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SYSCO CORPORATION-Form10-K 17
PARTII
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
Strategy
We are focused on optimizing our core broadline business in the U.S. and Canada, while continuing to explore appropriate opportunities to profi tably grow our
market share and create shareholder value by expanding beyond our core business. Day-to-day, our business decisions are driven by our mission to market and
deliver great products to our customers with exceptional service, with the aspirational vision of becoming each of our customers’ most valued and trusted business
partner. We have identifi ed fi ve strategies to help us achieve our mission and vision:
•
Profoundly enrich the experience of doing business with Sysco: Our primary focus is to help our customers succeed. We believe that by building on our
current competitive advantages, we will be able to further differentiate our offering to customers. Our competitive advantages include our sales force of
over 8,000 marketing associates; our diversifi ed product base, which includes quality-assured Sysco brand products; the suite of services we provide
to our customers such as business reviews and menu analysis; and our wide geographic presence in the UnitedStates and Canada. In addition, we
have a portfolio of businesses spanning broadline, specialty meat, chain restaurant distribution, specialty produce, hotel amenities, specialty import and
export which serves our customers’ needs across a wide array of business segments. We believe this strategy of enriching the experience of doing
business with Sysco will increase customer retention and profi tably accelerate sales growth with both existing and new customers.
•Continuously improve productivity in all areas of our business: Our multi-year Business Transformation Project is designed to improve productivity and
reduce costs. An integrated software system is included in this project and will support a majority of our business processes to further streamline our
operations and reduce costs. These systems are commonly referred to as Enterprise Resource Planning (ERP)systems. We view the technology as
an important enabler of this project; however the larger outcome of this project will be from transformed processes that standardize portions of our
operations. This includes a shared business service center to centrally manage certain back-offi ce functions that are currently performed at a majority
of our operating companies. This project also includes removing costs from our operations through improved productivity without impacting our service
to our customers. We continue to optimize warehouse and delivery activities across the corporation to achieve a more effi cient delivery of products to
our customers and we seek to improve sales productivity and lower general and administrative costs. We also have a product cost reduction initiative
to provide the right products to our customers while leveraging our purchasing power.
•
Expand our portfolio of products and services by initiating a customer-centric innovation program: We continually explore opportunities to provide new
and improved products, technologies and services to our customers.
•
Explore, assess and pursue new businesses and markets: This strategy is focused on identifying opportunities to expand the core business through
growth in new international markets and in adjacent areas that complement our core foodservice distribution business. As a part of our ongoing strategic
analysis, we regularly evaluate business opportunities, including potential acquisitions and sales of assets and businesses.
•
Develop and effectively integrate a comprehensive, enterprise-wide talent management process: Our ability to drive results and grow our business is
directly linked to having the best talent in the industry. We are committed to the continued enhancement of our talent management programs in terms
of how we recruit, select, train and develop our associates throughout Sysco as well as succession planning. Our ultimate objective is to provide our
associates with outstanding opportunities for professional growth and career development.
Business Transformation Project
In fi scal 2009, we commenced our Business Transformation Project, which currently consists of three main components:
•
the design and deployment of an ERP system to implement an integrated software system to support a majority of our business processes and further
streamline our operations;
•a cost transformation initiative to lower our cost structure; and
•a product cost reduction initiative to use market data and customer insights to make changes to product pricing and product assortment issues.
In fi scal 2012, we continued to refi ne our ERP system after implementing it at two pilot operating companies. The system has been deployed to three
operating companies and we are targeting to convert 5 to 15 U.S. Broadline operating companies in fi scal 2013. Our next fi ve conversions will be in Texas
and Louisiana. We believe future conversions will be 15 to 25 U.S. Broadline operating companies per year from fi scal 2014 to fi scal 2016. Although we
expect the investment in the ERP system within our Business Transformation Project to provide meaningful benefi ts to the company over the long-term,
the costs will exceed the benefi ts during fi scal 2013.
Expenses related to the Business Transformation Project were $193.1million in fi scal 2012 or $0.21 per share, $102.6million in fi scal 2011 or $0.11 per
share and $81.1million in fi scal 2010 or $0.09 per share. We anticipate that project expenses for fi scal 2013 will continue to signifi cantly increase primarily
due to the initiation of software amortization as the system was placed into service in August2012. Our costs will also increase from the ramp up of our
shared services center, continuing costs for deployment of the software platform and information technology support costs. Some of these increased
costs will be partially offset by benefi ts obtained from the project, primarily in reduced headcount; however the costs will exceed the benefi ts in fi scal 2013.
Our cost transformation initiative seeks to lower our cost structure by $300million to $350million annually by fi scal 2015. These include initiatives to
increase our productivity in the warehouse and delivery activities including fl eet management and maintenance activities. It also involves improving sales
productivity and reducing general and administrative expenses, partially through aligning compensation and benefi t plans.