[Cover Story] Tree of Life Distributes Quality Through Every-day Partnering

They are the next link in the chain for food manufacturers, providing access to major market and small specialty retail outlets across the nation. Tree of Life (a subsidiary of Royal Wessanen NV, based in the Netherlands) specializes in natural, organic, specialty, ethnic and gourmet food products, distributing goods from more than 2,000 manufacturers to over 15,000 retailers in the U.S., Canada and the Caribbean.

A shipment from Tree of Life may be as small as a pallet of goods headed to an independent natural food store or as large as a truckload headed to a supermarket chain’s warehouse. Tree of Life’s objective is to service its customers and vendor suppliers by maintaining a high level of awareness of the consumer who buys its products, identifying the retail stores where these consumers shop, then developing merchandising and product assortment plans tailored to the individual needs of that customer and retail environment – all while focusing on critical issues like order quality, food safety and organic compliance.

One of the company’s distribution centers, Tree of Life Midwest, in Bloomington, Ind., has set the bar at an exceedingly high level of performance – going beyond the industry standards for food safety and organic compliance, beyond required Organic Certification and regulatory standards, and attaining Orkin, Inc.’s Integrated Pest Management (IPM) Gold Medal Partner Award for two years running. As only one of three companies to win the award for 2005 – out of 300 companies on the Gold Medal Program – and the only company to twice achieve the recognition, Tree of Life demonstrates strong commitment to the IPM partnership through its internal processes and proactive systems toward vigilant sanitation, prompt adherence to structural pest management recommendations, diligent record-keeping and IPM training.

IPM PARTNERING. Partnering is precisely what makes the program, and all the facility’s strategies, successful, says Tree of Life Midwest Director of Operations Dave Boyer, "It is a way of working." In its pest management partnership, for example, he explains, "We are now proactive. It’s not all Orkin. It’s Tree of Life working with Orkin, and Orkin working with Tree of Life." As a result, the integrated program has enhanced the center’s sanitation and food safety efforts, and taken them to the next level. The award can be attributed to the hard work and dedication of all Tree of Life Midwest warehouse employees and operations management team, Boyer says. "By making pest control a top priority in all of our associates’ daily activities, we have been able to achieve great success."

The award is particularly significant for Tree of Life because of the additional challenges of being a distributor of organic and natural foods. "If I’m an organic producer, I don’t use conventional pesticides on my goods, so the risk of insect infestation needs to be monitored very closely," Boyer explains as an example. This makes Tree of Life’s IPM program that much more difficult and important – but has made the distributor become more proactive in its efforts. All incoming goods are inspected for pest evidence (see Supplier Requirements), and exclusion techniques and inspections are cornerstones of the facility’s IPM efforts.

Rodents and flying insects are often major warehouse problems – but not at Tree of Life. "Dock doors are never opened unless a truck is backed up to it," Boyer says. And once backed in place, there are no openings between the truck’s trailer and the warehouse door for pests to enter. In addition, all the doors are heavily sealed to keep rodents from entering; shelving is placed at least 18 inches away from all outer walls; a flue is maintained between racks to allow for inspection and cleaning; and inspections and audits are conducted daily, weekly, monthly – and unannounced.

It is just this type of proactiveness, which earned Tree of Life Midwest its selection for the award, said Orkin Director of Quality Assurance and judge, Zia Siddiqi. With 300 customers in the U.S. on the Gold Medal program, only three were granted the Gold Medal Partner Award in 2005. Facilities are nominated by the Orkin branch that provides service, and the nomination forms are then reviewed by a four-judge panel. "We don’t look at the company name, we look at the information sent," Siddiqi says. The judges consider such areas as sanitation, housekeeping, and maintenance; evaluating whether the nominee is proactive or if they rely on Orkin to solve their problems.

Tree of Life Midwest’s comprehensive documentation and continued improvement were two key reasons for its selection as a recipient of the award. The center’s audit scores have continually improved since it began its partnership with Orkin. In 2005, the facility achieved the highest food safety audit score in the company’s history – 99.1 percent. In the same year, Midwest earned a perfect 50 out of 50 on the pest management portion of an audit by Commercial Environmental Services, Inc. (CES), St. Augustine, Fla.

THE BOTTOM LINE. In addition to enhancing the distributor’s safety and sanitation efforts, the IPM program also has impacted Tree of Life’s bottom line, Boyer says. Prior to contracting with Orkin two years ago, the facility was with an individual pest control contractor, who provided basic services, but was not proactive or consultative himself and as a result, the facility did not have a very effective program. "We used to get occasional complaints from customers on infestation. Now we get none," Boyer says. In addition, the distributor’s customer credit rate dropped from a 1.6 percent average to less than one percent.

But IPM is not the only program that has enhanced Tree of Life’s food safety and quality efforts. Other quality programs include:

• One way of working. A year ago, the Midwest center began operating under a company-wide system, "One way of working." With each of Tree of Life’s 12 distribution centers following the guidelines of a 95-page Food Safety Systems manual developed by CES, food processors whose goods are distributed through Tree of Life have the assurance that their products will be handled with the same process and quality at any warehouses through which they are distributed. "Every distribution center works one way. We all have the same procedures in place," Boyer says. "This takes us to the superior level of food safety and sanitation." In addition to setting quality standards within the centers, the system means that the centers set higher standards for manufacturers of the incoming goods as well. "We won’t accept goods that are not up to our standards, so it raises their awareness, too," Boyer says.

• Key Performance Indicators (KPI). The warehouse maintains a large well-displayed whiteboard which tracks KPI goals and actuals including service level, on-time dispatch, on-time performance, overall warehouse cost and overall transportation cost. With daily updates and a past-week average, the board provides employees with an indication of how well they are doing their jobs. "If I’m a receiver, it tells me what I need to be doing on a weekly basis," Boyer says.

• Inspections and audits. In addition to the inspections by its pest management technician, Tree of Life conducts its own regular inspections, on a daily basis by Sanitation Lead Sondra Poindexter and her team, weekly by Warehouse Manager Gary Albrecht, and monthly by Boyer, himself. Tree of Life’s internal audit contains seven categories: pest control; sanitation; quality control/quality assurance; building, grounds and equipment; receiving, storage, shipping; employee practices; and organic compliance. In addition, the distribution center undergoes unannounced audits by its auditing agency (Silliker), state agencies and USDA, and annual inspections by its third-party Organic Certifier. "These inspections increase the every-day awareness of the employees," Boyer says, adding that because it’s a very different level of inspection, they also increase the center’s innate quality levels.

• Food security. Tree of Life has always had restricted entry, with alarms on all exterior doors, but in recent years, security efforts have been increased through the logging in and out of all visitors and the escorting of all non-employees – even customers picking up orders – to and from their internal destination.

• Traceability. The standard regulation along the food chain is being able to trace each product and ingredient one forward and one back. At Tree of Life, this tracing takes them forward right to the retail customer. In addition to the importance of traceability for recall and quality procedures, the distributor’s organic products must show traceable certification all the way back to the field. For this reason, Tree of Life had tracing procedures in place well before security issues upped the visibility and requirements for it.

• Efficiency systems.

• Pick slotting. Products are placed on shelves through a method that enables and facilitates easy picking. Following a standard First In, First Out system, new pallets of product are placed on the top shelves of the racks. Descending from that are opened pallets, opened cases, opened boxes (if applicable), allowing for quick picking according to the amount of product required in a shipment.

• Inline wiring. The picking is also sped up through a wire-guidance system imbedded in the concrete floor. Once steered into a row, the forklift is then guided along a straight path, freeing the operator from steering and enabling him or her to concentrate instead on "picking." This system has provided a 15-20% production gain, Boyer says.

• "Internal license plate" system. Once picked, the product is tagged with a scan-able piece code, depicting the customer number, piece count and UPC code, which "is what keeps it all where it’s supposed to be."

• Automated lines. The code is particularly important with Tree of Life’s automated system in which products are conducted through the warehouse on belted lines then sorted to the proper dock door by automated reading of the piece code.

• Pay for performance. A fairly recent change at the Midwest facility has served to enhance the warehouse efficiency systems even more – the transition from straight pay to pay for performance. The more product a worker is able to pick, place or move, the more he or she gets paid for the time. Though it is still undergoing implementation at this facility, Tree of Life’s Portland facility, which was the first to make the change, has seen a 25% gain in efficiencies, Boyer says.

The improvements, though, have not only increased efficiencies, they also have increased employee morale and retention. Boyer attributes a great deal of this to the pay-for-performance plan, which motivates employees to be productive and gives them control of their earnings. In the past, Tree of Life had an employee turnover rate of more than 100 percent; that has now dropped to 30 percent.

SUPPLIER REQUIREMENTS. In order to ensure that its IPM, quality and food safety programs are as effective as possible, the distributor sets requirements for manufacturers who wish to have their products distributed by Tree of Life. Along with its standard procedures and terms, Tree of Life has enacted the following policies for accepting new vendors as well as individual shipments.

• New Products. A food processor that would like to be considered for distribution through Tree of Life would begin by making a presentation in which they discuss their product, company, market niche, etc., and provide samples of the product. In essence, the company needs to "sell" its product to Tree of Life. "We are still basically serving two classes of trade: natural food stores and supermarkets," said Vendor Manager Dave Lotti, so one part of the decision will be where the vendor and product would fit into Tree of Life’s distribution and what the company’s potential is for growth over the long haul. While new start-up companies are generally not a fit for supermarkets, they could very well be an option for the natural channel, if Tree of Life feels that they would have forward momentum in the market, fitting into a stable or growing niche, rather than one that is declining.

• Inbound Check. Conducted on all incoming goods, a primary goal of the inbound inspection is to check for damage and evidence of rodent or pest activity. The inspector follows a complete checklist, with IPM standards that go further than most. "Every product is blacklighted," Boyer says. "If it is infested or any [urine or droppings] are detected, we will refuse it." Bulk items, such as fruits, nuts and grains, are also checked for stored product pests, such as the common Indian meal moth. In addition, pre-inspection facility reports are required from all food manufacturers whose products it distributes.

• Organic Certification. Any items to be distributed as organic or kosher must follow all applicable requirements, and proof of organic certification must be provided.

• Product Quality. Tree of Life has high standards for its own quality and service, and it expects the same of its vendors. Whenever considering new products, Lotti says, "we always ask for samples." To ensure ongoing quality and food safety, Tree of Life will also conduct random inspections on vendor plants.

• Words of Advice. His strongest recommendation for those seeking to successfully market a new product: "Strive for integrity and uniqueness."

Attention to quality, documentation and continued improvement. All are significant to Tree of Life Midwest’s selection as a Gold Medal Partner Award recipient, and to its overall quality and success. But the real secret to its success is within the wording of the award’s name: Partnering; Teamwork. Every quality initiative at Tree of Life Midwest is based on partnering within the facility, with the manufacturer vendor, with the retail customer. Every person who discussed aspects of the facility’s quality focused first on working together, acknowledging the team for its focus and commitment, recognizing the importance of their partnerships. But perhaps the most telling statement was an aside, an offhand remark by Boyer that seemed to have little significance at the time, but depicts just how ingrained, how constant the quality partnering is to the facility. A comment made with an unassuming shrug, "It’s like this every day." QA

The author is a contributing editor to QA magazine.

-----------------------------

Keeping the Chain Linked

Whether your product goes direct to the retailer or is marketed through a distributor, an emphasis on communication across the food chain can be the greatest asset to a smooth product flow. Inventory Specialist Richard Pejue has the following recommendations for keeping the chain linked from crop to consumer:

• Communicate in writing if you change a product’s size or packaging. A UPC code change will impact the distributor and retailer whose systems are set up to recognize existing codes, and packaging changes will affect the shelf space allocated to specific items. To ease a transition, provide a sample of the new UPC code prior to shipping your product to allow time for the distributor/retailer to make necessary changes. Even if the UPC is not changed, or a temporary marketing tactic (e.g., bonus sizing, introductory offer) causes the change, inform your next links in the chain so they can make the necessary modifications.

• The nature of the natural products industry – made up of thousands of suppliers including many who are small "mom and pop" manufacturers – means that out-of-stocks are more common, but there is still a need for manufacturers to inform distributors or retailers if goods are not available and when they can be expected. Out-of-stocks have a domino effect: when distributors are unable to fill retailer requests or provide an expected delivery date, end consumers face empty shelves and unknowledgeable clerks, which can turn them against both the retailer and the product itself. It is particularly important that the distributor – and the retailer – be informed of long-term out-of-stocks, so a temporary replacement product can be put on the shelf.

• Consider reducing minimums or at least allowing for flexibility. If your minimum is 200 cases, but your product is a slow mover with a short shelf life, distributors and retailers may be hesitant to stock the product, knowing they may end up with loss as an end result.

• Provide confirmation on product orders within 24 hours of receipt and keep deliveries on time. With lead times already long on many products, a product order that didn’t go through or a delivery that is a week late affects the chain all the way to the end consumer.

• Because international product symbols often vary from U.S. standards, ensure that the UPC on items originating outside the U.S. are converted the 12-digit standard.

• Provide advance notice of price changes – in writing. Pejue has actually had retailers eventually refuse to carry a product because of issues resulting from lack of notification on price increases.

· Delete Julian dates from your products. For the distributor who ships items according to expiration date, the retailer who stocks and sells by expiration date, and the customer who decides whether or not to consume a product based on expiration date – "The most important thing is to have a readable expiration date," Pejue

-----------------------------

By The Numbers

Tree of Life, Inc.

• is a subsidiary of the 250-year-old Royal Wessanen NV, based in the Netherlands. Founded as a seed-trading company in 1765, Wessanen has grown into an international food business with operations in Europe and North America.

• is a premier distributor of natural and organic products and gourmet and specialty items across the United States and Canada.

• has 12 distribution facilities in the U.S.

• operates all its facilities based on a 95-page Food Safety implementation manual. While this may seem a bit overwhelming for a new employee, Tree of Life strives to make it a "user-friendly guide and reference." While noting that the requirements are not optional, the text is lightened with friendly icons set throughout the manual, mid-paragraph or wherever appropriate to highlight a point or requirement. The icons include:

1 valuable information

M pitfalls to avoid

K "play-by-play" and

explanations

2 required audit documentation

Bloomington, Ind., Distribution Center

• is 163,000 square feet, including an 8,000-square-foot cooler, 12,000-square-foot freezer, and 143,000 square feet of dry warehouse.

• employs 88 employees, including four in management.

• has 1,450 customers and 800 vendors.

• ships 55% of its distribution in full cases, with 45% made up of less than full case pick items.

• distributes 13,955 unique products.