A Piece of Industry Americana
September 1, 2007
A Piece of Industry Americana
Dear readers: In April, I asked for your list of critical issues in 2007. I appreciate all your responses. I was particularly moved by one from the president of a small wholesale operation. You no doubt can relate to the issues described in the following excerpt:
I own a small 44-year-old meat wholesale plant. There are only three businesses left here, one of them being the local Five n’ Dime next to the post office, and the church across from the only blinking light in town. I don’t have trouble getting help because most people who work here live within 15 miles. They like working for a small company. From chicken cutters to salesmen to the maintenance crew to drivers, many employees have worked here more than 20 years.
We deliver fresh and frozen poultry, pork and beef to grocery stores and restaurants in rural upstate New York towns as well as to Buffalo, Rochester and Syracuse, three big cities across the midriff of our state.
I know my company is a blip on the radar screen of meat wholesalers, but it’s neat as a pin and a place I’m proud of. It provides a living for my two sons and me as well as for 30 families who work here.
But we’re struggling. We’ve fought to maintain tonnage but watched it erode from 19 million pounds to 14 million in the past six years.
These are the critical issues affecting my business:
Squeezed margins on gross profit: I think my chicken suppliers are selling direct to my old customers. Suppliers are delivering partial loads to places where they used to refuse to deliver because orders weren’t big enough. There has also been very little growth in my delivery area. Wholesalers like me are “gnawing off the same bone” and that means we cut our margins to keep existing business. It’s a waiting game. Eventually someone will go out of business and those left will descend upon their customers.
Increased cost of energy including electricity, fuel oil to heat my plant and diesel fuel to run my trucks: Utilities are up 37 percent and truck fuel expense is up 27 percent in two years. Fuel-service-charge payments are considered increased energy costs. I paid $60,000 in fuel service charges on last year’s product loads, for example. I finally put a fuel-service-charge on each invoice, which covered the $60,000. I paid out. I did not recover the increase in diesel fuel cost for my own trucks, however.
Increased cost in product: I’m told this one is related to the demand for corn by both the chicken plants and the ethanol plants. Because the price of product is up, my customers are complaining about record-high chicken prices and my receivables are up, which means my cash flow is taxed. When sales are high, even when tonnage has decreased, my insurance premiums are higher because insurance premiums are tied to sales!
I’ll keep fighting. I’ll continue to watch expenses; deliver top-notch service to our customers; keep my plant clean and stay right on top of cooler and freezer temperature and product rotation (the two biggies affecting quality); and explore new ways to make money and reward employees for their terrific dedication to this company.
Can you relate? Let me know, and thanks in advance.