Choosing a Distributor: SYSCO - Case Study Example

SYSCO of the of the History of the company The food distribution company Sysco is one of the largest food distribution companies in USA. The company was founded in 1969 by John F. Baugh and Harry Rosenthal. The company became listed in the year 1970. The company was ranked by the Fortune 500 Company based on the sales volume. The company was ranked 7th largest amongst the companies and 55 largest among the company among all the companies in USA. Recently the Sysco is merging with US foods which are much smaller than US to increase its market share in US. Geographical areas that they serve Sysco is located all over America. The concentration of the distributors is located more towards eastern parts of the America than in the western parts of America. The concentration of the Sysco stores and warehouses all over America means that the can serve a wide range of customers. High-level list of supplies they offer 75 Sysco sells its products under various brands. The main tagline of Sysco is that they sell quality products. They say that good things come from Sysco. That means that Sysco sells its products with the single goal of providing quality products at high levels of hygiene. The six brands are Supreme Sysco- The quality levels of the items sold under this brand is of premium quality. Imperial Sysco – Under this brand level the items selected are premium quality that are selected from a particular region Classic Sysco- this brand offers the greatest mix of products in terms of variety, value and innovation Reliance Sysco- This brand as the name suggests offers a mix of products that are easy on the pocket. Natural Sysco- under this brand Sysco offers fresh farm produce. Serene Sysco- Under this brand Sysco offers products such as paper, foam, plastics etc. The main competitors Among the main competitors of Sysco are the companies like Sherwood, Cargill, and Gordon Food service. The competitors differ amongst themselves on the different kinds of food products that they offer, price range, payment terms etc. The distributors also differ between themselves based on the services that they offer to the customers. Comparison between Sysco and SFD Figure 1Price list of Sysco (Source: Sysco. 2015) Figure 2Price list of SFD (Source: Sherwood food distributors. 2015) Product Company Price ($) Quality Value Cheese Sysco 10.99/ 5lb good Better as compared to SFD SFD 14.95/ 5 lb good Lower as compared to SYSCO Tilapia Sysco 27.99/ 10 lb good Lower as compared to SFD SFD 23.9/ 10lb good Better as compared to Sysco Ham Sysco 10.99/ 3 lb good Lower as compared to SFD SFD 6.87/ 3lb good Better as compared to Sysco Rice Sysco 12.89/25lb Good Better as compared to SFD SFD 21.08/ 25lb Good Lower as compared to Sysco Turkey frank Sysco 80cent Good Lower as compared to SFD SFD 69cent Good Better as compared to Sysco Overview of this company’s payment policy including: a. Objective of payment policy The mantra that Sysco has always followed is fast convenient and cheap. The pricing and payment policy of the company has been designed following this ideal. The objective of the payment policy of Sysco that it offers to its customers is to offer them easy mode of payments so that they do not feel humiliated and continue a long term relationship with the company. The payment policy is designed keeping in mind the convenience of its customers. b. The costs of paying early In cases where customers pay their bills early such payments are appreciated by the Sysco and such customers are given extra discounts or special privileges. The customers who pay early may be given credit periods sometimes as a special offer. The paying early is always suitable for a company like Sysco since they too have to pay their suppliers and if the company goes for late payment policy then it significantly increases the risk that exists for the company. The customers who pay the company at the earliest are treated by the customers on a priority basis. Such types of customers receive special attention from the part of the company. When most of the customers of the company start paying early then the account receivable in days for the company is greatly reduced and this is a good sign for the company. If most of the customers start to pay early then the risk associated with not receiving the payments on time gets greatly reduced. c. The costs of late payment Most of the food distribution companies do not entertain late payments. Whereas it is industry norm to maintain a payment cycle of 45 days some companies sometimes demands to be paid earlier. Sometimes the companies which have a bad credit history are offered less credit period and are required to pay early. For other companies which are good is their credit history may sometimes be offered certain credit period. The company which gives good credit period to the customers is at a risk because their account receivable time period increases. This causes a lot of risk for the company. The company in order to motivate the customers to pay early devices some measures that either punishes the customers or indirectly incentivizes them to pay early by providing them good discounts. d. The mechanics of bill paying The bill paying system of the company is designed keeping in mind the convenience of the customers. Sysco offers latest innovations in bill paying mechanisms so that the customers can pay their bills easily from the comfort of their homes. Sysco offers online solutions to its customers where they can pay their bills track their shipments and do lots of stuffs on their portal of Sysco. e. Discounting  Sysco like all other distributers in this field offers discounts to the customers who pay early is pay in cash. Sysco offers discounts to all the customers who give all the payment in a single term and within a certain specified time period. The discount that Sysco offers to its customers is aimed at motivating the customers to pay their bills early and pay the full payment in cash. The discounting offered by the company is aimed at motivating the customers to stay with the company. 4. Compare and contrast the distributors payment policy with at least two (2) competitors The payment policy of the Sysco has been described in the above pages. The competitors of the company in this field are SFD and Cargill. The payment policy of the company is almost similar to the competitors. The payment policy of most of the competitors along with Sysco is designed so that it facilitates payment of the customers. The payment policy only differs in some aspect like the amount of credit period that the individual company offers and the amount of discount or incentives that the company offers to those who pay early. Whether or not to choose this distributor as the main supplier a. The impact of this distributors purchasing policy on the supplier selection Purchasing policy has a good deal of impact on the supplier selection mechanism of the company. The purchasing policy of the distributor in terms of the payment policy that it offers and the other benefits that it offers plays a big role in selecting the perfect supplier for the business requirement. The purchasing policy of the supplier should match with the customers for them to work together. There should be actually a win-win situation. b. This distributors ranking based on the supplier selection criteria The distributors are ranked based on several criteria such as pricing policy, technology, quality, value, price, location where it is placed, etc (Feinstein and Stefanelli, 2010). The distributor Sysco is chosen in this regard for the supplying of food items for the restaurant business. Among the various factors that influenced the choice is favorable payment policy, location which refers to the fact that Sysco is located almost all over America. Another factor that contributed to my decision making is the fact that Sysco offers far low prices than its competitors and offers good value products. d. The most important supplier selection criteria for this distributor The most important factor driving the decision to choose Sysco as the supplier is the fact that Sysco is present in almost all the location over America. This is very important for our restaurant as in the proposed restaurant it is thought that we will prefer just in time inventory management. So the restaurant will not store any food items and the restaurant will directly fetch the food items from the nearest Sysco store. e. Comparison between this distributor and its competitors On the basis of the most important characteristic of location advantage, Sysco scores in a much better and efficient manner as compared to SFD. Sysco has more no. of distribution centers across America than SFD. This will in turn help the restaurant as the restaurant is going to follow just in time inventory management. So the most important aspect for the company will be the availability of supplier stores close by and that is exactly why Sysco will be chosen over SFD. Sysco’s location advantage far out grows the negative characteristics if any that it has. Coupled with this fact the company is the largest amongst the food distributors and knows the business very well. They will be able to provide unmatched competitive advantage. References Feinstein, A. H. and Stefanelli, J. M. 2010. Purchasing: Selection and Procurement for the Hospitality Industry, 8th Edition: Selection and Procurement for the Hospitality Industry. NY: John Wiley & Sons. Sherwood food distributors. 2015. Prices good February 16th thru February 22nd 2015. Retrieved from: http://www.sherwoodfoods.com/detroit-flyer-1#7 Sysco. 2015. Sysco Discount Food Center. Retrieved from: http://www.syscodiscountfoodcenter.com/ordereze/default.aspx Read More