Ordering food-service supplies from Robert's Foods is not a job for the indecisive. Want french fries? You'll need to specify 1/2-inch cut, 3/8-inch cut or 5/16; long or extra long; and standard or fancy. Ordering food handlers' gloves? You'll have to choose between vinyl or latex; medium, large or extra large. And that's not the half of it. The catalog Robert's sales reps hand out to customers in the upper Midwest—restaurants, hospitals, schools, even a sub-shop chain—lists no fewer than 5,500 items carried in stock at the regional distributor's Springfield, Ill., distribution center.

Not bad, you might think. But actually, 5,500 items is not good enough to compete in a world dominated by the giant food-service suppliers known as broadliners. And it's definitely not good enough to expand market share. "Our mix of 5,500 products was limiting our ability to grow," says Dean "Robbie" Robert Jr., the company's president and CEO. Time and again, he says, customers told him: 'We love your service but wish you had a better product offering.'"

Robert contemplated a couple of ways of fighting back. He thought about building a larger DC, which would allow the company to expand its selection of everything from powdered cheese sauce mix to hairnets. Or he could expand his menu via the digital route. Robert chose the latter. He signed on to participate in a high-tech program run by his principal supplier, Dot Foods, one of the nation's largest food-service redistributors with $1.5 billion in annual sales. Known as the Virtual Warehouse, the program has allowed Robert's to quadruple the number of items it offers by tapping into its principal supplier's extensive inventories.

Today, sales reps for Robert's take orders using laptops that let them link directly into Dot Foods' inventory. That's a substantial inventory—Dot Foods carries 25,000 items, which it distributes through six DCs located around the country.With that capability, Robert's, a $45 million regional player with about 790 regular customers in a 120-mile radius of Springfield, can offer one of the largest inventories in the food-service industry while cutting back on stocks of slow-moving items and limiting costly special orders. "In the food distribution business, there's lots of opportunity to take inventory out of the pipeline," says Robert. "That's … what this is all about."

Connecting with Dot
Robert says the idea began germinating about three years ago, when he was contemplating building a new distribution center in order to expand his inventory. As he and his managers kicked around alternatives, he recalls, "we asked ourselves 'What if we develop software that electronically loads our sales reps' computers with [Dot Foods] products and offers the total inventory for next-day service?'"

Dot Foods proved an enthusiastic participant. "What the Virtual Warehouse program accomplishes is that distributors can sell products they don't physically house," says Pat Tracy, CEO of Dot Foods. Tracy explains that Dot Foods has been experimenting with the concept for about 10 years now, letting restaurants order from the Virtual Warehouse via seven formats ranging from printed catalogs to Dot Expressway, an online ordering system. But none of those initiatives has been as comprehensive as the one used by Robert's Foods.

"The model Robbie is utilizing, which supports next-day delivery and real-time cross-dock fulfillment, is more sophisticated," says Tracy. "It requires sophisticated software." That software was developed for Robert's by Distribution Management Systems Inc. (DMS), a Milford, Conn.-based software company, which readied the system for a March 2003 launch.

The system developed by DMS allows every member of the Robert's sales force to upload orders to Robert's DMS Eagle Food Distribution System software, which extracts orders for Dot and transmits those at the 3 p.m. cut-off time. Dot then picks and packs those orders at its Mount Sterling, Ill., DC, labeled by route and stop. The orders are palletized and shrinkwrapped by delivery route. When the Virtual Warehouse orders arrive at Robert's 750,000-square-foot Springfield distribution center, they can be cross-docked to the outbound delivery vehicles. (Deliveries are made by Robert's Foods' 17-vehicle private fleet.)

The system is virtually invisible to Robert's Foods' customers, who receive a single invoice and a unified shipment. "We just say, 'Here's our offering,'" Robert says.

Out of touch?
At this time, the Virtual Warehouse system, which has a 99-percent fill rate, can handle dry goods, refrigerated and frozen products, and perishables (though not variable-weight items). That's an undeniable advantage for Robert's Foods. Because his company is able to offer a broader range of products, Robert expects a 20-percent increase in his street business this year.

He expects efficiency gains as well. "One of the ways to take costs out of the distribution system is to eliminate touches," Robert says. "We averaged five touches for everything we had in inventory.We average two touches with the Virtual Warehouse."

The system has already allowed Robert to reduce his in-stock SKUs (stock-keeping units) by about 250 items. As he cuts back on those items—his slowest movers—he'll be able to devote more space in his facility to the fast movers, which normally ship in full pallets. Right now, the volume of goods delivered to Robert's Foods' customers through the Virtual Warehouse system is still relatively small—about 4 percent of the total cases shipped. But Robert says he would eventually like to get about 20 percent of his cases delivered through the Virtual Warehouse system, with the remaining 80 percent delivered in full-pallet loads from his DC's stock.

Robert believes the next big opportunity for the Virtual Warehouse will come when manufacturers —Dot Foods' suppliers—begin to realize what the system's all about."Our big challenge is educating the manufacturing community of the opportunity," he says. "Traditionally, manufacturers' reps or brokers spend a fair amount of time coming in and saying, 'What do we need to do to get into your warehouse?'" In the past, he says, he'd encourage them to get rid of the slow movers and liquidate the dead inventory. Now, he says, he can refocus their attention on creating demand for their products. "With the Virtual Warehouse, that whole inefficient part of the food supply chain disappears."