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Food Diversion in Wholesale Distribution

As restaurants move to a take-out environment given the COVID-19 crisis, the demand for food on-site has been reduced. On-premise food demands have been replaced with risings off-premise food needs. Foodservice distributors have a supply chain with a food surplus, as grocery retailers are being stressed to keep shelves stocked.

Imagine a supply chain full of food that was purchased from suppliers to meet the demands of restaurants, bars, theaters, stadiums, hotels, resorts, or amusement parks that now has no customers. Diverting food to a completely different channel is as much a digital information challenge as a logistical one. It seems completely logical that foodservice distribution centers and trucks full of everything from toilet paper to chicken tenders could be easily diverted from restaurant to grocery customers. This, however, is not the case. The back-office challenge is how to handle the inbound delivery and subsequent billing. Simply stated, if products originally procured for foodservice demands are being diverted to grocery retailers, the material barcodes required for receipt and billing don’t necessarily match. For example, if a foodservice distributors truck full of bar code “123” is diverted to a grocery store that typically gets the same or similar product from a grocery distributor that uses material barcode “456”, the shipment may end up in a stalled order-to-cash process.

This type of master data challenge can be solved if the foodservice distributor and grocery retailer have systems that allow for multiple GTIN’s and EAN’s for a single material. Foodservice distributors are rushing to either create new material information fields in their legacy material masters, or simply add the new material information to existing fields in more current ERP systems.

An example of food diversion in wholesale distribution was announced today by US Foods. Per the Business Wire, US Foods Holding Corp, a leading foodservice distributor, today announced updates on the impact of coronavirus (COVID-19) on the foodservice industry and its business.

“While the full business impact of COVID-19 is not yet known, we are taking immediate action to reduce our costs to match the slowdown we’re seeing in restaurant, hospitality and education volumes. We are also leveraging our supply chain resources to support the retail industry as they experience unprecedented increases in consumer demand. Finally, I would like to thank our associates for their outstanding efforts in continuing to serve our customers during this difficult time.” said Pietro Satriano, Chairman and CEO of US Foods.

Clearly the foodservice distribution industry is securing new opportunities to not only support, but sell to the grocery channel, as they see declines in sales to restaurants, hospitality and education customers. Agile technology is required as diversion strategies are embraced and new channels to markets are exploited. Something as simple as be able to scan a barcode for receipt and billing could slow the delivery of available products from one channel to another. Let’s hope all distributors are leveraging agile technology that can keep pace with the current speed of change.

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