Sysco Corporation Research Paper

Research Paper On Sysco Corporation

For a long time now, Sysco Corporation has been involved in the distribution of foods to various restaurants as well as the marketing and procuring of such foods. This company was founded by Herbert Irving and two of his colleagues back in the year 1969 (Pederson, 2007). As with regards to the volume of sales, the company was ranked at position 204 in the Fortune Magazine in the year 2009. Due to a merger with US Foods Inc. in the year 2013, the two companies now occupies more than a quarter (27%) of the food distribution the United States of America (Mathews, n. d). The following year, Sysco was at number 55 in the United States of America based on the size of its revenues. They not only serve restaurants in the United States and Canada, they also offer similar services to educational and healthcare facilities. The company is considered to be the world’s biggest distributor of foods, having over 500,000 clients in diverse fields. This company is a wholesale distributor of foods. To date, Sysco has about 190 locations in the whole of the US, Ireland and Canada (Sysco Corporation, n. d). The services of Sysco range from ingredients to serving and preparation items. The company has grown in leaps and bounds, having started with a capital of $115 million at its IPO in the year 1970 to the $37 billion that was reported during the fiscal year ending 2010.

The greatest competitor of Sysco is the US Foods Inc. Sysco has plans of acquiring US Foods Inc., its biggest competitor. This has led to an uproar as state attorney raise concerns regarding the dissolution of competition in the event that Sysco is successful in acquiring its biggest competitor (Sander & Bobo, 2013). This is likely to create a monopoly in the food distribution industry. Besides US Foods Inc., there are some other small competitors in the food distribution industry which cannot match Sysco Corporation in terms of strength. These includes Royal Ahold, Performance Food Group, Maines Paper and Food Service, Gordon Food Service Edward Don and Company, Ben E. Keith as well the local foodservice distributors.,

The brand products of Sysco are categorized in into six groups, each portraying a varying standard of quality, consistency of supply and hygiene (Falat, 2011). The Supreme Sysco is the highest quality products offered by the company (Sysco Corporation, n. d). They have a uniqueness that cannot be compared to anything else in the industry. It is followed by the Imperial Sysco which consists of product from a few selected regions, among them being the potatoes they get from Idaho. The third category is the Classic Sysco which is the largest among the six in terms of the variety of the products that fall under it. Reliance Sysco come at number four, offering some of the cheap mixes of products. Natural Sysco, which falls at number five embodies all the fresh products the company distributes. Serene Sysco on the other hand does not include foods but rather comprises of plastics, paper and foam products that the company offers.

As mentioned early, the US Foods Inc. is the biggest competitor of Sysco. Below is a list comparing the Sysco Corporation and US Foods Service on the grounds of price, quality and value.

Company Brand Packing Description Item Number Date Price
US Foodservice SPUNKMEYE 12/2 LB BROCCOLI FLORT PTITE IQF FZN 2328334 8/1/2012 20.10$
Sysco PACKER 12/2 LB BROCCOLI FLORT PTITE FZN 9340563 8/1/2012 19.23$
US Foodservice MONARCH 20 LB BROCCOLI SPEAR WATER PK FZN 1328491 8/1/2012 18.26$
Sysco TYSON 20 LB BROCCOLI SPEAR WATER PK FZN 3328358 8/1/2012 19.23$
US Foodservice FLAV-R-PA 96 EA CORN ON COB 3″ FZN 1327584 8/1/2012 17.07$
Sysco SYS CLS 96/3 IN CORN COB 3″ FZN 1082106 8/1/2012 19.50$
US Foodservice SIMMONS 1/30 LB CARROT SLI GR A P 1038660 8/1/2012 19.54$
Sysco SYS CLS 1/30 LB CARROT SLI KK GR A 3959327 8/1/2012 20.77$
US Foodservice CTLMN SLC 12/2 LB CARROT WHL BABY GR A 3856655 8/1/2012 30.17$
Sysco SYS IMP 12/2 LB CARROT WHL BABY GR A P 1025139 8/1/2012 30.10$

The objectives of Sysco’s payment policy include among other things: to safeguard the company from losing finances through poor financial guidelines; to prevent legal liabilities that might arise out of the payment systems; as well as to foster confidence in its customers (Jason, 2006). The authorized distributor agreement lays the ground for all of Sysco’s payment policies. The agreement gives reference to IHG Contract Products and PV Contract Products. In this regard, cost is described as the amount that is provided under the applicable Supplier Agreement. This is the amount which is billed to all distributors devoid of the subtraction for any cash discount that might be allowed by any suppliers for purposes of prompt payment.

Sysco Corporation is responsible for drafting the invoice to be handed to the operating companies. This invoice is used to definethe cost to be paid. The cost of products supplied is never reduced by any cash discounts meant for prompt payments. According to the participation agreement between the customers and Sysco corporation, the except for payment for products and Services already rendered to the customer as well as the necessaryreimbursements allied to the transition process are all a liability that the customer has to incur whenever, such termination shall be without further cost, expense or liability to Customer. The other service that that Sysco Corporation undertakes is the consolidation of payments made by the Operating Companies to the company.

In the event that the customer fails to make payment to the company for pay of any service of product that have been offered to any of thefranchisee properties (should be within the all payment terms), the company has the right to withhold the products and services made to the franchisee properties up to the time when the company is able to receive its payment from the customer. The payment has to be in full service as reflected in the selling price as quoted initially. Late charges are also permitted as per the agreement or the credit application. Additionally, in the event that the customer does not make payment on time as receiving either services or products that have been delivered to them by a franchisee property, Sysco corporation is entitled to proceed with the conditioning of any future delivery to the franchisee properties, having put in place severepayment terms as well as credit measures which will ensure that the company is able to recover all of its payments.

The payment mechanism by Sysco Corporation is very similar to that of US Foods Inc. (Tsao, 2009). The difference comes with the terms of termination for the agreement. This clause is included in US Foods Inc.’s form of participation agreement. It reads,

“By either Party if the other Party breaches this Agreement and does not cure such breach within thirty (30) days of receiving notice of such breach from the non-breaching Party; provided, however, that no cure period shall be permitted for any Party’s breach of its financial obligations hereunder or breach of any applicable federal or state laws, ordinances or regulations that are material to the operation of such Party’s business or the performance of its obligations under this Agreement.”

This clause does not have such a weighty effect on the agreement terms since there are some other clauses such as the call for termination in the event that any of the party feels so upon feel uninterested before the expiration of the agreement license.

Another competitor for Sysco Corporation is the Royal Ahold. The company which is originally from Netherland is an international food supplier. The Company was at its peak in the year 2001 when the sales reached a high of €66.6 billion while the profits reached €1.1 billion (Broekstra et al., 2005). At this time it had over 5, 200 warehouses in 27 nations. Its employees are way above a quarter of a million. During this time, the company was the second competitor to Sysco Corporation. Nonetheless, there was a turnaround in the year 2003 when fortunes reversed. The problems can due to overexpansion. The company experienced a meltdown and it has ever since not recovered completely though there is progress.

According to Broekstra et al. (2005), the payment policies as well as the financial controls atRoyal Ahold also hadissues. A while ago, the company was characterized by a failed system that was fraudulent. A breach of an agreement would be covered by a bribe either by either Royal Ahold or the operating company. Corruption was very rampant. An Audit done by the Deloitte Accountants showed that the accounts were always inflated. This is what drove the company to be liable for criminal charges. If given an opportunity to choose between the three companies, I would turn down Royal Ahold immediately. This is due to the fact that I still do not have confidence in the operations of this company. It has managed to build enough goodwill since the shameful acts that in which the company was involved. Contracting such a company would mean that I am putting my business at risk, lest I it becomes entangled in Royal Ahold’s mess again since the company has such a history. My choice would be Sysco Corporation because of two main reasons; (i) the company has a good has years of good reputation in meeting the terms of agreement in its contracts; (ii) the company’s products are offered at relatively cheap prices as compared to those of competitors.

Conclusion

Sysco Corporation continues to remain a leader in the food supply industry both in the US and Canada. The company has so far established many branches across these regions. It has managed to grow over time, starting from the time when it was founded in the year 1969 with a small capital of about $115 million. Currently, the company is worth over $37 billion. Its plans of buying US Foods Inc. will see it become even bigger, therefore achieving an increased command in the food supply industry. The prices for its products are relatively low as compared to its competitors. This is the reason why I would contract this company when compared to the others.

References

Broekstra, G., Sornette, D., & Zhou, W. (2005). Bubble, critical zone and the crash of Royal Ahold. Physica A: Statistical Mechanics and its Applications, 346(3-4), 529-560.

Falat, S. (2011). Working through gatekeepers to access the grassroots. A case study of Sysco Grand Rapids and Michigan fruit and vegetable growers. Appetite, 56(2), 528.

Jason, K. (2006). Sysco Corp.. Mergent’s Dividend Achievers, 3(4), 271-271.

Kashiwagi, M. (2004). Direct payment policies for the regeneration of less-favoured areas: a comparative study of the EU and Japan. International Journal of Agricultural Resources, Governance and Ecology, 3(3/4), 193.

Mathews, P. (n. d). Is Sysco A Good Dividend Stock To Buy?. – SYSCO Corporation (NYSE:SYY). Retrieved June 5, 2014, from http://seekingalpha.com/article/2238423-is-sysco-a-good-dividend-stock-to-buy

Pederson, J. P. (2007). International directory of company histories. Chicago: St. James Press.

Sander, P. J., & Bobo, S. (2013). 100 best stocks to buy in 2014. Cincinnati: F+W Media.

Sarwar, G., & Fox, G. (1992). An Evaluation of the Redistributive Efficiency of Alternative Crow Benefit Payment Policies in Western Canada. Review of Agricultural Economics, 14(2), 187.

Sysco Corporation. (n. d). News. Retrieved June 5, 2014, from http://topics.nytimes.com/top/news/business/companies/sysco_corporation/index.html

Tsao, Y. C. (2009). Production and payment policies for an imperfect manufacturing system with machine maintenance and credit policies. International Journal of technology Management, 48(2), 240.

 

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