Sysco 2014 Annual Report Download - page 15

SYSCO CORPORATION-Form10-K 3
PARTI
ITEM1Business
Our distribution centers, which we refer to as operating companies, distribute nationally-branded merchandise, as well as products packaged under our
private brands. Products packaged under our private brands have been manufactured for Sysco according to speci cations that have been developed by
our quality assurance team. In addition, our quality assurance team certi es the manufacturing and processing plants where these products are packaged,
enforces our quality control standards and identi es supply sources that satisfy our requirements.
We believe that prompt and accurate delivery of orders, competitive pricing, close contact with customers and the ability to provide a full array of products
and services to assist customers in their foodservice operations are of primary importance in the marketing and distribution of foodservice products to our
customers. Our operating companies offer daily delivery to certain customer locations and have the capability of delivering special orders on short notice.
Through our approximately 12,800 sales and marketing representatives and support staff of Sysco and our operating companies, we stay informed of the
needs of our customers and acquaint them with new products and services. Our operating companies also provide ancillary services relating to foodservice
distribution, such as providing customers with product usage reports and other data, menu-planning advice, food safety training and assistance in inventory
control, as well as access to various third party services designed to add value to our customers’ businesses.
No single customer accounted for 10% or more of Sysco’s total sales for the  scal year ended June 28, 2014.
We estimate that our sales by type of customer during the past three  scal years were as follows:
Type of Customer 2014 2013 2012
Restaurants 62% 61% 63%
Healthcare 9 10 10
Education, government 9 8 8
Travel, leisure, retail 8 8 8
Other(1) 12 13 11
TOTALS 100% 100% 100%
(1) Other includes cafeterias that are not stand alone restaurants, bakeries, caterers, churches, civic and fraternal organizations, vending distributors, other distributors and international exports. None
of these types of customers, as a group, exceeded 5% of total sales in any of the years for which information is presented.
Sources of Supply
We purchase from thousands of suppliers, both domestic and international, none of which individually accounts for more than 10% of our purchases.
These suppliers consist generally of large corporations selling brand name and private label merchandise, as well as independent regional brand and private
label processors and packers. Purchasing is generally carried out through both centrally developed purchasing programs and direct purchasing programs
established by our various operating companies.
We administer a consolidated product procurement program designed to develop, obtain and ensure consistent quality food and non-food products. The
program covers the purchasing and marketing of Sysco Brand merchandise, as well as products from a number of national brand suppliers, encompassing
substantially all product lines. Sysco’s operating companies purchase product from the suppliers participating in these consolidated programs and from
other suppliers, although Sysco Brand products are only available to the operating companies through these consolidated programs. We also focus on
increasing pro tability by lowering operating costs and by lowering aggregate inventory levels, which reduces future facility expansion needs at our broadline
operating companies, while providing greater value to our suppliers and customers. This includes the construction and operation of regional distribution
centers (RDCs), which aggregate inventory demand to optimize the supply chain activities for certain products for all Sysco broadline operating companies
in the region. Currently, we have two RDCs in operation, one in Virginia and one in Florida.
Working Capital Practices
Our growth is funded through a combination of cash  ow from operations, commercial paper issuances and long-term borrowings. See the discussion in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources” at Item 7 regarding our liquidity,
 nancial position and sources and uses of funds.
Credit terms we extend to our customers can vary from cash on delivery to 30 days or more based on our assessment of each customer’s credit worthiness.
We monitor each customer’s account and will suspend shipments if necessary.
A majority of our sales orders are  lled within 24 hours of when customer orders are placed. We generally maintain inventory on hand to be able to meet
customer demand. The level of inventory on hand will vary by product depending on shelf-life, supplier order ful llment lead times and customer demand.
We also make purchases of additional volumes of certain products based on supply or pricing opportunities.
We take advantage of suppliers’ cash discounts where appropriate and otherwise generally receive payment terms from our suppliers ranging from weekly
to 30 days or more.