Miller, James A.

English

Research Papers in Economics

Service So Good
by
James A. Miller
President
Kraft Foodservice, Inc.
Deerfield, IL
I. Who and what is Kraft Foodservice?
1 of 7 operating units of Philip Morris
Philip Morris is $57 billion company, primarily
tobacco and food
Tobacco represents $25 billion
Food and beer represent $32 billion
Foodservice distribution represents $3.5 billion
Kraft Foodservice
- Headquartered out of Chicago
- 45 sales/distribution centers
- Covers 95% of the U.S. market
II. Foodservice industry (as a distributor)
. Our customers
- Restaurants, hotels, hospitals, caterers, etc.
We sell and ship an array of food and non-
food items (from meat/chicken to cups and
brooms)
“ The industry
Approximately $115 billion in 1992
Fragmented, 4,000 distributors, very slow
consolidation
- Top 5 (15%), top 50 (20%)
“ Growth . . . slowed
- Last 5 years 5.4%, 1991/92 3.6%
- Low margin/a need to turn inventories, can
have attractive return
o Some industry pressure on margins
- Finding other ways to compete
- Including service
- Answering question
. . .Is there real, tangible value?
III. A typical day
“ Receiving
Warehouse 180-220,000 square feet
(freezer, dry, 3 to 4 coolers)
- 800 suppliers, 8,000 SKUS
- Receive 28,000 cases a day
- Put away/let down
Journal of Food Distribution Research February 931page 7“ Sales force - Don’t understand why we as distributors
- 50 reps., 12 sales phone coordinators
- 700 orders from customer base of 3,500
- Orders taken today would be for delivery
tomorrow
o Picking/selection
- 700 orders equal 28,000 cases
- Selected, staged, loaded on truck
“ Trucks begin delivery early morning (2 a.m.
sometimes)
- Failure to execute simple orders
0 Customers . . . all we want is . . .
- What I ordered . . . no outs
-When I want it... Tuesday between 9-
10:30 a.m.
- In good condition . . . no damage
- At the price promised
- See little difference between distributors
- To them we’re all bad . . . why?
“ Between 55-60 trucks
o Research shows
“ Trucks complete late afternoon
- 1 out of every 2 orders has a problem
. Not unlike many industries
- 50% of orders have some type of problem
- Our complexity lies
o Customers’ reaction
- Vast maze of transactions
(products/vendors/customers) - Become de-sensitized . . . don’t have high
expectation
- Very short lead time
- High error rate accepted
- Traditional customer/supplier/employee
habits - Response . . . split the business . . . multi-
ple
- Overwhelming opportunities for error
- Insure back-up
IV. How our industry views service
o Distributors talk about service
- Not cost eftlcient for an operator, but neces-
sary (latest research 6 total distributors, 2
broadline)
- Service more “talk” than reality
. Our research also asked
- Read periodicals -98.5- 99% service levels
- What if, would you be willing . . .
- Is itreal? . . . Talking about fill rate.
- Getting back to an earlier question
. Customers view service much differently
- Conducted research using an outside
research firm
- Is there a real, tangible value in having
significantly improved service?
February 931page 8 Journal of Food Distribution Research- kalrl y comprehenswe set ot questions to get
at:
o What they view as service
V. The opportunity
. The obvious
- Reliability, more of a customer’s base
- Should help get new business
- Prevent some of our lost business
“ The not so obvious
- Noise level
- Cost of error to distributor
- Don’t care what number used, it’s big
- Same true for cost to customer
“ Our conclusion
- Yes, the opportunity is likely enormous, but
- Rethink fundamental way we conduct busi-
ness
- Anything less than perfection is a customer
disservice
- Measurement must be customer driven - not
case driven.
VI. How we got started
“ Defined service
- Perfect invoice
- 16 major errors (subs, sales)
- How we would track - how much detail -
how often?
-.. . . .
- Would location need support/help . . . Yes,
but ownership must reside with &e location/
employee
“ Lots of unanswered questions
- Selected two pilot locations
VH. How we implement SSG . . . Framework
“ Kick-off meeting
- All employees
- Explain the how, what, where, when and
why
- That it’s a 3 phase process
1) SANDRA 90
2) CSI
3) MARKET
- Combination of team work and technology
- Introduce the transition team
o Our objective, which actually later became our
mission
- Recognition by customers as leader
- National “brand” distinctly superior service
“ What’s a “brand”?
- Tangible, real
- Consistent
- Protected (barriers to entry)
- Well marketed, properly priced
“ Our guiding principle
- Empowering, training
- Resources to perform job right first time
. Tracking - what’s CSI
Journal of Food Distribution Research February 93/page 9- Daily, department, individual
- Plastered everywhere
“ I need help forms
- Guaranteed response (200 in the first week)
- Simple, but most effective tool
“ Transition team
- Each functional area
(sales, operations, procurement, finance,
human resources, systems)
- Business knowledge, system knowledge
- Facilitator for problem solving
- Integrity of numbers
- CSI tracking
- Error resolution - Reactive Mode
- Agent of change - Proactive Mode
- Inter-department communication
. We explain the keys to success
Focus - Common goal, #1
Ownership - What’s their role
priority
Teamwork - Group problem, interdepartment
Change - Emotional roller coaster
Celebrate success
“ The benefits
Customer Emt)lovee comDanv
What Job easier Satisfied customers
When Job satisfaction Market share
Good Job security Acct. penetration
condition
Price promotion Financial success
“ Pass the challenge
- Process not project
- Forever
VIII. What have we learned to
s From employee’s standpoint
date?
It works/ownership
They like, they participate
It’s achievable, no burnout
Breaks down fictional
Who is the customer?
Lots of pride
walls
New levels of achievement
(selector 130K, customer service 37 weeks)
Defined the training needs of employees
. Remember we didn’t tell them how, only what
we wanted to achieve
- Work with/ride with
- Wall of fame
- Committee/task force
- Inter-location competition
“ From customer’s standpoint
Begin to notice a difference
At about 80% perfection,
comment
Between 80-85%, we begin
Consistently over 85
they begin to
to tell them
Raised the level of expectations
February 93/page 10 Journal of Food Distribution Research- Good/bad (competitors’ mistakes mm
evident)
“ From company’s standpoint
- Culture/morale (better way
. Evolution of selling process
Took orders (green beans)
- Talked portion cost
- Total food cost
to do business)
- SSG - total operational cost
From a visibility standpoint
- Sign up boards
- (XI tracking (also at headquarters)
- Truck logos
- Stickers for invoices
- Coordinating/direct mail/food shows
Recognition programs (Toni’s Tigers)
From a structure standpoint
- Location ownership
Transition team has really helped
Formed a SSG Council (functional)
c Consistency
“ Share learning
. Professionalize material (amortized)
Journal of Food Distribution Research
IX. Where are we?
T Timing
First two pilot locations, 9-12 months
- Now 8-10 weeks, 11 locations
Q Continuous improvement process
Further external research (DSI)
CSI, DSI, VSI, CMI, Customer Feedback
Rating
Added more training (Pro Customer, SST)
X. Next steps
o Feel good about results to date
“ Will continue implementations
. Know we still have a lot to learn
. Hope someday we’ve really created a “national
brand of distinctly superior service. ”
o And it’s truly recognized by
across the entire United States
our customers
February 93/page 11

SERVICE SO GOOD

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