Supply Scan

Ahold Splits U.S. Foodservice Into Two Separate Units
Ahold announced that it will reorganize its embattled U.S. Foodservice division into two separate units, each focusing on a specific customer segment.

One division will focus on broadline foodservice distribution, which has made up 87 percent of U.S. Foodservice's net sales.

It will continue to supply food, equipment and related supplies to independent restaurants, healthcare providers, hospitality customers, government entities, educational institutions and other foodservice customers. It includes 67 distribution centers in 36 states and employs about 25,000 people.

The other division will focus on multi-unit chain restaurant accounts, primarily in the quick-service and casual theme restaurant segments. That division will be given its own brand identity. It currently includes 11 distribution centers in 10 states and employs about 2,100 people.

Along with the reorganization, Ahold announced four initiatives to drive growth of its broadline business, which last year totaled $12.4 billion. They include:

  • Accelerating private brands penetration. In 2005, the company's 60 private labels accounted for about 26 percent of total net sales;
  • Investing in the sales organization;
  • Strengthening targeted brand geographies; and
  • Rolling out a comprehensive operational excellence program.

Over the next three years, the company is targeting an annual broadline net sales growth of at least 5 percent and operating margins of at least 3 percent. Ahold also plans to make significant investments in systems and infrastructure improvements, reduce total U.S. Foodservice administrative costs by $100 million and consolidate one of its Chicago-area distribution centers.

The company is also looking at expanding third-party distribution partnerships to develop its regional inbound network and reduce inbound logistics costs, and is looking to possibly acquire some companies to give it a presence in some parts of the country.

"U.S. Foodservice represents a significant part of Ahold's business and value," says Ahold CEO Anders Moberg. "Our management team has accomplished a major organizational overhaul at U.S. Foodservice during the past two years, integrating the past acquisitions, strengthening the operations, improving internal controls, enhancing corporate governance and restoring employee pride. U.S. Foodservice's financial performance is recovering, and the plan we are presenting today details the strong opportunities for pursuing profitable growth and creating a more valuable and transparent business for Ahold shareholders."

U.S. Foodservice had been embroiled in an accounting scandal which resulted in federal charges for 16 vendors accused of helping the food distributor overstate earnings by more than $800 million between 2000 and 2003, receiving large monetary bonuses in return. The suppliers have been charged with filing false audit confirmation letters for the company.

So far, 15 of them have pleaded guilty to criminal charges in the case. The latest, Robert Henuset, a sales manager at Crowley Foods in Yardley, PA, pleaded guilty Nov. 28 in federal court in New York to conspiracy charges.

In July 2004 prosecutors charged former U.S. Foodservice Chief Financial Officer Michael Resnick and former marketing head Mark Kaiser with securities fraud, conspiracy and fil;ing falsified documents with the U.S. Securities and Exchange Commission (SEC). The pair has denied any wrongdoing.

Ahold also agreed in late November to pay $1.1 billion to shareholders to settle a separate civil lawsuit in the United States related to its accounting practices.

EDI Helps Meet Bioterrorism Regs
The Grocery Manufacturers Association (GMA), based in Washington, says that commonly-used Electronic Data Interchange (EDI) will allow manufacturers and others to meet the record-keeping requirements specified in the Public Health Security and Bioterrorism Preparedness and Response Act (Bioterrorism Act) of 2002, which went into effect Dec. 9.

In partnership with GS1 US (formerly the Uniform Code Council), GMA examined the available options that would enable companies to comply with the Bioterrorism Act's record-keeping rules. GMA and GS1 US found that EDI meets these requirements, and will have little or no effect on total supply chain costs.

"The food and beverage industry is fully committed to ensuring the security of the food supply. And, having closely reviewed the Bioterrorism Act with GS1 US, we are confident that EDI will meet the requirements for record-keeping between manufacturers and retailers effectively and efficiently," says Pam Stegeman, GMA's vice president of supply chain and technology.

The Bioterrorism Act requires all companies that manufacture, process, pack, transport, receive, hold or import food to establish and maintain records of transactions for all food products. All effected firms must be able to track products one step up and one step back through the supply chain, and may use existing paper or electronic systems to do so. They will have to be able to provide records within 24 hours of a resquest by the U.S. Food and Drug Administration, which is enforcing the rules.

GS1 US is an industry-supported, not-for-profit organization dedicated to the adoption and implementation of standards-based, global supply chain solutions. GS1 US-based solutions, including EDI transaction sets and barcode identification standards, are currently used by more than 1 million member companies worldwide.

Sara Lee, Dannon Make The Switch To CHEP Pallets
Sara Lee Food & Beverage will soon be moving all products on those trusty blue pallets from CHEP, based in Orlando, FL. By the beginning of next year, most of Sara Lee's biggest brands, including Ball Park, Jimmy Dean and Hillshire Farm, will be shipped to grocery, foodservice, club store and convenience store retailers from the company's 22 processing and distribution locations around the country on CHEP pallets.

The Downers Grove, IL-based division of the Sara Lee Corp. previously used one-way wood pallets to ship products to its customers, but experienced pallet supply challenges and other operating inefficiencies. In addition, the one-way nature of the system added to the country's waste stream and has other negative environmental factors.

"The economics of the CHEP solution provides us with clear financial benefits gained from sturdier unit loads and improved product handling. CHEP is also helping us positively impact the environment by reducing the number of pallets sent to landfills," says Larry Rogers, senior vice president of supply chain at Sara Lee. "Sara Lee F&B will also lower its overall shipping platform and carrier costs by moving to CHEP."

The Dannon Co. Inc., White Plains, NY, also joined the CHEP pallet pool. Several of Dannon's brands are now being shipped to the grocery, mass merchandiser, club, convenience and foodservice trade channels on CHEP pallets.

Dannon previously shipped its product using a pallet exchange system, however, the company determined that the CHEP program is more efficient and provides transportation synergies and environmental benefits including the reduction of packaging entering the waste stream.

"Dannon is focused on fulfilling the needs of our customers, and the CHEP program clearly helps us become more efficient, particularly on the receiving docks. The program also helps us secure optimal pricing from our carriers, which improves asset utilization, and is better for the environment," says Jim Felmley, logistics director at Dannon. D

Rite-Hite IDs Greatest Dock Safety Threats
In an effort to address two main loading dock safety issues, Rite-Hite Corp., Milwaukee, launched an awareness campaign and last month released a series of products specifically designed to minimize problems related to what it calls "dock shock" and "trailer drop."

Dock shock, as defined by Rite-Hite's vice president of marketing, Joe Mannone, occurs when a forklift crosses the bridge between the loading dock and the trailer. Trailer drop, he says, refers to the bouncing of a trailer as a forklift moves in and out of it. Both are among the leading causes of product and equipment damage and forklift operator health issues, including musculoskeletal disorders of the neck, back, hands and arms, as well as fatigue.

Dock shock, it was found, is caused by the vibrations that occur when forklifts drive over the bumps and gaps that exist on traditional dock levelers. In response, Rite-Hite engineers developed the Smooth Transition Dok System, which includes hydraulic, air-powered and mechanical loading dock levelers with specially designed rear hinges and lip crowns that create a thoroughly flat surface between the dock floor and the trailer bed.

According to Tim Muhl, Rite-Hite's project engineering manager, these new dock levelers reduce dock shock by 50 percent.

Rite-Hite has also been working with forklift manufacturers to address vibrations and driver well-being through changes in ergonomics and the designs of their seat cushions, tires, suspension systems, steering columns and engines. "As we began to explore the issue, we discovered that forklift manufacturers alone cannot solve the problem," says Mannone.

Trailer drop, he says, is most prevalent among trailers with air-ride suspensions. In some cases, a trailer can drop as much as 6 inches to 10 inches with the sudden shift in weight when a forklift enters.

To combat trailer drop, Rite-Hite recently launched the STR-4000 Dok-Lok vehicle restraint system, which features a unique rotating hook to engage the trailer's rear impact bar in a two-point lock that restricts trailer movement in any direction. In tests, it reduced trailer drop by 300 percent.

"The hard data alone provides clear evidence that a smooth transition dock system greatly reduces dock shock and trailer drop and the problems they create," says Kyle Nelson, Rite-Hite's vice president of new business and product development. "These issues are gaining recognition and it's the employer's responsibility to control the environment where lift trucks operate. Given the importance of employee safety, as well as the adverse effects it can have on productivity and profitability, it's important that decision-makers are aware of these issues, as well as a solution that allows them to design the problem out of the process."