There’s no one-solution-fits-all when it comes to distribution. Focus and timing can make all the difference in the world.
By Marilyn Odesser-Torpey, Associate Editor.
After working with a single distributor for 40 years, York, Pa.-based Rutter’s Farm Stores last month signed three-year agreements with Core-Mark and US Foods. Robert Perkins, Rutter’s vice president of marketing, said that the c-store chain chose to go with the two distributors to take advantage of specific strengths that pertained to the two parts of its business.
It’s a seismic shift for family-owned Rutter’s, but one the company believes was necessary to take operations to a higher level.
“We chose Core-Mark for our wholesale and grocery deliveries because we were looking for a more convenience store-focused partner,” said Rutter’s Vice President of Foodservice Jerry Weiner. “We chose US Foods because foodservice has grown to be such a major part of our business and we wanted a restaurant-experienced fresh foodservice specialist partner to help us to reach the next plateau.”
Weiner explained that the company’s needs have changed dramatically from the time its first stores opened in 1967.
“Beyond sheer volume and product mix, the most dramatic change was in our focus in immediate consumables instead of grocery-related items,” he said. “That has changed for us 180 degrees.”
Both Core-Mark and US Foods are now servicing all of Rutter’s 58 central Pennsylvania stores. Deliveries are made twice a week directly to the stores.
Both distributors have the capability to deliver with the frequency and timing that an operation of the size and scope of Rutter’s requires, Perkins said. Shorter fulfillment times and extensive category management experience also made the distributors attractive partners for Rutter’s.
Before signing with Core-Mark and US Foods, Rutter’s stores were receiving two deliveries a week from their former distributor. Weiner explained that while the number of deliveries was not an issue, the times of day those deliveries arrived were often a problem.
“Most deliveries came when the stores were the busiest and sometimes interfered with customer service, an already crowded parking lot and holding up the vendor since we take care of our customers first,” he said. “Core-Mark and US Foods are very flexible in regards to the delivery windows, and going to later deliveries addresses all of these issues.”
Store Support
In addition to distribution, US Foods has chefs that work with its clients to enhance and expand their foodservice programs. Although Weiner has not started working with the chefs yet, he said he plans to tap into this resource to focus on keeping up with foodservice trends, new product development and the use of their product resources.
“If you ask most distributors for a burger, they’ll give you a burger,” Weiner said. “But if you ask US Foods for a burger, they’ll show you 20 burgers and help you choose the one that is right for your operation.”
Last May, Turkey Hill, a subsidiary of Kroger Co., also signed a three-year distribution agreement with Core-Mark. The c-store chain, which has its headquarters in Lancaster, Pa., has close to 270 c-stores across Pennsylvania, Ohio and Indiana.
For the Valparaiso, Ind.-based Family Express c-store chain, self-distributing of perishables is the most efficient and cost-effective solution, said company President and CEO Gus Olympidis. This model allows Family Express to deal directly with the manufacturers, often resulting in discounts, and to arrange for product delivery on schedules and at times that work best for the stores. It also helps with inventory management, using an automatic replenishment information management solution, which results in the reduction of the incidence of out-of-stocks.
Family Express has been operating its own distribution system for about 10 years. And, said Olympidis, the system has proven to be very successful.
The company’s distribution system actually has two parts. The first has to do with dry goods and other shelf-stable grocery items. For these, Family Express works with a traditional c-store distributor and has deliveries scheduled for once a week.
The second part of the system, “the unique part,” as Olympidis calls it, involves the daily direct store delivery (DSD) of perishables, among other items. These items, which include fresh sandwiches, chips, frozen pizza, milk, bread and pastries from Family Express’s commercial proprietary bakery, are delivered on a daily basis from its 140,000 square-foot distribution center.
“We aggregate most of the DSDs— which can total between 25-30 per week—and compress the majority of them into one daily delivery,” he said. Family Express operates its own fleet of around 10 delivery trucks to service its 61 stores in northwest and north central Indiana.
With the continued development and effectiveness of this distribution model, the percentage of traditional DSD deliveries Family Express receives has plummeted to under 15% of total in-store merchandise sales, he explained. This merchandise is pretty much limited to some packaged beverages, Frito-Lay products and ice cream.
“The Achilles Heel for the traditional DSD model is that its inherent inefficiencies have to be passed on by traditional DSD vendors,” Olympidis said. “Retailers are unable to react to and defend themselves against discriminatory pricing and promotion vs. other channels of trade. The result can be a dramatic difference in cost of goods.”
Expanding Resources
While this two-part system works well for Family Express, Olympidis acknowledges that not all c-store chains have the resources to dedicate to it. First, is the major financial investment required to construct a warehouse and purchase a fleet of delivery trucks. Second, other chains might not have the unit density along transportation corridors necessary to make self-delivery efficient.
The logistics of self-distribution can also be daunting. “It’s like running another business,” he pointed out. Just deciding how to allocate limited warehouse space takes a lot of thought and planning. “We have a sizeable facility and it’s still not big enough,” he noted.
But for anyone thinking of doing it, he said, self-distribution can be extremely rewarding, “but it isn’t for the lighthearted.”
“In any case, self distribution is hard to fathom, absent a total commitment of capital and intellectual resources,” he explained. “For Family Express, it is the engine that drives our business model because it dramatically changes the level of competitiveness. We have access to deals that range from better to unimaginable that would not be applicable to c-stores using traditional distribution no matter what their size.”
In July, Altoona, Pa.-based Sheetz Convenience Restaurants started construction on a $32.8 million, 250,000-square-foot distribution and production center in Burlington, N.C. The new distribution center is expected to open by fall 2014.
On the 44-acre site will be a Sheetz Bros. Kitchen bakery, distribution and warehousing center for the Sheetz distribution fleet. Other corporate support departments that will serve the company’s southern region locations will also share the site. An estimated 254 jobs are expected to be created with the addition of the new facility by 2018.
“The new distribution center is a big component in our future growth,” said Ray Ryan, executive vice president, distribution services for Sheetz.
Sheetz currently has 450 locations, 56 of which are in North Carolina. The company announced that it plans to open at least a dozen more in the state over the next few years.
