement.” The
distributor of the future will develop a “last-mile” focus of flawless execution
that delivers frictionless service, complete and on-time orders, with a
reputation for reliability and flexibility.

Critical to this is a superior level of customer service that involves
transparent communication and a goal of providing immediate action to solve
problems. This also requires a commitment to highly effective and efficient
performance tracking, including publishing KPIs, and course correcting against
identified challenges. Only through a best-in-class review and refine process
can flawless execution be achieved and maintained.

5. Efficient, Optimized Portfolio Mix

Broadline distribution in foodservice has always required a vast portfolio of
products.  Effectively managing this complexity requires walking a fine line
between meeting customer needs and minimizing operational complexity and the
costs of a warehouse filled with thousands of slow-moving items. 

As distributors broaden their reach to new segments and innovation evolves, the
focus on “Exclusive Brands (EB)” and operator proprietary items must be
balanced; otherwise, the drive toward continued SKU proliferation will only
intensify.

Success in the future will require a continued evolution of strategic sourcing
to deliver a high level of service without increasing warehouse complexity. One
approach is the third-party seller model. As of March 2021, Amazon offered more
than 75.1 million products. 53 percent of purchased units were sold through
Amazon’s platform by third-party sellers. Is there learning here for
foodservice?  Clearly the business model for foodservice distribution is
different, but can this third-party seller model be further adapted in the
Foodservice industry?

The distributor of the future must also employ best-in-class principles of
category management, which requires close collaboration with strategic
suppliers.

Although there is no silver-bullet solution, best-in-class portfolio management
will require creative multi-partner solutions involving new thinking and new
technology.

6. Collaborative Strategic Supplier Engagement

Collaborative engagement starts with the realization that supplier strategies go
two ways. Many supplier relationships are still transactional in nature. While
these relationships have their place the value of a closer relationship with
select suppliers is a smart approach to supplier engagement. Many suppliers have
deep resources and insights that can provide tremendous value. Maximizing this
value starts with deciding with whom to align.

A best-in-class distributor understands that optimizing supplier value starts
with a segmentation model to assess each relationship’s current and potential
value. They have effectively segmented suppliers to understand which are
strategic versus transactional and then leverage strategic supplier capabilities
into areas such as category management, insights, innovation and joint selling
efforts. Critical to successful supplier engagement is the belief in mutual
benefit, grounded in transparency and a commitment to collaboration.

7. Winning Culture & Engaged Labor Force

The relationship among team members and the distributor organization has a
direct impact on their performance, work quality and retention. Building a
winning culture of engagement and empowerment is a critical business factor for
any company. This is especially important for Foodservice distribution given the
labor-intensive model with multiple direct customer touch points including
sales, drivers, customer service reps and newer services like culinary and
restaurant consulting and support services.

According to the latest Gallup report, only 36 percent of employees are engaged
in the workplace, 51 percent of employees are disengaged, while 13 percent are
actively disengaged. Clearly there is significant opportunity for improvement.

The distributor of the future will build a culture that attracts the best people
and an engagement strategy that optimizes their performance and promotes
retention. Critical to this effort is flexibility related to work life balance,
a progressive commitment to diversity, equity, inclusion, training, and a team
environment that embraces genuine TLC with the evolving needs of today’s
workforce.

8. Strategic Partnerships

Strategic relationships allow businesses to expand their services and customer
base without the time, expense or risk of launching new services themselves. For
distributors, building a network of out-sourced services for their operator
customers is an effective way of providing differentiated, one-stop services.

A best-in-class distributor of the future will have proactively built a network
of external partnerships with associations, redistributors, agencies, and
suppliers and leveraged those relationships for smart-outsourcing of non-expert
functions and to scope and build new business adjacencies and services. They
also understand the value of external connectivity in promoting industry health
and overall industry success. 

Looking forward, the “Distributor of the Future” can be defined by the eight
business success factors outlined above and is taking action today to plan and
invest both thoughtfully and aggressively to build these best-in-class
capabilities. In the words of Amazon founder Jeff Bezos, “In today’s era of
volatility, there is no other way but to re-invent. The only sustainable
advantage you can have over others is agility.”

Tim Hand and Bruce Reinstein are partners with Kinetic12 Consulting, a
Chicago-based Foodservice and general management consulting firm.  The firm
guides multiple best practice projects and forums, and consults with leading
Foodservice suppliers, operators, PE firms and associations on strategic
initiatives.  Their previous leadership roles at Foodservice manufacturers and
restaurant chain operations provides a balanced perspective and insight into how
the industry is evolving and what must be done to stay relevant.

DMA has delivered customized, national distribution solutions via a network of
prominent “super-regional” distributors for more than 30 years. Members include
Ben E. Keith Foods; Cash-Wa Distributing; Cheney Brothers, Inc.; Gordon Food
Service; Harbor Foodservice; Martin Brothers Distributing, Inc.; Merchants;
Nicholas and Company; Saladino's; SGC Foodservice; and Shamrock Foods.

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