Fleming Companies Inc. plans a $41.4 million consolidation of its distribution system, in a move that is expected to cost 1,000 jobs nationwide, the Oklahoma City-based firm announced Thursday.
The consolidation effort is expected to be completed in two years and will give the nation's largest wholesale food distributor fewer and larger distribution centers, according to a statement by Dean Werries, chairman and chief executive officer.
"High volume, high productivity super centers are the wave of the future in our business," he said. "With this action, we are providing for the transition to more of these highly efficient facilities."
The consolidation plan will combine smaller operations into ones with higher volumes which provide economies of scale. Decisions on which warehouses or divisions to be consolidated have not been made, according to Ron Frost, director of corporate communications.
"Our business, which is food wholesaling, is extremely competitive.
It is a low-margin business. We are earning one penny or less on the dollar, and it is absolutely vital that we operate as efficiently as possible. On the other side of it is that we want to keep the cost of goods to our retailers as low as possible."
Werries called the consolidation a "necessary part of the company's ongoing effort to increase efficiency."
The 1,000 jobs expected to be eliminated represent less than 5 percent of the company's 22,800 associates. Frost said it could not be immediately determined how many jobs in the Oklahoma City area would be affected.
The two-year period for implementation of the plan "gives us a long lead time. Attrition will take care of a lot, and early retirements will take care of some," he said. Some affected workers also are expected to be transferred.
"The reductions will happen over the next two years, but we don't know when they will begin. We don't have a date set, but I imagine they will start in the next few months," Frost said.
A key element of Fleming's long-range strategy for its distribution system has been the development of super centers, which have annual sales of $800 million to $1 billion. Fleming has five such centers and already had announced plans for another one in the Kansas City area, Frost said.
The existing five super centers are in Phoenix; Memphis, Tenn.; Lubbock, Texas; Philadelphia; and Waukesha, Wis. The Kansas City super center will combine the Topeka and Kansas City operations into a new Heartland division. It is expected to be operational in 1994.
"We may only have two or three more super centers" as part of the consolidation plan, Frost said. …