The usual complaint among supply chain executives is that the supply chain is all but invisible to the CEO. But you won't hear that from William B. Day. Day is a senior supply chain executive at food-distributor Sysco, which supplies fresh and frozen food, china and silverware, and kitchen equipment to nearly 400,000 restaurant and institutional food-service customers. Sysco's CEO, Richard J. Schnieders, has made it clear that he sees the supply chain as the industry's new competitive battleground. In a November 2005 address to shareholders, Schnieders announced his intent to make Sysco the global leader in "multi-temperature food product supply chains." And he left no doubt as to his expectations: "We will be able to move a case—or multiple cases—of food and related products from points anywhere in the world more effectively than any other company."
It's now up to Day to deliver on that very public promise. But at least the groundwork is in place. Since 2001, he has been immersed in a wide-ranging supply chain overhaul that will leave virtually no aspect of the operation untouched. Among other goals, the project seeks to improve the company's forecasting, use technology to cut operating and delivery costs, and open as many as nine new distribution centers (or as Sysco calls them, "redistribution" centers) throughout the United States. And according to Day, it's beginning to see results.
A 24-year Sysco veteran, Day began his career as a staff accountant at the company's Memphis, Tenn., office. Since that time, he has transferred to corporate headquarters in Houston, where he progressed through a variety of technology and finance positions, becoming vice president of supply chain management in 2003. In February, the company announced his promotion to senior vice president, supply chain, effective next month.
Day met recently with DC VELOCITY Group Editorial Director Mitch Mac Donald to discuss how he moved from staff accountant to senior vice president, the study that prompted Sysco's supply chain overhaul, and what he sees lacking in supply chain management in most industries in the United States.
Q: Would you tell us a little about Sysco?
A: We are the nation's largest foodservice distributor. For fiscal 2007, sales are projected to be around $34 billion. We have about 53,000 employees nationwide, supplying our customers with 300,000 different products.We have somewhere around 10,000 salespeople out on the street calling on restaurants, hospitals, schools, nursing homes, and so forth. Our customers are any institutional user of food products.
We also have the largest private truck fleet in the United States, with over 9,000 delivery vehicles on the road.
Q: Do you strictly serve the U.S. market or does your scope extend beyond that?
A: We are primarily North American, but we do have a division called International Food Group that exports food to about 70 different countries. It doesn't account for a large percentage of our sales right now, but we are certainly planning to grow that part of our business.
Q: As Sysco's senior vice president of supply chain, what are your responsibilities?
A: I'm responsible for what we call supply chain management and redistribution. That encompasses a network of redistribution centers that we're building across the country that makes our supply chain a lot more efficient and cost-effective than our previous system. I am also responsible for the national inbound transportation of all the products flowing into the redistribution centers and into our operating companies. I am responsible for demand planning and inventory management, which is primarily management of the redistribution centers. I also have responsibility for the inventory systems that are used by our other business divisions. I have a very substantial analysis team that is responsible for supply chain planning and optimization as well as supplier compliance and a few other little things. The big pieces are the redistribution centers, inbound transportation management, demand planning and inventory management, and planning and optimization.
Q: What are "redistribution centers"? I've never heard that term before.
A: A redistribution center is basically an aggregation point for product that doesn't go directly from the manufacturer to our operating companies. Our analysis and supply chain planning team spends a great deal of time looking at the transportation costs, inventory costs, handling costs, transaction costs—essentially all supply chain costs—for our various products. If they determine it would be less expensive to move a product through the redistribution center than to go directly to our operating company, that's how we flow the product.
We're in the process of building several redistribution centers across the country. Our first is in Front Royal, Va. It services our 14 operating companies in the Northeast.
Q: How long have you been with Sysco?
A: I've been with Sysco for 24 years, though not always in a supply chain capacity. I started out in the financial area and came up through the ranks. I was a financial officer with the company at one time, but I also have a strong systems background here. I was the director of applications development for the company and actually led the development of the systems that the company runs on today.
About six years ago, we initiated a study to weigh the merits of shifting from a system in which each individual location managed its own supply chain (we have 172 locations around the country) to a model in which we would centralize certain aspects of the operation where it made sense to do so.What we've done as a result of that analysis is to centralize execution of carrier management functions, especially as it relates to the flow of inbound inventory. We've also implemented a new demand planning and inventory management system that will help with the transition to our new processes using the redistribution centers. The new system is allowing us to dramatically reduce our safety stock and cycle times at our operating companies.
Q: The holy grail of inventory management, right?
A: Yes, that's right.We have had really fantastic results in that regard.
Q: I would guess that your IT background made your shift to this side of the business a fairly natural transition?
A: Yes, it actually was a pretty easy transition for me. Of course, there were a lot of nuances about the logistics field, especially as it relates to managing relationships with the railroads and motor carriers.
Q: What are some of the biggest challenges you face when it comes to optimizing Sysco's logistics operations?
A: The biggest challenge for me is continuing to lead the transformation that we're going through right now. It's a big cultural change for the company. So far it has required the integration of five new best-of-breed supply chain systems into our existing ERP [enterprise resource planning] system.
Q: What prompted Sysco to overhaul its supply chain?
A: Sometimes a company looks at its position in the market and realizes that it needs to transform its business processes if it wants to stay competitive in the long run. That's what we saw when we did our analysis. It is a big adjustment for the company, but it is needed. Changes like these affect almost every area of a company—no one goes untouched.
Q: When did Sysco begin the transformation process?
A: We began in 2001.We've now got our first redistribution center up and running in Virginia. A second redistribution center is under construction in Alachua, Fla., and will begin shipping in April 2008. The site for a third redistribution center has been secured; we plan to begin construction next month. It should be operational by October 2008. Then we have three or four other sites that we are working on.
Q: It's not uncommon for corporations to encounter some pretty serious resistance when they ask employees to change the way they do their jobs. Are you taking any steps to help them understand why it's so important to embrace these changes?
A: That is a very big and very important part of the transformation. Certainly, education must be a big part of the process when you're asking people to begin looking at costs differently than they've looked at them in the past. You're asking them to make decisions differently. You're changing the standards against which success is measured. All of that change is always difficult to introduce and manage in a company.
Q: You mentioned earlier that Sysco has the largest private truck fleet in the United States.What do you use the fleet for?
A: We use dedicated private carriage for outbound deliveries of goods from the redistribution centers to the operating companies. Those operating companies then distribute the supplies directly to customers in their regions.
Q: What will be the next big breakthrough in supply chain management?
A: Full integration of the entire business process.We talk about it all the time, but when I look at supply chain management across most industries in the United States, I see a lot of room for improvement. One of the biggest problems I see is the disconnect that exists between sales and supply chain planning, and then even among various supply chain activities.
We have to get to the point where we have full integration across all those business processes and where we have an optimized planning layer that really enables us to understand our capacity needs, our constraints, and what we need to do to optimize the supply chain.
Q: What will it take to get there?
A: I think a big part of the answer will be technology that helps with demand planning and inventory management and sharing of information with your suppliers so that production can be planned and shipments can be predicted. The effort to integrate business processes will always be ongoing, but I do think there are tools that can move things forward quickly. There are enough people in the software development world who understand the need, that I think the tools are going to get even better over time.
Q: Speaking of tools, if you had to identify the one tool in your personal skill set that's most useful in the dayto-day management of your company's supply chain, what would it be?
A: In the context of this large-scale transformation we've been working on, I would say strategic thinking and decision-making ability. I've been out there on the front lines throughout the process, presenting the business case, organizing the projects, and making really most of the decisions. I think my leadership skills are good, and I have the ability to really help people bridge the gap between strategy and execution—that is, taking the strategy and then figuring out what steps are required in order to realize it.
Q: It brings to mind the old adage that a really good idea is a job half done.
Q: A few years down the road when your supply chain overhaul is complete, what do you hope to point to as testimony to the project's success?
A: Well, actually it already exists. In the Northeast, with our first redistribution center online, our inventory levels are lower than they were in 2004. The operating benefits that we expected to achieve and that we built into the business case are being realized. I think that we have our proof of concept. In the end, what we will have will be a network that will be able to significantly increase our capacity to grow because our supply chain is going to be lower cost and more efficient. We are going to have a capacity to move more product at a lower cost than anybody else can.