Cremins: small distributors need to be customer-intimate

Nation's Restaurant News,  Oct 8, 2007  by Caroline Perkins

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Jim Cremins has spent more than 40 years of his career in foodservice distribution. He has held upper-management positions in a number of companies including Kraft Foodservice and, most recently, Performance Food Group, or PFG. In 2004 he left PFG to start his own consulting business, Foodservice Pro. His forte is long-term strategic business development. In addition, he serves part time as vice president of sales at Pate-Dawson Company in Goldsboro, N.C. Cremins' company is based in Clayton, N.C.

What are some of the changes you've seen in the distribution industry?,

The "haves" and the "have-nots" are getting clearer all the time. The four big guys - Sysco, U.S. Foodservice, PFG and Gordon Food Service - are growing and taking share. With some notable exceptions, the smaller distributors are struggling.

Why do you think this has happened?

To succeed, a company has to be either operationally excellent or customer-intimate. This is clearer than ever before. Operational excellence means producing lowest total cost. Customer intimacy is providing the best customer solutions. I've worked with a number of distributors who struggle to be operationally excellent. I tell them you can't "out-Sysco" Sysco.

What should they be doing?

If they focus on customer intimacy, it will quadruple their bottom line or more. I know this is a radical view. Some people say I'm nuts. But it's the only chance a small distributor has: to really partner with their customers.

One of the problems is that operators try to work with too many distributors. I ask operators why they use three or four sources when the chain restaurant down the street only has a single source? They would do much better if they followed suit and worked with one distributor.

Does this also mean that a distributor should not work with a customer who buys from three or four competitors?

Yes, if a distributor can't build a good long-term partnership with an operator customer, they should walk away. As large as this industry is growing, everyone in the supply chain should be more selective about whom they do business with. For instance, a smaller distributor is not going to get the attention it needs from the large manufacturers who spend their time and money on the large distributors. The small guy would be better off dealing with the small to midsized suppliers.

What change do you see on the sales side?

The most important thing is that distributors have to stop paying sales people on a transactional basis. Right now, sales reps are paid on gross profit dollars per transaction. That doesn't necessarily produce long-term results. That compensation system is rooted in the '70s.

I see the need for two types of sales people. First, the service people who go out and take the order, do what's necessary to fill the order, monitor credit and handle delivery details. Then, there is a need for a true consultant team that is in charge of business development, and by that I mean developing the customers business. The distributor's business and the customers business should be mutually inclusive, not mutually exclusive.

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