Sysco Shipping Compliance
In this article, learn about Sysco’s shipping compliance program, including:
Replenishment requirements
Shipping, ordering, and transportation requirements
Sysco’s claims expectations
How to dispute claims with Sysco
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Compliance is an important factor in every piece of the supply chain puzzle. For Sysco suppliers, compliance is particularly relevant to shipping because Sysco operates primarily in the distribution space.
Sysco’s business operations involve purchasing products from suppliers (primarily food) and distributing them to restaurants, hospitals, and schools. Sysco functions primarily through its distribution system, which includes warehouses, distribution centers (DC), and redistribution centers (RDC). Additionally, since Sysco’s primary products are food and ingredients, its standards are strict to ensure that it can guarantee the freshness of its products.
Sysco’s vision and mission center on delivering quality products, exceptional customer service, and being a valuable, trustworthy business partner. To achieve this goal, Sysco must rely on its suppliers to deliver consistent, reliable products. For suppliers, this means compliance with Sysco’s expectations and requirements, which are outlined in four key sections in Sysco’s Supplier Compliance Manual:
Replenishment and Ordering
Transportation and Freight (including BOL requirements)
Claims and Claims Disputing
Sysco’s Replenishment Expectations
As with many aspects of supply chain compliance, it all starts with the Purchase Order, and Sysco is no exception.
Sysco expects suppliers to adhere to what they call Service Level Requirements. Sysco defines this as “the fulfillment of a purchase order without substitutions.” The Service Level Requirements are as follows:
POs must be placed within the previously specified timeframe and must follow a 100% fill rate.
Suppliers are responsible for shortages and must ship product to facilities that need them at their own expense.
Should a product be completely unavailable, suppliers are required to provide an explanation at the time the order is confirmed. This explanation can be sent via letter or email and will be used to communicate with end customers.
In addition to Sysco’s Service Level Requirements, Sysco also lays out the broader expectations and requirements suppliers must adhere to in relation to POs.
Purchase Order Requirements
The PO cannot be split over multiple shipments, regardless of the transportation type; however, multiple POs can exist on a single truck or other type of transportation.
Suppliers are responsible for ensuring that the correct PO is loaded onto the truck, and the carrier is responsible for matching the Bill of Lading (BOL) with the load to ensure they are picking up the correct purchase. Adhering to these requirements helps reduce errors in order fulfillment and shipping by ensuring accuracy and consistency.
Should a PO need to be adjusted, Sysco allows suppliers to adjust POs up until 48 hours ahead of the pickup date.
The supplier is expected to account for all lead times, because Sysco expects suppliers to have everything processed correctly within the agreed timeframe. Changes in lead times must be communicated at least 30 days in advance of the change.
Sysco does not permit backorders or substitutions. Because Sysco distributes food products, backorders are likely to fall outside of shelf-life requirements, and substitutions may not be exact, which could cause problems for pre-set restaurant menus. However, should a supplier fulfill a previously unavailable product, they must notify their Supply Planner.
Ordering Requirements
Because Sysco is a distributor not a retailer, it is important for suppliers to have their documentation in perfect order to ensure compliance with Sysco’s requirements and expectations.
When it comes to ordering, suppliers need to make sure that they notify the appropriate person no less than 60 days regarding any changes to the Ship Point.
Additionally, suppliers need to ensure that their products meet the minimum required shelf life. This is determined through what is called Guaranteed Redistributed Shelf Life (GSL). GSL is how much shelf life remains for a product at the time it is received at a redistribution facility.
A product with a shelf life of 30 days or less must have at least 80% of its remaining shelf life upon receipt at a redistribution facility. A product with a shelf life of more than 30 days must have at least 50% of its remaining shelf life upon receipt at a redistribution facility.
If a product arrives at a redistribution facility with less than the required shelf life remaining, it may incur noncompliance fees.
Proper packaging is also essential to meet Sysco’s compliance standards, as it helps ensure products maintain required shelf life and avoid noncompliance fees.
Shipping Requirements
As with all shipping, exceptions sometimes happen. Sysco defines several examples of “extenuating circumstances,” two of which are direct shipments to Operating Companies and drop shipments.
Drop shipments and direct shipments to Operating Companies are considered extenuating circumstances by Sysco because they bypass Sysco’s distribution system. While sometimes, due to unforeseen circumstances, drop shipments and direct shipments may be necessary, Sysco requires additional compliance in these areas because Sysco has less visibility with these types of shipments.
For Direct Shipments, Sysco expects suppliers to ensure that:
All shipping dates are specified and strictly adhered to.
Quantities for the shipment and the order must match exactly.
Shortages, overages, backorders, and/or substitutions are not accepted.
In addition to the same requirements above, for Drop Shipments, Sysco does not allow shipments with multiple POs to be consolidated into a single shipping container.
Sysco’s Transportation and Freight Expectations
It is impossible to successfully ship product without understanding what Sysco requires regarding transportation. Specifically, Sysco’s freight terms refer to load, count, and seal for Free On Board (FOB) Shipper’s Dock, for products purchased by a redistribution facility.
Load, count, and seal requirements for Sysco are:
Only the correct quantities of products and cases must be loaded.
All cases must be in good condition.
Loads must be secure to avoid shifting, which can cause damage to cases.
Products must be shipped with a sufficient amount of shelf life remaining, per Sysco’s standards.
All trucks must be sealed before leaving, and notation of the seal must be listed on the BOL.
Refrigerated or frozen times, being shipped via rail, must have a Temperature Tracking Recorder.
When a sealed truck arrives at a supplier’s facility, the seal must be notated before it is broken, and the new seal notated on the BOL.
Accurate reporting of seal numbers, temperature records, and other compliance data is essential for streamlining transportation and freight compliance processes.
Chargebacks related to freight are highly common for Sysco suppliers.
BOL Requirements
The Bill of Lading is the backbone of the freight and shipping process, and most retailers, including Sysco, have strict requirements for how a BOL must be formatted and sent. Additionally, the United States Department of Transportation require that a BOL accompany all shipments.
Sysco expects the following information be present on every BOL:
PO number
The supplier’s customer number
The supplier’s sales order number
Ship date
Estimated time of arrival
BOL number
Seal number
The quantities of items shipped, and the total number of items shipped
Both the weight per item and the total weight
Number of pallets
Temperature of load
Lot number
Load number
In addition, Sysco requires suppliers to adhere to the Country of Origin labeling requirements as outlined in the USDA’s rule 7 CFR, Part 65.
Overages, Shortages, and Damage Claims
Of course, even when suppliers strictly adhere to all the necessary compliance requirements, things still go wrong.
Should Sysco receive products that were either mis-shipped or did not have sufficient shelf life, it will initiate a disposition request. The supplier is then required to respond to this request within 24 hours of receiving it. In the response, the supplier must provide a return authorization number.
The supplier then has the option to either pick up the product or give Sysco permission to donate the product. Sysco will choose the organization to donate the product with insufficient shelf life.
Should the supplier opt to pick up the product, they must do so within two weeks or give permission to Sysco to destroy the product instead.
Sysco may, at its discretion, recoup any lost revenue for mis-shipped and/or product with insufficient shelf life.
Other areas where a supplier might receive a disposition request from Sysco are in relation to:
Overages
Shortages
Damages
These categories are referred to as OS&D.
Should Sysco receive a shipment that qualifies as one or more of the above, it will contact the supplier within a week. Sysco will then notify the supplier of the OS&D claim.
After receipt of the product and BOL, Sysco will inspect the product. If the product shipment is short, over, or damaged, Sysco will initiate an OS&D claim. Whoever receives the product at the warehouse or RDC must photograph the damage, and Sysco’s transportation department will determine the reason for the damage and send notification to whoever is responsible (as necessary).
For all OS&D claims, the supplier will be notified of the claim by Sysco’s Accounts Payable or Transportation departments. The supplier must respond to the notification within 14 days.
Sysco will then work with the supplier on one or more of the following possible outcomes:
For overages, Sysco may choose to either return the overage or buy it from the supplier.
For shortages, the supplier is responsible for both fulfilling the original order in full as well as the cost of expediting the shipment. If this is not an option, then Sysco will include a deduction on the invoice.
For damages, Sysco will initiate a disposition claim, and the supplier must respond within 24 hours. All damaged cases will be disposed of within 14 days if the supplier has not responded to Sysco.
Suppliers must stay vigilant regarding compliance with Sysco to avoid losing money or incurring chargebacks. Sysco allows suppliers to dispute OS&D claims within the timeframe outlined. Suppliers must respond within 14 days of the claim notification to contest the claim. For damages, the supplier must respond within 24 hours.
It is important that suppliers make sure that they have all the necessary documentation on hand should it be required to resolve the claim.
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