Sometimes an industry under pressure needs companies that can provide unique solutions. Robinson Fresh and its parent company, C. H. Robinson, is that kind of organization, with resources in people, finance and technology that stand alone in the produce industry.
This year, retailers across the country have been under pressure. First foodservice closed, so countless meals that would have been eaten in restaurants were going to go through the retail channel instead of foodservice. Second, working with limited retail space and limited warehouse and transportation options, retailers had to prioritize water, face masks, hand sanitizer, etc. Third, purchasing habits changed instantly as consumers prioritized purchases they saw as suitable for a possible quarantine or important for health.
What does a large retailer do in this situation? Well Robinson Fresh threw its intellectual, reputational and financial attributes into becoming a kind of secondary distribution center for many retailers across the country. We asked Pundit Investigator and Special Projects Editor, Mira Slott, to find out more:
Todd Bernitt
Vice President of Managed Services
Robinson Fresh
Eden Prairie, Minnesota
Q: I’m intrigued to learn of Robinson Fresh’s new venture to build a national network of local warehouses paired with direct store deliveries (DSD) to manage and expedite safe, high quality produce to supermarket chains. I understand the premise is based on alleviating the challenges and kinks of supply chain product movement during peak local produce seasons, and odd consumer buying spikes given COVID-19 for both instore and online systems.
You’ve been instrumental in developing complex managed procurement services at CH Robinson for both retail and foodservice. Now you are leading this ambitious undertaking… Can you take us more in-depth into the strategies?
A: To give you some background, I’m vice president of managed services for the fresh side of the business. I’ve been with the company 27 years and enjoy it. I started out on the transportation logistics side but came to the produce side about 20 years ago.
I’ve been fortunate to launch several different programs, especially in the fresh side of the business, around our warehousing certification network, with a heavy focus on our managed procurement services, which we launched back in 2015, and our replenishment services, which we launched about 10 years ago for several retail chains.
In terms of our local warehousing providing DSD, we saw a need for this prior to COVID-19, but this was exacerbated with COVID. There was a massive surge on the retail side, and a consumer shift of more consumers eating at home versus eating out, along with omni channel, which really started a couple of years ago. A newly released report by the Retail Feedback Group showed 50 percent of in-store supermarket shoppers in the past 30 days also ordered groceries online, escalating the omni-channel grocery trend.
Due to the really high surge in demand that’s going on at the retail level, it just puts a ton of stress on the current supply chains and on the Distribution Centers (DC’s) at the retail level.
And to be honest with you, the retailers just don’t have the capacity to handle all that surge. So, they’re seeing a lot of products going out of stock. They’re seeing high levels of shrink. It just really puts the stress and the demand on inventory, and there’s a lot of inventory and “outs” in current supply chains. And you know if you go to the store and the product is not there, you probably won’t return to that store or you’re going to be really disappointed in the dollars that you spend there.
So, what we’ve launched is a warehousing and DSD program, really to meet the current demands of this surge, not only the surge but also to offset these supply chain challenges that retailers are seeing. What we want to do is to reduce shrink. And we also want to avoid inventory going out of stock for the retailer to meet the needs of the consumer. They’re missing that sale through the app or at the store for that consumer, and right now the retailers need every dollar they can get.
Q: Does this mean CHR is now replacing the warehouse for suppliers and arranging direct store delivery?
A: Yes, from a supply chain perspective, we are augmenting either their current warehousing network to handle surge and seasonal, or creating an entirely new warehousing and direct store delivery because the consumer is requiring faster turns on highly perishable product, especially with those omni-channel items in high demand.
Q: This program is quite broad in scope. Initially, I was thinking this new warehouse system was designed for local product to ensure food safety and that you were developing this program for peak seasons with local produce, and now it sounds like it’s much more complex than that…
A: Our program is highly flexible and very customizable with a menu of services. So, with the number of warehouses and DSD’s that we’ve established, the system really acts as the retailer’s DC or as their DSD model. Really it works hand in hand. So, it can be for local and regional product. It can be for new product and processed items, especially highly perishable, such as grab-and-go and snack-type items. It definitely can be for a surge, which is something retailers are experiencing right now. What it is for all of those is a single tech platform.
Q: Could you explain that single tech platform?
A: Yes, it allows a national retailer to tap into a macro/micro geographic supply chain on a national scale. So, what we’ve knitted together is all of these local warehouses on a national scale for the retailer. So, they don’t have to go out and purchase the technology, and they don’t have to establish their own network with all of these different providers. They can tap into our service, actually on a North American scale.
In layman’s terms, it’s a warehouse model on a national scale that can execute on the local and store level.
Q: Could you walk us through how it works with some examples? If a retailer wants to use this system, what should management know?
A: I can’t give specific retail names, but I’ll give you a couple of examples. We have one large retailer, where really their entire DC network was overwhelmed by the COVID surge. They did not have the resources to literally go out to all these regional DCs, to hire local warehousing. Instead, this retailer tapped into one contact, that’s Robinson Fresh, to now overlay the technology and its warehouse network across its entire country format. It would have taken them years to get that network set up. In this case, we went from concept to store execution in under 25 days.
Q: The CH Robinson network is already quite sophisticated. Have you done anything like this in the past? Is this actually a new concept?
A: Not necessarily. So, we’ve leveraged this model on the convenience side of the business, large convenience chains. We’ve also leveraged this model on the restaurant foodservice side of the business. What we are finding is this capacity and distribution network can be leveraged on the retail side.
Q: Is it fair to say that not many companies would be set up to do something like this?
A: Yes. It’s extremely unique. Our difference is that we can do this on a North American scale versus a regional only scale.
Q: Can you provide some perspective of what that means? How many warehouses now and in the future? How does this compare to what you had before, etc.?
A: What we’ve put together is roughly 10 million square feet under refrigeration. Six of our own managed service centers, and 175 different distribution centers across North America. It’s a single technology platform for all of that, with one log-in…
So, each of these 175 DCs has their own warehouse inventory management systems, and each one of them has their own technology or inventory system and their own financial system. So, what we’ve done is tied everything through our Electronic Data Interchange (EDI). We are directly tapped into the point-of-sale system and the entire warehouse inventory management system. So, what that means for a national retailer is we can adjust any order directly from their stores to this distribution system. They can do that through us, versus trying to figure all that out on their own.
Q: You know how retailers are so protective of their proprietary information. Is that an issue?
A: There are contractual agreements. We work on the retailers’ behalf, so it is an extension of their own supply chain. We gather that information. It’s the customers’ data supply chain information, so there’s analytics, and everything behind the scenes we feed back to the retailer, and they gain visibility throughout their entire supply chain. Think about it… if they had to go to 50 different distribution centers to try and collect all that data. We do all of that.
Q: This interview is taking on a much broader vision than I was anticipating.
A: There are several applications for execution. You described one of them, where local or regional growers need to get their product into a national retailer with stores in their geography.
This network is fully food-safety certified. If you think beyond what the warehouse is in general for storing inventory, our network is a network of service centers, which do quality control and the additional layered services, but that is only one aspect. Bring in any product, whether it’s grown down the road, rework that product, repackage that product into a consumer good, and then another benefit of the service center, you’re actually getting that product into either a DC or directly in the store.
The reality is there’s so much demand right now in retail. No matter where it comes from, having inventory as close to store as possible is critical. We as a service provide the ability for a store to order product at 5:00 pm and get it delivered at 5:00 am the next day.
Q: Fast turnaround.
A: Whether that’s our local Patrick Farm that grows all our greens down in Omega, Georgia, for Robinson Fresh or whether it comes from a large grower out in Salinas Valley, we still have to have that product local.
Q: Could you elaborate on the warehouse strategy? Are you building them, contracting them? Are they already part of your operation…?
A: We have our square footage that is part of our direct logistics, so, just to name a few, there’s Chicago, Los Angeles, Miami and McAllen, Texas. The other network, the other 175 distribution centers, those are locally owned warehouses and DCs. We hold down certain safety and management standards. We provide the technology for them. So, as long as they meet our high standards for food safety and execution and service, they are contracted with us.
Q: Are any of these 175 DC’s already existing produce companies, such as produce wholesalers near big cities like Cincinnati or Atlanta or in remote places? Are you able to identify any of them?
A: This is a network of perishable warehouses and distributors, handling a wide range of temperature-controlled product, including produce, dairy, grab-n-go, etc. They’re both in highly dense urban areas and are regionally based geographically.
Q: So, are you partnering with certain retailers, and already have these arrangements secured, and/or any retailer that’s interested can reach out to you?
A: It’s both. I can give you an example of contact execution. That program involves over 1,400 stores in over 20 states, and that’s ongoing. Another example… we are one of the largest watermelon growers in the country. We have a private label, and product is harvested from the West Coast all the way through Florida, North Carolina up. Watermelon is in high distribution right now; it’s a heavy bulk item with distribution centers having a really hard time bringing it in because it takes so much space.
What we’ve set up with a number of retailers is to bypass the DC and go from the farm through our distribution network directly into the stores. Again, we want to add in all our services, we want to make sure the product is good, that the quality is correct. We receive the store orders the day before and they receive the product the next day.
Q: It takes the burden off the retailer…
A: The way to think about it is the produce manager at store level is now dealing with over 30 percent of orders coming through an App. They’re online orders or click-and-collect, so they have to take care of that. They have to take care of the regular consumer coming into the store. And by the way, there’s that surge in overall demand from 12 weeks ago. We’d rather have the produce managers take care of the store and focus on marketing and merchandising their items, and we’ll take care of their supply chain and getting the products into their stores.
Q: Is this partly related to supplier/retail inventory management and replenishment? Walmart got a lot of attention for pioneering this many, many years back…
A: I can’t speak for Walmart, but this is a much more integrated process with categories down to the store level. We’re housing in DSD to the store level. Replenishment is a function of it. You have to replenish at the DC. You’ve got to have the right inventory, so you better have the process and technology to replenish it.
So much more is on the line right now because of COVID-19. There’s the influx of product coming in at retail because of what’s happened in foodservice, and that’s why it makes sense to talk about this program now and the launch specific for the retail vertical.
This is built by supply chain experts. We had to change the technology for the retail vertical model, compared to what we’ve done for convenience chains and foodservice. The orders come in differently, and the connectivity of the supply chain has changed. So, we’ve had to update the technology and tweak the system… everything that is different about retail affects the supply chain. Just think about all the complexity in switching from foodservice SKUs to retail SKUs.
Q: How does that intersect with UPC codes and loose, bulk items in fresh produce, and the increase in online/omni-channel shopping? Does that create more complications?
A: Yes. If you think about the individual items that come through an online order or Instacart and things like that, the items have absolutely increased, along with bulk, packaged items. People are buying an individual orange and individual apple just as much as they’re buying a five-pound bag of onions or potatoes. You need to have the technology to handle all of that with the distribution.
Q: Do you feel your system is more beneficial, and geared to the larger, national chains, rather than a smaller regional player?
A: It’s adaptable for both, but the large regional and national retailers leverage our resources on their behalf so they don’t have to scale up. They don’t have to add on the technology, they don’t have to put out the capital for a DC somewhere. Our capital infrastructure is there for them. The small regional chain can tap into our people and technology to compete with the national chains. They may need help with the supply into an App they just launched, or through Instacart…
Retailers looking to meet the surge in demand, as well as the typical seasonal surge that comes with the holidays, can leverage this model, and they can scale up fast without having to scale capital or personnel costs.
Q: I don’t know why I have an image of a pop-up store, but is a retailer able to pick and choose when they use your service?
A: Yes. There are several retailers with DC’s doing that. Some retailers have been struggling with DC’s due to COVID and labor. And we are able to fire up distribution in 24 hours. It can be planned and unplanned… What I really want to strike home on is that we are the retailers’ DC and the DSD execution. We are national in scale, but we execute at the local level.
Q: What impact has COVID had on your company, and in terms of instituting the necessary protocols in your operations, and warehouses, etc. How complicated and challenging has that been?
A: As a publicly traded company, we’ve done a great job in terms of our pillars of success throughout the COVID pandemic. Our first priority is the safety of our employees. That is what we always put first. And as long as we continue to lead in this respect, we will continue to lead in doing the right things in our DCs.
We’ve been very effective in getting our teams up and running, getting the personal protective equipment (PPE) right away — the masks and equipment — all that is needed, ahead of many other distribution centers. The resources and support we provide our DC’s and warehouse service centers, the proper PPE and protocols and whatever requirements the retailer has, we will institute that as part of the supply chain.
It’s important we get the word out that we have this service, and in certain areas where we work with several large retailers across the country, we are well positioned to thoroughly execute with this new model.
Q: Is there anything else that you believe would be important to include in this discussion?
A: On the Robinson Fresh side of the business, there are several core services that we’ve been integrated in that we’d like to highlight. Our management procurement services, for example. We have a full supply outsource for companies that are non-self-distributing. We will fully provide the people process and proprietary technology for an entire supply chain.
Q: Have there been COVID-related challenges in getting the product that you need?
A: I think you have your normal traditional seasonal challenges, the logistics of importing/ exporting. At this time, we haven’t seen major challenges in harvesting and production. For the most part with our supply chain, we have a process in place to work through those.
Q: That’s good news, especially since this Robinson Fresh retail model came about because you were receiving requests from customers in need of your services. Do you have other examples of helping retailers in distress?
A: An entire retail DC shut down during the pandemic, so we launched DSD warehousing for that chain. There was a fresh product launch and specific shortages. We were able to fulfill the launch to around 900 stores across the country.
As a solution provider, you don’t typically create these solutions unless there is an issue. We are kind of redefining our business statement here: Feeding the world through fresh produce and complex supply chains. What we’re doing here with this service is feeding people in a time of need and taking massive stress out of the supply chain. We’re in heavy produce season now, and people need fresh fruits and vegetables, and we need to get that to them.
Q: We’ve talked about surges in retail produce sales with COVID, but there’s also been dramatic fluctuations in supply and demand, and in shopping behaviors and platforms. At the beginning, people were ravaging shelves and hoarding food for anticipated extended quarantines, and then things seemed to stabilize, and now there’s more concern as uncertainty abounds… I suppose that’s part of taking the stress out of the supply chain. And fluctuations are always going to be inherent in the produce business.
A: It’s getting the right product on the shelves at the right time, and that may mean reducing the number of SKUs and also executing better on the SKUs you do have. The consumer App format and ordering online, where you pick and choose, is not like the demand at the traditional store level. Produce managers can see that demand physically on their shelves. With so much App/online buying going on, you may not see what’s on and off your “virtual” store shelves. And you need a service provider to actually meet those orders.
Q: It adds a whole new level of responsibility for produce managers and their teams…
A: They have to monitor what’s going on with omni channel, and they also have to keep their store shelves stocked with the traditional inventory… Consumers are usually picking up at the store at certain times, and the store has to act as a commissary for omni channel.
We have a leading industry analytics team, and they’re staying on the forefront of that with our customers, which is part of the replenishment process, within our menu of services. We have a vast network of teams executing on a daily basis, on multiple levels. This is more necessary than ever as we all adapt to the “new normal.”
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We did a big conference in Amsterdam in 2018 on Omni-Channel Retailing. The focus for most people on both the vendor and retail side was, of course, trying to sell more fruits and vegetables. What this pandemic has taught, though, is that it is important to focus on Omni-Channel opportunities because one never knows what will come up, how supply and demand will shift, and what opportunities will open and which will close.
The numbers are not all in yet. Much of the foodservice industry is operating with diminished capacity and, while plenty of consumers have been caught being reckless, many are still playing it safe.
Few companies, even giant retailers, have the flexibility and resources to handle the massive waves of capacity that the COVID-19 pandemic has required. Many companies have truly gone above and beyond the call of duty to help their customers and consumers. We hope that when this is all done, retailers will want to assess their relationships with vendors and try to make plans for how to serve their customers best should another problem come around.
It would be nice if vendors that have shown the ability to serve unexpected needs are given credit in getting future business.
