Over the past several years, US Foods has led the efforts within the food distribution industry to grow their e-commerce and data analytics capabilities. As recent as a few years ago, US Foods\u2019 customers could only place and track orders through traditional methods, such as phone calls or faxes. Not only is the antiquated ordering system highly inefficient, it also drove higher error rates and lower customer satisfaction. Furthermore, the data generated from the tremendous volume of transactions was not used in any systematic way to capture business insights.<\/p>\n
In 2013, in response to customer and competitive demands, US Foods launched its e-commerce and mobile technology solutions, which allowed customers to more easily place orders, track shipments, make payments and quickly view product information [1]<\/sup>. As an example, instead of customers calling in to sales reps and asking when their delivery was due, nearly all of the active customers can now use the US Foods mobile app to track deliveries themselves [2]<\/sup>. The mobile app also allows sales reps to place customers\u2019 orders online from their phones or tablets while they are on the road. Additionally, the Company transformed the corporate website (USFoods.com) to give it more business-to-consumer appeal by including more pictures and increasing white space [2]<\/sup>.<\/p>\n Figure 1: USFoods.com home page [3]<\/sup>.<\/p>\n Alongside its e-commerce tools, US Foods provided its customers with business analytics solutions to analyze food costs, analyze trends based upon transaction history, manage inventory and improve menu engineering [1]<\/sup>. These solutions have resulted in less lag time, improved communication and more transparency across the entire supply chain. The efficiency gains achieved by the new platform have become a main competitive differentiator in the industry, especially as millennials become key influencers and decision-makers. By the end of fiscal 2016, $16 billion of US Foods’ net sales was generated through e-Commerce, and the mobile application had been downloaded almost 300,000 times. The independent restaurant customers who use e-commerce to place orders have over 5% higher retention rates, over 5% higher purchase volumes and approximately 600 bps higher NPS scores than those who do not [1]<\/sup>.<\/p>\n Figure 2: US Foods e-commerce strategy [4]<\/sup>.<\/p>\n While the digital platform has achieved great momentum, opportunities and challenges remain. Over the next several years, US Foods management plans to continue to invest in the platform by expanding its service offerings and continue to upgrade its existing functionalities. Furthermore, the management team plans to drive increased productivity within the sales organization as they increasingly benefit from the digital platform when they communicate with customers [1]<\/sup>.<\/p>\n In addition to what US Foods management has already laid out, there are a couple of additional actions that can help the Company continue to navigate the shift into digital. First, in order to stay ahead of its competitors, US Foods should invest in research and development and stay on the cutting edge in terms of their digital capabilities. As US Foods Senior Director of e-commerce and Mobility points out, the need to stay ahead would also require the organization to align the company culture with digital change and continuous innovation\u00a0[5]<\/sup>. Second, US Foods can leverage the data they gather from the platform to provide better localized offerings. One key competitive advantage in the foodservice space is the ability to cater to the localized needs of the customers. For example, US Foods can offer business analytics and demand trends on a localized basis to further add value to their customers.<\/p>\n The medium-to-long term goal of the Company should be to leverage the enormous amount of transaction data that passes through the system and create value with this data, much like what large technology companies do. For example, the data could be used to forecast end consumer demand based on geography, type of customer, type of product, source of item, etc. Additionally, the data can be used to better track pricing information, which can help drive sales and promotional strategies throughout the supply chain.<\/p>\n In order to investigate the digital transformation further, there are a couple of questions I would focus on. How will the value proposition of the distributors evolve as the industry becomes more digitalized over time? How will e-commerce continue to disrupt the restaurant industry and how will this impact the providers further up the supply chain?<\/p>\n (771 words)<\/p>\n <\/p>\n [1] US Foods Holding Corp, September 13, 2017 Prospectus Supplement, https:\/\/www.bamsec.com\/filing\/119312517286343?cik=1665918<\/a>, accessed November 2017.<\/p>\n [2] Tepper, Nona. \u201cUS Foods whips up an e\u2011commerce recipe for success.\u201d Digital Commerce 360, May 22, 2015. https:\/\/www.digitalcommerce360.com\/2015\/05\/22\/us-foods-whips-e-commerce-recipe-success\/<\/a>, accessed November 2017.<\/p>\n [3] USFoods website, USFoods.com, accessed November 2017.<\/p>\n [4] US Foods Investor Presentation, Morgan Stanley Consumer and Retail Conference, November 15, 2016. https:\/\/s21.q4cdn.com\/186195789\/files\/doc_presentations\/Final-Morgan-Stanley-Conference-Deck-November-2016.pdf<\/a>, accessed November 2017.<\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Figure-1-2.png\")
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