Lisa: Staying ahead of the curve is essential in the fast-paced distribution world. SimplyDepo, an innovative software company in the distribution industry, was privileged to sit down with Tim Sher, the Vice President at HC Foods, a prominent US-based distribution company headquartered in Los Angeles.
The company boasted a remarkable 36-year track record within the food and beverage sector and an impressive annual revenue exceeding $30 million.
Tim, having you on board, we couldn’t help but admire your extensive experience and the insights you keep sharing about the trends, challenges, and strategies shaping the distribution landscape today.
Could you please share with us what trends you’re currently observing in the distribution industry?
Tim: Trends come and go, but every product can be sold. The hardest part, I think, that brands face is not the product’s quality; it’s actually sales and distribution. In terms of trends, I see a wave where any brand can get on the shelf with the right tools.
What I also see right now is that sparkling water is pretty big. In terms of food, a lot of it is going towards health and protein. Additionally, unique flavored snacks and sauces like Sriracha are significant, and Korean hot sauce is rising. There’s also a new flavored sauce from the Philippines called Ube, which is gaining traction, especially at Trader Joe’s. Trader Joe’s has a reputation for being a trendsetter; they had innovative products before anyone else. They are willing to take risks and say, “I like it, I’ll try it.” However, most other retailers require data and established sales figures before considering a product.
Lisa: Which one wields greater influence between distributors and larger retail chains?
Tim: Many distributors don’t engage in sales; their primary function is distribution. It’s essential for brands to have their salespeople because distributors typically handle a wide range of products and can’t prioritize any particular brand. The largest distributors, like KEHE, have thousands of products, so taking on a new brand is a small fraction of their workload for them. The onus is on the brand to visit stores and actively promote their product. Brands need to get into those stores, share information about their presence in larger distributors like KEHE, negotiate terms, and get added to delivery routes.
Lisa: What are the current challenges in the distribution market?
Tim: The biggest problem in the distribution market currently is the increasing cost of transportation stemming from the production and factory worker expenses. Many factors are at play, including the journey from farmers to delivery, production costs, salaries, warehousing, and delivery to retail. It’s all escalating faster than anticipated. I believe there’s a lot of wasted revenue in this process. By making it more efficient, we can save both time and money. If we can help brands reduce overhead costs, it might lead to lower FOB prices for distributors. Essentially, a one-dollar increase in the early stages can result in a $52 price hike at retail. I commend SimplyDepo for supporting small businesses, so I focus on them. Talking directly to owners helps me understand the issues. When dealing with larger companies and CEOs, they often lose touch with what’s happening in the background and lose money. We encounter numerous fees at HC Foods when delivering to their warehouses, and the reasons behind these pricing increases often remain unclear.
Lisa: What are the major challenges you face in the distribution business?
Tim: In our distribution business, we encounter many challenges, but one of the most pressing ones is undoubtedly our ongoing efforts to enhance the quality of customer service our representatives provide. Ensuring that our team consistently delivers exceptional service when taking orders is paramount to our success
Lisa: Are there any specific logistical and operational pain points that you struggle with?
Tim: Absolutely, Lisa. When it comes to our logistical and operational aspects, there are several pain points that we’ve been actively addressing. One of the most critical areas is our warehousing operations. Currently, we’re grappling with the absence of a reliable Warehouse Management System (WMS) software, which has been causing inefficiencies and inaccuracies in our inventory management and order fulfillment processes.
Lisa: Do you have KPIs for each sales rep?
Tim: Yes, we do, and often, they fall short of their targets. Even though they make calls, revenue may decline. The problem lies in the lack of tools for me, as a manager, to analyze their performance. We have numbers, but the right software system could help me pinpoint areas for improvement and track their activities more effectively. We are still profitable, but I see room for improvement, and the potential is there. By providing reps with the right tools, we eliminate excuses. It becomes a win-win situation; they become more productive, and I can step back from constant management.
Lisa: Have you tried to solve any of the listed challenges, and what was the result?
Tim: Indeed, we’ve diligently tackled these challenges head-on. Initially, we took the approach of hiring a dedicated development team to address our software needs. However, this endeavor faced significant hurdles due to my demanding schedule and the intricacies of overseeing the development process. Despite our best intentions, managing the development proved to be more challenging than anticipated, even though we managed to create a functional product prototype.
Lisa: What are your customers’ primary needs and preferences, especially retailers?
Tim: Retailers frequently find themselves caught up in the daily grind of reordering, leaving them with limited time to focus on enhancing their in-store experiences. Distributors could be more proactive by offering timely reminders for reorder points and streamlining communication and service. Another area of potential improvement is the transition from paper-based ordering systems to digital solutions, particularly for smaller brands. Allowing retailers to scan items for reordering and electronically transmit orders could significantly enhance efficiency. Furthermore, it’s a well-established industry fact that personal visits to retailers often lead to increased order volumes.
Lisa: Are there any unique demands within your customers?
Tim: Among our customers, the top priorities are pricing, product availability, and reliable on-time delivery.
Lisa: How do you communicate with customers, and what’s crucial about it?
Tim: Our primary mode of communication with customers is through phone calls, although a substantial portion of orders still arrive via email or fax. Managing this mix of communication channels can sometimes be challenging, as email and fax orders can occasionally be overlooked amid the influx of phone calls.
Lisa: What is genuinely missing that no one does is the information for the buyer, how to convince the customer to put a product on the shelf.
Tim: One notable industry gap is the lack of comprehensive information provided to buyers regarding why they should stock a particular product on their shelves. There’s a significant opportunity for distributors and brands to collaborate on delivering persuasive, data-backed insights to help retailers make informed stocking decisions.
Lisa: How do you evaluate the performance of your suppliers?
Tim: In the supplier-distributor dynamic, the distributor often wields more influence. Distributors sometimes resort to making excuses when products don’t perform as expected. To counter this, brands should adopt a proactive stance, actively engaging with distributors to ensure both parties fulfill their responsibilities. Furthermore, brands should continue their efforts in evaluating distributors, as they provide invaluable reports detailing sales volumes, customer profiles, and other critical metrics.
Lisa: Could you share more about your industry’s competitors and your strategies or competitive advantages?
Tim: Competition is always present, especially for us. Many brands offer similar products under different labels. Our success depends on our ability to maintain follow-up efforts. As soon as we stop promoting and following up with customers, they may switch to other options, causing us to lose shelf space. Field Sales CRM is crucial in ensuring our presence and reminding buyers about our products. Unfortunately, ERP systems often overlook small businesses needing customer support.
Lisa: What advice would you give to the brands and small distributors?
Tim: To brands and small distributors, I advise focusing on strengthening sales and merchandising teams, embracing digitalization, and fostering transparency within the sales team. These steps are essential for success in today’s competitive business landscape.
Tim’s insights provide a unique perspective into the distribution industry’s dynamics. With the distribution landscape constantly evolving, staying adaptable and innovative remains paramount. Tim’s emphasis on efficiency, effective communication, and tools like Field Sales CRM highlight the critical elements for success in this ever-changing field. As a tech company, SimplyDepo continues to support brands and distribution businesses and addresses the challenges discussed here; they play a pivotal role in shaping the industry’s future.