IDENTIFYING INNOVATIVE FOOD CHOICES

SYSCO's customers include restaurants of all kinds, which accounted for the bulk of sales in fiscal 1999 - 64 percent - while hospitals and long-term healthcare facilities constituted 10 percent. In addition, schools and colleges represented 7 percent of total sales, while hotels and motels comprised about 5 percent. Churches, camps, cruise lines, theme parks and other foodservice locations combined to represent the remaining 14 percent of sales. The heart of SYSCO's business is to help this variety of customers create plea-surable dining experiences based on delicious and, as customer surveys reveal they desire, innovative food choices that reflect today's evolving tastes.

OK's Cascade Company's mobile kitchen is a SYSCO customer that provides meals to forest fire fighters from an 18-wheel tractor-trailer customized for buffet-style serving.

The Marketing and Merchandising Departments use customer feedback to identify and support new dining trends that keep diners returning time and time again for meals they love. Company professionals work hand-in-hand with suppliers to custom-tailor new products and test new marketing and merchandising methods, making it possible for customers to build a repeat clientele based on personal menu favorites.

One example of the consumer's quest for new and delectable tastes is the surge in popularity of ethnic foods throughout the 1990s. SYSCO was at the forefront of this trend when it created, with its suppliers, ethnic product groupings and a line of other specialty products to join the SYSCO brand family. Arrezzio™, which has been the most popular, has strongly impacted the Italian market segment. Casa Solana™ and Jade Mountain™ are its Mexican and Asian counterparts, while the Block & Barrel™ brand, frequently seen advertised on the rear door of SYSCO delivery trucks, is marketed to the delicatessen segment. House Recipe™, another specialty brand that initially was introduced as a line of tabletop sauces, appeals to customers' desires to feature an upscale specialty brand. Featuring individual neck bands customized with the restaurant's name, this highly successful line now includes sugars, sweeteners, jams, jellies, dressings and many common seasonings comparable to other national brands.

SYSCO offers a variety of frozen products, including fresh meats, fruits and vegetables as well as bakery specialties and other foods.

RESPONDING TO CUSTOMER CONCERNS

SYSCO recognizes that its customers are concerned about issues that affect their businesses. In recent years, food safety issues have become a primary concern to the public. SYSCO's commitment to food safety is evident throughout every aspect of its business - from receiving to warehousing, loading and delivery. Both inbound and outbound products are received into the warehouses and loaded onto trucks for delivery from temperature-controlled docks. Once received, products are warehoused in areas that have multi-zoned temperature levels appropriate for each product, then delivered in triple-compartmented vehicles which are segregated by temperature for frozen, refrigerated and dry items. SYSCO also offers customers special training programs in safe food-handling practices, such as SERVSAFE, devised by the National Restaurant Association's Education Foundation, to help eating establishments operate their businesses more efficiently and safely. The program offers food safety instructions, including training in proper food storage temperatures, safe cutting and handling techniques (to avoid cross-contamination) and recommended hygiene practices. At the end of fiscal 1999, more than 15,000 foodservice operators across the U.S. had received training at SYSCO-sponsored SERVSAFE_® training seminars. From creating menus to developing training materials for restaurant employees, SYSCO believes that providing customers with the tools for success is an integral part of building customer loyalty.

Customers expect to receive products undamaged and at the proper temperature, so loading docks are refrigerated accordingly. In the photo, Roel Martinez leaves the freezer with an order.

LEVERAGING WAREHOUSE TECHNOLOGY

Over the years, advances in technology have allowed SYSCO to warehouse products more efficiently and deliver consistent quality products on a timely basis. As a result, inventory turnover rates continue to improve and averaged 17 days of sales in fiscal 1999. SYSCO's broad range of 275,000 products are transported by rail, roadway or air from points around the globe to its 78 distribution centers. Each traditional foodservice facility may serve 4,000 to 7,000 customers and inventory 10,000 to 16,000 products.

Winter sports are popular across North America and SYSCO has many ski resort customers. It is important that products be delivered as promised to meet the customer's "time window," whether taken to the top of the mountain by snow caterpillars or carried up the gondola lift in a container.

The SYGMA centers, which specialize in chain restaurant distribution, supply multiple locations of one to five large restaurant customers and inventory 150 to 350 items per customer. The warehouses are divided into dry, freezer, and cooler storage. Within the cooler, at least three optimal temperature zones and varying humidity levels maintain products at their appropriate temperature. Each storage area is designed to retain the quality of various types of produce, dairy products, meats, packaged and canned products, dry goods and frozen products. One of the basic services that customers expect is to receive products undamaged and at the proper temperature. Refrigerated loading docks with temperatures maintained near 55 degrees keep the environment stable as pallets of product are transferred from inbound vehicles to inventory, then loaded onto outbound SYSCO delivery vehicles.

Number of Cases Delivered Per Week (in millions)

Striving toward the objective of perfect service, SYSCO introduced an initiative in 1999 to reduce the number of stock keeping units (SKUs), or items, by 10 percent during fiscal 2000. Eliminating duplicate and slower moving products will provide several benefits, including more efficient use of warehouse space and inventory reductions. This program is made possible with tools now available on the SYSCO Uniform System (SUS). SUPPORTING ITS COMMITMENT WITH TECHNOLOGY The commitment to error-free service is supported by the installation of the SYSCO Uniform System, to be completed by December 1999. This major update of management information computer systems has been under development for over five years. The system is Year 2000-ready and is believed to be the most advanced in the industry. SUS provides compatibility between all areas throughout the company, comprising procurement, pricing, warehousing, order processing, logistics, delivery, executive information and billing and finance applications.

SYSCO's delivery associates are "the eyes of SYSCO," interfacing with customers and providing feedback to the sales and warehouse staff. Pictured left to right are drivers Thomas Crump and Kavin Griffin.

Measurement and reporting tools within the system enhance the ability to monitor productivity and service levels and provide key information to customers. To evaluate productivity improvements, reports for individual operating companies now compare results to the average of the best 25 percent of SYSCO operating companies - raising the bar on key performance measures.

Sophisticated computer routing systems determine the most efficient routes and delivery times. To increase customer satisfaction, reports focus on improving deliveries within specified "time windows." In photo: Albert Granado, Router.

The first application of SUS was the warehouse management component, the SYSCO Warehouse Management System (SWMS). It includes two components - inventory management and labor management. The first encompasses a locator system and a fully directed warehouse management system that tracks inventory through every aspect of its life within SYSCO - from receipt to storage, selection and delivery. Through improved order accuracy and inventory control, the system should increase productivity and help control costs and expenses. The labor management segment is a tool used to increase safety and pro-ductivity and improve accuracy and efficiency by managing an employee's production time throughout the day.

Employees have new tools to help them be more productive. The finger-mounted SOS product scanner verifies an item's bar-coding and has significantly reduced mispicks.

A further enhancement is a new finger-mounted product scanner that allows a warehouse product selector to verify - with the touch of a finger to bar-coding on the package - that the correct product has been pulled for a specific order. The scanner - called the SYSCO Order Selector (SOS) - tested very successfully in 1999, significantly reducing the frequency of order-selection errors. By increasing accuracy in order fulfillment, SOS should reduce costs associated with returning and replacing products selected in error, ultimately enhancing customer satisfaction.