Case Studies

Seneca Foods-Stokely Vegetables business at Bashas “Opportunity is missed by most people because it is dressed in overalls and looks like work” -Thomas Edison

Seneca’s Story:

Founded in 1949, Seneca Foods has been dedicated to providing quality food products and service excellence to their customers. They started small, concentrating on a single product, Concord grape juice. From this humble beginning, they carved out a successful niche in a growing market. Today, Seneca’s product line encompasses a vast array of fruit and vegetable products, including the long standing Libby’s Brand of vegetable products.

Seneca Foods Corporation is a fully integrated producer, having made significant investments in facilities and technologies to enhance manufacturing processes, increase line speeds and guarantee premium quality. Seneca even develops crop seeds and manufactures their own cans to give them an additional competitive advantage. These capabilities led many of the industry’s leading food companies to Seneca to manufacture their products! Their geographically diverse processing plants and breadth of operations assure retailers Seneca possess the resources and means to deliver. Because they are not weather-dependent on any one region of the country, their customers know they can depend on them.

As of this writing and even after, Seneca’s promise is their commitment to delivering high-quality products that their customers can trust and depend on.

In 2003, Seneca acquired Chiquita canned vegetable, Stokley’s and Festal Brands, opening up their distribution channels. Skip ahead to April 2005 when the problem reaches it’s tipping point. This is the part of the story where Wesley Associates and Seneca work together to again close the gaps in the unsaleables area and rein the problem to a controllable level. Our story, our account is detailed in the pages that follow and shows Seneca’s dedication to their promise.

From Problem to Solution

1) Seneca Foods acquires Chiquita canned vegetable brands during 2003:

  • Acquisition enables full line canned vegetable distribution at some retailers with limited distribution before 2004.
  • The business was very high volume/turn, driven by an EDLC (Every Day Low Cost) sales & marketing strategy that is important to the manufacturer and retailer alike.
  • The High volume & turn business incurred problems with this previously unfamiliar retailer (Bashas).

2) Bashas:

  • 165 store grocery chain in Arizona.
  • Operates under Bashas & Shopper’s Food brand names.
  • Shortly after acquiring distribution at Bashas, Bashas DC personnel transformed from a unionized group to a more transient, lower wage scale workforce.
  • Earlier in 2005 the company started using World SS Inc, an outside truck unloading service, with undetermined impact on overall damage rates.
  • Net: Many changes occurring at a retailer Seneca was largely unfamiliar with.

3) When did Seneca realize there was a problem?

  • Early in2005 Seneca began receiving large, unprecedented damage claims from a small / medium sized regional retailer.
  • Charges exceed Seneca’s policy. The issues:
    • Prices invoiced on unsaleables claims did not correspond to the attractive EDLC contract they were on.
    • Fees charged were 60-65% cost of the product, in stark contrast to the policies 30% max.
    • Being on unsaleables policy is a Seneca prerequisite to remaining on the EDLC contract.
  • Preliminary investigations revealed:
    • No loss of facings following the Thanksgiving/Holiday peak season or any reset of any form.
    • No ongoing concealed damage situations at the time of receipt.
    • Calls to Rec Center revealed ongoing, full pallet claims over 3-4 months on large and small volume
      UPCs. Our Seneca sales rep. reviewed the damages and discovered full pallets, still shrink-wrapped, wholly wet, mildewed and mildly rusted.
    • Bashas had outgrown their distribution center and use of a satellite receiving DC results in double handling Seneca’s largest UPCs.
    • No thorough inspections at point of receipt and no freight claims against the freight carrier over the prior 6 months.
  • Spanning the next 4-5 invoicing periods claims actually worsened.

4) Mining intelligence from raw information/dialog/observation and developed damage theory’s to test:

  • Relating claims by SKU to our sales by SKU reveals:
    • Our overall rate had grown to an ungainly 2.6%, far higher than the average for canned goods of 1.86% from the 2000 GMA benchmark study.
    • Our highest volume UPC Whole Kernel Corn was only 1.2% however the remaining products averaged a whopping 5.2%.
    • We have individual items as high as:
      • Water damaged Stokely Cut Green Beans 23%.
      • Stokely Golden Creamed Corn 6%.
      • Stokely Sauerkraut 5%.
    • Creamed Corn, Sauerkraut and Pumpkin tend to be high at all accounts.
  • Requested and received unsaleables claims by location:
    • Exposed 48% damage rates at the warehouse. For a product that does not leak, destroying all units in an otherwise good case, this is “off the scale” high.
    • Over 6% were unidentified, revealing a reverse logistics operation that is slack.
    • Food City store claims were significantly higher than Bashas claims, although there was evidence of passing on warehouse damage to Food City.
  • Interviews with managers/night managers at 6 “good” stores and 6 “bad” stores revealed:
    • No “real” inspection other than throwing obvious damage at the case level into their damage area.
    • One Food City Night Manager revealed some shipments “looked like King Kong stepped on it”. The result of mishandling, not little dings and dents.
    • Managers noticed a drop-off in quality from the Chandler DC after the personnel/wage scale changes.
    • “Run & Gun” floor merchandising at Food City contributes to damage.
    • A Northern Arizona manager was critical of overall training in the area of handling. He attributed his low rate of spoils to the considerable efforts he applied in the area of training – “training, training & training”.
  • Observed a number of receipts at the Chandler and satellite warehouses. Inspected nearly 100 pallets received or received within a day, none of which had visible damage.
  • On August 3, 2005, there was a monsoonal weather event with winds powerful enough to pry off roofs, which resulted in damages to many businesses East of Phoenix including Fry’s and Osco.

5) Facts/Theories to test:

  • Most damage, including store level damage, occurred in the Chandler warehouse following receipt of the product. Number one contributor would be Chandler personnel during racking/unracking and subsequent staging for shipment. Second, would be the unloading service.
  • Storm damage and unrecognized freight claims added to the high rates of damages, particularly on Stokely Cut Green Beans.
  • Material mishandling is limited to a few out of 135. Food City end cap displays on the floor may be the chief local issue.
  • Ironically, double handling Whole Corn/some Regular Green Beans is not contributing to the problem.
  • An internal packaging factor of the can is contributing to the high rates on creamed corn, sauerkraut and possibly pumpkin.
  • Improbable (except ‘e’ above) that Seneca Food’s tray packs contribute to the situation.

6) Meetings between Seneca’s sales/distribution personnel (with Wesley’s research) & Bashas to address situation:

  • Non-negotiable points:
    • EDLC accounts must re-bill EDLC price and Seneca policy fees.
    • Water damaged product is never Seneca’s responsibility. It is either the responsibility of the freight carrier (who accepted the condition of the product when picked up) or Bashas (directly or through an insurance claim)
    • A high level of damage from unidentified locations is unacceptable.
  • Handling issues:
    • Constructing floor stacked end caps at in the store from 24 count shrink-wrapped trays is likely contributing to the damage rate when the tray’s wrapping is removed and the cap is built (spillage).
    • Seneca developed smaller naked 12 count trays palletized for individual Food City stores
  • Discovered some poor shipping practices by Seneca:
    • To accommodate high volume shipping, product is palletized on slip-sheets.
    • When distributed, some modes of shipment resulted in slip-sheeted product going on a pallet with a slip-sheet (slip-sheet on slip-sheet) resulting in substantial load shifting, particularly when racked and removed from the rack.
    • This oversight at the “grass roots” level of palletizing/staging/shipping was immediately stopped, affording beneficial results.

7) Net Result and ongoing actions, goals, and achievement of those goals:

  • Higher awareness of the consequences of the shipping/handling practices at Bashas and Seneca are important to making business between manufacturer & retailer more profitable for both parties.
  • Damage rates on the 5 high volume Stokely SKU’s at Bashas:
    • Set medium term goals of damage vs. the GMA average of 1.86% of sales
      • Whole Kernel Corn (highest volume sku by far) 1.0%
      • Cut & Short Cut Green Beans, Cream Corn and Sweet Peas 1.5%
    • Measure monthly claims vs. those goals monthly:
      • 4 of 5 items are below our goal
      • Cream Corn is still above goal. RE: “King Kong” – During our collective research, we discovered creamed corn, sauerkraut and pumpkin products have an internal temperature of 180 degrees or higher when packaged (other Seneca products have an IT of 100-114 degrees). This extreme temperature creates a greater vacuum in the can while it cools, compromising the container’s strength. This could cause cans to ‘collapse’ in shipping/stacking instances, not necessarily from mishandling.
    • Damage from the peak of the issue:
      • Down a range of 27% to 74% over the last 4 months.
      • Though damage reduction levels of Creamed Corn were not optimum, they are down 10% over the 4 months and 34% in the most recent month.
      • Bashas’ account disposition was updated to ‘Donate Product’ from ‘Hold for Review’ resulting in lowered Reclamation Center costs.
  • Bashas recognized the equity of billing at Seneca’s policy/EDLC.
    • Fees reduced from $.29 to $.17 to approximately a 30% fee.
    • Overall billing rate reduced by over 30%.
    • Net/net with these new rates and significant volume reduction, Bashas has certainly avoided a price increase, which is good for all.

Conclusion:

Wesley Associates, working with Seneca Foods and Bashas was able to unearth questionable shipping practices, storage and facility damage, and needless waste of ‘good’ product. We were able to analyze incoming data at our offices, investigate problematic practices and with continual communication efforts we were helping our client identify what they could not measure. With this information, Wesley Associates working with Seneca was able to encourage Bashas to adhere to Seneca’s policy. It also revealed that not all wastage could be attributed to Seneca’s customer. The results of this comprehensive effort were the final step to reduced unsaleables, and ‘out of pocket’ expenses for Seneca on the reclamation end of the business.

In addition to the current services they are utilizing, we have also begun discussions about sourcing stronger materials/containers to package Seneca’s high IT (Internal Temp.) line of products. Seneca’s Senior Sales and Distribution personnel, sales and support team, along with Wesley Associates were involved with on-site visits with Bashas’ buying and distribution personnel. The broad support of everyone involved was essential to this project’s success.

Wesley Associates continues to work with Seneca. Just as Seneca lives up to their promise with the steps they take in this presentation, so too does Wesley Associates continue working toward our goal of reducing and stabilizing Seneca’s unsaleables well below Industry standards.

 

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