Reducing Labor Costs to Counteract Market Pressure

Market forces mandate changes and shrink margins, requiring distributors to find new ways to trim costs.


West Monroe Partners’ comprehensive 2008 analysis of the food distribution industry reveals a landscape of both opportunities and threats. While consumer spending on food away from home continues to follow a long-term upward trend, a variety of factors—from changing tastes, to rising food prices, to industry consolidation—are putting extreme pressure on distributors’ profit margins. Analyzing and optimizing labor costs can help foodservice distributors counteract market forces by reducing costs and establishing flexible, competitive operations.

Food service distributors can counteract shrinking margins by optimizing labor costs.

The combination of shrinking margins and a weak economy mandates swift changes to the distribution environment and practices in order to reduce costs.

While technology initiatives can produce significant efficiency improvements and, ultimately, lower costs, these efforts typically require a sizeable investment and a long lead time. Labor costs, on the other hand, represent at least half of a distributor’s total spending. Applying certain labor management strategies, such as those described below, can help foodservice distributors achieve significant short-term cost savings and improve their margins.

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