Tight labor market hits US Foods
- US Foods will combat cost increases from wage growth and fuel expenses by changing its distribution routes to reduce miles-traveled during deliveries, CEO Pietro Satriano said on the company's most recent earning's call.
- Adjusted operating expenses for the fourth quarter were up 1.9% compared with the same quarter last year and re-routing is already underway for one-third of the company's operations.
- Warehouse picking technology, routing systems and dynamic labor planning tools are technologies US Foods plans to pilot between 2019 and 2020 in an effort to make its supply chain more efficient. Longer-term plans include warehouse automation and "transport technologies," according to a company presentation.
US Foods expects new scanning technology, which is currently ready for implementation, to help with training new pickers. The company struggled with high turnover in this area and it can be hard to find employees for this kind of work in the current tight labor market, Satriano said on the call. Wages have gone up across the board for US Foods employees, the CEO said, adding that the company had originally only expected to see increased in starting wages, but this hasn't been the case.
The company doesn't expect one single change to offset the increase in wage cost, and says it has multiple supply chain initiatives that could work to drive costs down.
U.S. Foods is not the only food service company fighting upticks in operating expenses. Sysco recently reported facing a similar struggle, as it has seen a 4.7% YoY increase in operating expenses in its U.S. foodservice operations division.
Both U.S. Foods and Sysco hit a similar note on these increased wage costs: this is a new normal and they have to figure out how to manage the cost.
Follow Matt Leonard on Twitter