April 6th Interview: Paul Allegri, Vice President Logistics, CSCS (Centralized Supply Chain Services, LLC)
Paul was interviewed by Sachin Sharma, 1st year MBA Student, TCU Neeley School of Business
SS: Could you please tell us about your background and journey from college to this job?
PA: I have a background in accounting and finance. I graduated with degree in accounting, completed my CPA and then went to work in June 1988 with Applebee’s. The first project we did as a team was to clean up the books to take Applebee’s to the national public level which successfully completed in September 1989. I’ve held various roles within accounting up until 1998, and then I got the opportunity to move into supply chain. In 2004, I assumed a leadership role in the organization, leading the distribution and logistics side of Applebee’s International. In 2007 IHOP purchased Applebee’s. In 2009, the supply chain team spun off and became a supply chain co-op for Applebee’s and IHOP.
SS: Currently, what is your team’s job focus?
PA: My team’s focus is on the logistics side. We outsourced distribution and the inbound freight component of business.
SS: TCU’s Center for Supply Chain Innovation has been working with the NRA (National Restaurant Association) and recently we’ve done some research around distribution and redistribution. Could you share your experience and how you identify vendors in the market for distribution and redistribution?
PA: Distribution and ReD (Redistribution) are two different concepts. Mark Smith, chief procurement officer, along with his team, sets up contracts directly with the manufacturers across the United States. Our logistics is responsible for the work to get product into Distribution Centers (DC) and restaurants. One of the biggest projects that we began was optimizing our distribution, taking our DC’s from 57 to 23. It has saved millions of dollars for our members. Now, it’s about managing the distribution network. We’ve set up compliance for distributors such as product development compliance, quality management compliance and pricing compliance. We conduct an annual business review with our distributors. Operators participate in the meeting. We lead the discussion which lasts around 5 to 7 hours.
In terms of ReD: We’ve partnered with Kinexo over the past 10 years. We go through a transparent type of model where suppliers deliver FTL (Full Truck Load) to distribution centers or they bring FTL to ReD hub. Now you have distributors who buy FTL of mixed product and deliver it to restaurants.
Here are the benefits:
- Suppliers deliver to one point of contact instead of 23 points of contacts, improving administrative efficiencies.
- Distributors go to one redistributor rather than to 7 different suppliers, improving admin efficiency.
This program provides technical benefits for slow moving items.
SS: Where do you see the future of this distribution model? What’s CSCS’s strategy?
PA: We went through 5 years of optimizing our network so we believe that currently we are setup with the right distributors in the model. For the most part, we assign the network to a distributor. For example, we have one distributor and they have four distribution centers on the West Coast and they serve Applebee’s and IHOP’s up and down the west regions of USA. We have done the same for the most part across the US.
SS: What are operators doing right now with the Distribution model?
PA: Distributors are right-size models. There is not a lot of capacity out there now. It’s similar to what the airlines industry went through in 2008-09: you saw them take capacity out to come to this right profitability model. So, if you’re independent distributor, what’s out there today is significantly less than what it was 10 years ago and that’ll continue. It’s national players out there and they are looking for strategies of where they expand. It’s expensive to expand so making a change in DC is disruptive to restaurant operations. Hence, we want right partners. I have watched several distributors filing for bankruptcy during my career, and that’s not fun.
SS: ReD/Distributors were ignored in past by executives, however, since recent bankruptcies of distributors, along with the huge costs of business, do you see any change in Supply Chain coming to the forefront?
PA: It’s very valued and especially in the industry I am in. So, we have a staff of 50 Supply Chain experts for these two iconic brands – Applebee’s and IHOP. A lot of value generation depends on how we partner with members in the networks and how collaboratively this is with the brands.
SS: Do you see any major changes coming in the industry or in your organization?
PA: The biggest change we see coming is in tracking and traceability and partnership with GS1. One thing about this adaptation is protecting investment in global operations. Leveraging GS1 will allow us to identify where the product is in the global supply chain that needs to be recalled based on its lot number. This is a major initiative which is going on within and across our industry.
With GS1, when you recognize there’s a product that needs to be recalled, you get it out of chain immediately and minimize distruption to everybody from restaurants to the distributors, to the operators and to the suppliers. It will not only reduce the restrictions, but also reduce the number of cases that are pulled out of chain.
SS: How do you manage food quality when you’re working globally?
PA: Dine Equity has a quality management department that checks each food item in our system. There’s an 800-hotline number where guests can call and report problems. The department investigates whether this issue was in a specific restaurant, across the supply chain or in preparation, transportation, etc.
SS: Do you have any suggestions for research that can be a great help to restaurants with a significant presence across the nation and globe?
PA: Is there any research or work about transportation over the next 10 yrs.? It’s very costly to be in that space and it doesn’t just impact restaurants, but all the industries across the United States. We are seeing more and more products, today, more than before, ready to be delivered. This will only increase, so how’s the landscape changing? Are we going to have more DC’s than expected so that we don’t have more and more overnight driving and transportation costs? Can we leverage rail options here and now? What’s the future (e.g. of drones, other technologies)?